PROPERTY DEVELOPERS & ARCHITECTURAL LAW
EXPERIENCED LAWYERS FOR A COMPLEX AREA OF LAW
In construction and architectural law, a large number of legal norms come together. To ensure that this does not have a counterproductive effect on the realisation of your project, the legal relationships must be clear and balanced. This requires experience and expertise, which you can rely on from us. We are happy to advise, represent and accompany you on the way to the successful realisation of your project.
WE REPRESENT:
Building owners and property developers, architects, project managers and property supervisors, condominium owners and condominium owners’ associations as well as buyers and sellers.
EXPERTS FOR PROPERTY DEVELOPERS & ARCHITECTURAL LAW
AHMET CAGLAYAN
LAWYER
VASSILIKI SIOUCHOU
LAWYER
HOW CAN WE HELP YOU?
For a non-binding enquiry, please contact us by email at berlin@jur-law.de or use the contact form at the bottom of this page. For a personal appointment on site, please call:
+49 30-5557 82820
OUR SERVICES
IN PROPERTY DEVELOPMENT AND ARCHITECTURAL LAW
At JUR | URBAN we offer you the following services, among others:
- Preparation and drafting of contracts and addenda:
in particular property development contracts, architects’ contracts, engineering contracts - Legal due diligence: Through thorough checks, we contribute to transparency and security in legal matters in the run-up to construction projects. Our comprehensive legal due diligence ensures that potential risks and legal aspects in connection with construction projects are recognised and addressed at an early stage.
- Enforcement of claims and litigation:
Our law firm competently represents you out of court and in ordinary court proceedings, in independent evidence proceedings and in conciliation or arbitration proceedings. We regularly represent clients in the defence or enforcement of fee claims, claims for damages or warranty claims (e.g. in the event of delays in completion by property developers) - Training and seminars:
We offer training courses and seminars for architects and property developers, in particular on topics such as HOAI service descriptions, notification obligations, consulting obligations, documentation obligations and liability risks.
What is property developer and architect law?
Property development and architectural law involves a detailed and lengthy process that extends from the acquisition of a suitable plot of land to the completion and subsequent use or sale of a building. This process requires the co-operation of various parties with different interests.
IMPORTANT CONSIDERATIONS FOR INVESTORS
For investors, the legal framework for property development and financing options play a decisive role. Questions regarding the buildability of a property in accordance with public law regulations and legal relationships with future neighbours often have a decisive influence on the feasibility of projects.
DYNAMICS IN THE PLANNING PHASE
During the planning phase, responsibilities and the scope of activities owed are clearly defined in contracts to ensure that everything runs smoothly. This involves not only the urban planning office and the building inspectorate, but also architects and specialist planners. Such regulations minimise delays and clarify liability and supplementary claims.
CHALLENGES IN THE EXECUTION PHASE
The execution phase is dynamic, with various contractors often working on the construction site at the same time. Whether through general contractor agreements or the awarding of individual trades, this phase requires flexibility and adaptability of the respective construction contracts to the actual circumstances. Legal relationships should be as unambiguous and clear as possible in order to fulfil the requirements of the reality of a construction project. In this phase, legally ‘watertight’ documentation and the formulation of notifications of concerns and reminders are particularly essential.
FINALISATION PHASE AND LEGAL DETAILS
In the final exit phase, questions of acceptance, limitation periods and warranty must be considered and resolved in a legally sound manner. Depending on the constellation, the special features of condominium law, particularly for property developers, come into focus here.
COMPLIANCE WITH VARIOUS LEGAL STANDARDS IS A PREREQUISITE FOR SUCCESS
To summarise, it can be said that property development and architectural law involves the interaction of a wide range of legal norms. In particular:
- HOAI
- MaBV
- Property development contracts according to the BGB
- Architect contracts according to the BGB
- VOB/B and VOB/C
Appropriate expertise and experience is required to observe and comply with them. In addition, there are always interfaces with residential property law, construction law and property law.
ADVICE FROM A SPECIALIST LAWYER IS ESSENTIAL IN THIS COMPLEX AREA OF LAW
We are happy to advise, represent and accompany you on your way to the successful realisation of your project. If you would like us to support you, please contact us!
The regulations on property development contracts in Section 650 u BGB and Section 650v BGB were introduced into the BGB with the law on the reform of building contract law.
The property development contract is legally defined in Section 650 u (1) sentence 1 BGB as a ‘contract which has as its object the construction or conversion of a house or a comparable building and which contains the obligation of the contractor to transfer ownership of the property to the customer or to create or transfer a heritable building right.’
The property development contract is a mixed contract with elements of a purchase contract and a contract for work.
Purchase law applies to the obligation to procure the property or heritable building right and works contract law applies to the obligation to provide a construction service. In addition, elements from the law on contracts for work and services may apply.
The purchaser claims a property at an agreed fixed price without any risks on completion. The construction description, construction planning and construction management are carried out by the contractor. For the contractor, the sale of the property and the construction of the building are linked for reasons of calculation and construction technology.
The contractor is also referred to as a property developer. A ‘property developer’ is anyone who intends to prepare, realise or use construction projects as a principal in their own name for their own account or for the account of a third party. According to Section 34 c (1) No. 3 a GewO, they require a licence from the competent authority. The provisions of the Real Estate Agent and Property Developer Ordinance (MaBV) also apply to him in accordance with Section 1 (1) MaBV.
The customer, also referred to as the ‘purchaser’ or ‘buyer’, may be a consumer or a commercially active entrepreneur.
The general rules apply to the conclusion of the contract. The contract must be notarised in accordance with Section 311 b (1) BGB. The same applies to co-ownership in the form of residential or partial ownership.
In the area of heritable building rights, the formal requirement of Section 311 b BGB applies via Section 11 ErbbauRG.
In accordance with section 650 u (1) sentence 2 in conjunction with section 650 j BGB, a building specification must be provided if the buyer is a consumer.
In addition, pre-formulated contract terms must fulfil the requirements of §§ 305 ff. BGB must be met. They are subject to an AGB review.
In terms of time, Section 650 u BGB applies to contracts concluded from 1 January 2018. In accordance with Art. 229 § 39 EGBGB, the provisions of the EGBGB, the BGB and the regulation on advance payments for property development contracts, in the version valid up to this date, apply to contracts concluded before this date.
On the legal consequences side, Section 650 u (1) sentence 2 BGB refers to the application of provisions under work/construction law, while (1) sentence 3 refers to the application of provisions under sales law.
Pursuant to Section 650u (2), Sections 648, 648a, 650b to 650e, 650k (1) and Sections 650l and 650m (1) do not apply to the property development contract.
WARRANTY RIGHTS: WHAT DO I HAVE TO WATCH OUT FOR?
Liability for construction defects and planning defects shall be determined in accordance with the provisions of Sections 633 et seq. BGB.
Construction defects may include, for example, the use of materials not agreed, cracks in the walls and floors, leaks or incorrect installation.
SUBSEQUENT FULFILMENT ACC. §§ 634, 635 BGB
The purchaser can demand subsequent fulfilment in accordance with § 635 BGB. The contractor can choose to either rectify the defect or produce a new work. The property developer must be given a reasonable grace period for this.
SELF-REMEDY ACC. §§ 634, 637 BGB
After the grace period has expired, the contractor may remedy the defect himself, i.e. at the expense of the property developer, and demand reimbursement of the necessary expenses, Section 637 BGB.
MINDERING GEM. § 634, 638 BGB
The prerequisite for a reduction is also an unsuccessfully set deadline for subsequent fulfilment. The reduction claim is calculated by comparing the value of the item in the defect-free condition and the actual value in the defective condition and reduced by the difference. The reduction according to § 634 No. 3 BGB can no longer be demanded after an effectively declared cancellation. It also applies in the case of insignificant defects, Section 638 (1) sentence 2 BGB.
COMPENSATION FOR DAMAGES ACC. §§ SECTIONS 634, 281, 311A BGB
An unsuccessfully set deadline for subsequent fulfilment is required for the assertion of damages. Pursuant to Section 278 (1) BGB, compensation for damages also requires the property developer to be at fault, unless a liability guarantee has been assumed pursuant to Section 276 (1) sentence 1 BGB. The need to represent is legally presumed, the property developer must exculpate himself and bears the burden of presentation and proof, § 280 Para. 1 S. 1 BGB.
The purchaser can also demand compensation if he has previously effectively cancelled the contract or demanded a reduction in price.
COMPENSATION FOR WASTED EXPENDITURE IN ACCORDANCE WITH SECTIONS 634, 284 BGB
After unsuccessfully setting a grace period, claims for reimbursement of expenses that were incurred in reliance on the delivery of a defect-free construction service can be asserted. These are ‘frustrated expenses’ incurred as a result of liabilities entered into.
CANCELLATION IN ACCORDANCE WITH §§ 634, 323, 326 PARA. 5 BGB
The client has a right of cancellation after an unsuccessful grace period.
The breach of duty must be significant.
If the right of cancellation is exercised once, the contract shall be converted into a reverse transaction relationship. The services received must be returned.
Partial cancellation is generally not possible because the developer’s performance is indivisible. The purchaser cannot withdraw from the construction of the building and at the same time demand the purchase of land. However, the purchaser can be given the option of cancelling the part of the contract for work and services for good cause if this has been agreed in writing. This means that a corresponding provision must be included in the property development contract. This can be particularly important with regard to significant construction delays or a possible subsequent insolvency of the property developer.
Rescission is excluded in accordance with Section 323 (6) if the purchaser is solely or predominantly responsible for the circumstance or if the circumstance for which the property developer is not responsible occurs at a time when the purchaser is in default of acceptance.
The exclusion of the obligation to perform pursuant to Section 275 BGB covers cases in which the provision of services is impossible or unreasonable for the property developer.
Liability for defects in the property and for movable objects sold with it is governed by the law on the sale of goods, §§ 433 ff. BGB.
A property is defective if it has a legal or material defect. A material defect in the property exists if it does not have the agreed quality, for example if the property does not have the area specified in the contract.
If the conditions are met, the purchaser can assert the same rights, i.e. subsequent fulfilment according to § 439, reduction according to § 441, compensation according to §§ 440, 280, 281, 283, 311a or withdraw from the contract according to §§ 440, 323, 326 Para.5 BGB.
However, property defects are not as important in property development law as construction defects.
In the event of delayed completion of the construction project, the German Civil Code provides the client with various rights, in particular compensation for damages.
The delay in performance with a claim for damages in accordance with Section 286 firstly requires that the client has a due claim for the production of the agreed work against the contractor. A further prerequisite is the non-performance of the contractor at the relevant time.
The contractor must have been expressly reminded after this claim became due, unless the reminder is dispensable in exceptional cases. This is particularly the case if deadlines for completion or readiness for occupancy are included, as is customary in the case of a contract for work and labour. Finally, the contractor must be responsible for his non-performance, i.e. the delay.
Damages incurred by the purchaser as a result of delayed completion are, for example, the rental costs incurred for the period of time.
rental costs incurred for the period,
travelling expenses,
hotel accommodation or temporary storage costs for furniture,
Financing costs, in particular interest on the cost of travelling,
legal fees,
expert costs or compensation for
compensation for loss of use.
Example from case law:
In its judgement of 15 May 2018 – 21 U 90/17, the Court of Appeal ruled that the defendant had to pay damages to the plaintiff due to the delayed handover of a condominium. This compensation consisted of the cost of renting a replacement flat, the estate agent’s commission for the extension of the replacement tenancy agreement, the cost of storing the furniture, the cost of accommodating guests and interest on provision.
The property developer cannot invoke a liability agreement if it can be proven that the defect was fraudulently concealed.
The exclusion of liability also includes the assumption of a guarantee by the contractor for the quality of the work.
According to § 309 No. 7a BGB, a form or consumer contract may not include a limitation or exclusion of liability for damages resulting from injury to life, body or health that are based on a negligent breach of duty by the user. This also applies in accordance with § 309 No. 7b BGB for other damages. In addition, Section 309 No. 8 BGB contains a list of inadmissible clauses that must be observed.
The client has a right of choice in the event of defect rights.
The start of the limitation period for warranty rights varies.
For work on a property, the warranty periods under sales law apply from handover in accordance with Section 438 BGB. For work on a building, the warranty periods under works contract law apply. Construction defects only become time-barred after five years from acceptance of the building in accordance with Section 634a (1) No. 2.
Case law defines acceptance as approval of the work as essentially in accordance with the contract. This takes place after a joint inspection of the contractual property by the purchaser and the property developer. Significant legal changes are associated with acceptance: Transition from the fulfilment stage to the supplementary performance stage, start of the limitation period for claims for defects, transfer of risk, due date for payment, and reversal of the burden of proof.
From this point onwards, the warranty period begins and, in case of doubt, the buyer must prove that there is a defect in the property. Until acceptance, on the other hand, the property developer must prove that he has built the property free of defects and that it was ready for acceptance.
Section 650u (2) BGB excludes the applicability of free termination in accordance with Section 648 BGB and termination for good cause in accordance with Section 648a BGB to the property development contract. However, the parties can agree on the inclusion of the VOB/B in the contract and attempt to enforce its validity or include deviating cancellation rights in the contract.
The provision of a construction service is always assessed in accordance with the German Civil Code, unless the provisions of the German Construction Contract Procedures (Vergabe- und Vertragsordnung für Bauleistungen) have been agreed as an exception.
Accordingly, the customer has no right of cancellation in the event of defects in the area of warranty rights. At most, he has a claim to subsequent fulfilment, reduction or compensation in accordance with § 13 VOB/B.
On the other hand, §§ 8, 9 VOB/B regulate more extensive cancellation options for the customer.
In addition, the limitation period for the VOB construction contract in § 13 No. 4 VOB/B must be observed. If the VOB has been agreed, claims expire after two or four years, for defects in buildings and for work on a property even after one year.
Under certain circumstances, compensation may be paid in addition to damages for default. This is the case if the parties have included a contractual penalty provision in the event of default.
The client is entitled to contractual penalties as a means of exerting pressure to ensure that the contractor performs the agreed construction work to the agreed extent and meets the completion date on time. In this case, the client does not have to provide specific proof of damages as in the case of a claim for compensation.
Contractual penalties must be agreed in the notarised property development contract. In addition, they must be limited in amount. The amount of the limitation is based on the contract value.
The deadlines must also be determined when the contract is concluded or effectively included in the contract at a later date.
Problems can arise if construction hindrances are reported during the construction period and the resulting postponement of the completion date.
Property developers are facing challenges due to the coronavirus pandemic. When can they invoke an extension of completion and occupancy deadlines because construction has been delayed?
Property development contracts often contain clauses that provide for an extension in the event of ‘force majeure’. The coronavirus pandemic is likely to be regarded as an unforeseeable, unavoidable and extraordinary event, and therefore as ‘force majeure’.
If this is the case, there is a reversal of the burden of proof for the property developer. The property developer must then demonstrate and prove that there were difficulties with the delivery of materials and the deployment of personnel.