Agreed-upon upfront payment plan for house building projects with contractors
When constructing a private residence, it's vital to arrange a specific payment arrangement with the building firm to shield against financial hazards. According to the VPB (Private House Builders Association), the foundation for progress payments should be the real advancement of construction.
Early and excessive payments could lead to a substantial portion of the funds being spent if the builder experiences financial issues, leaving the construction half-completed, with insufficient funds to complete it with another contractor.
Suspicious Offers
Offers asking for a hefty deposit at the time of agreement signing or those requiring payment for unrendered services are viewed with suspicion by the VPB.
Expert advice suggests: Only make the agreed progress payment once the corresponding construction phase has been finalized - i.e., transfer funds only after the shell, roof, or plumbing installation has been completed.
Consumer Building Contract Improves Homeowners' Position
Notably, when hiring a provider for a turnkey property, homeowners sign a Consumer Building Contract. The payment plan should be included in this contract. This contract design, introduced in 2018, strengthens the homeowners' position and rights, as per the VPB.
With the first progress payment, the contractor must provide a security deposit equivalent to five percent of the construction costs. This right must be mentioned in the contract template; otherwise, the payment plan may be considered invalid.
The final payment is due upon acceptance of the property - by law, a minimum of ten percent of the total amount is required for this in a Consumer Building Contract.
If uncertain about the payment amounts and corresponding construction phases, it's wise to seek advice from skilled lawyers before signing the contract. Similarly, it's beneficial to seek professional advice before approving individual construction phases - for instance, from experts who can verify if the provided service is free from defects.
When assessing potential construction offers, the VPB advises against agreeing to suspicious payment terms, such as large deposits at signing or payment for uncompleted work. Adhering to expert advice, homeowners should only make progress payments after completing the corresponding construction phase.
