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 |  Dennis Wiegard

The developer contract as distinct from the construction contract

A construction contract is a contract for the construction, restoration, removal or conversion of a building, an outdoor facility or a part thereof (Section 650a I BGB). A developer contract, on the other hand, is a contract which has as its object the construction or conversion of a house or a comparable structure and which at the same time contains the obligation of the contractor to transfer ownership of the property to the purchaser or to create or transfer a heritable building right (Section 650u I BGB).

So while the construction contract is only about the construction itself, the developer contract combines the elements of construction & purchase.

Therefore, not all of the usual provisions that apply to a construction contract (§§ 650a et seq. BGB) apply to a property development contract:

No right of termination

Until 31.12.2017, it was possible for purchasers to terminate the property development contract for good cause. This has no longer been possible since 01.01.2018. § Section 650u (2) of the German Civil Code (BGB) expressly states that the termination provisions of Sections 648, 648a of the German Civil Code (BGB) do not apply. According to the legislator's conception, a purchaser is sufficiently protected via the remaining right of rescission (§§ 636, 323, 326 para. 5 BGB). This represents a blatant deterioration of the legal position of the purchaser. I refer to this to a contribution of 01 June 2022.

In the case of a construction contract, the termination provisions of Sections 648, 648a of the German Civil Code (BGB) shall continue to apply as normal.

No right of the purchaser to issue instructions

Purchasers may not issue instructions to the developer. The order regulations of §§ 650b ff. are excluded in accordance with § 650u para. 2 BGB in the case of a property development contract.

No security mortgage

Furthermore, the developer cannot demand a security mortgage (§ 650e BGB) from the purchaser. The main reason for this is that the developer does not build on land owned by the purchaser.

No construction workman's compensation

Property development contracts are typically consumer contracts. This means that the contract is concluded between the developer as an entrepreneur (§ 14 BGB) and the purchaser as a consumer (§ 13 BGB). This means that the developer cannot demand building workman's compensation from the purchaser in accordance with § 650f Para. 6 No. 2 BGB (unless this is stipulated in an individual contract).

No right of withdrawal

The right of revocation in the case of consumer construction contracts (Section 650l BGB) does not apply to property development contracts (cf. Section 650u (2) BGB). The argument in favor of this is that in the case of a property development contract, the purchaser is sufficiently protected against haste by the notary's duties to instruct and the time provided for reviewing the draft contract. A construction contract, on the other hand, does not have to be notarized.

No VOB/B regulations

In principle, the VOB/B cannot be effectively agreed in a developer contract with a consumer.

Both before the conclusion of a property development contract and before the conclusion of a construction contract, we advise you to seek prior legal advice in order to provide you with comprehensive information but also to be able to make important decisions for you.

Dusseldorf, September 15, 2022

Attorney at Law Dennis Wiegard

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