New construction from a developer: What matters in the purchase contract

Buying a new apartment or house directly from the developer seems convenient at first glance: land, planning, and construction all come from one source. However, purchasing a property that is not yet completed involves particular risks. It is therefore crucial that the contract, building specifications, payment schedule, and acceptance procedures are clearly defined, and that buyers know which documents they should review before signing.

What the contract and building specifications should clearly state

The notarized developer contract forms the basis of the entire purchase. It should clearly define the property or co-ownership share, the construction work owed, the completion date, and any potential consequences of a delay. A detailed building description is particularly important. Materials, standard of fittings, living space, energy efficiency, landscaping, parking spaces, and special requests should be documented not only in sales brochures but also legally binding in the contract documents.

Buyers should also check which plans, declarations of division, community regulations, and permits are included in the contract. Verbal promises made by the sales team are difficult to prove later. Therefore, any changes during the construction phase require a comprehensible written agreement that also addresses additional costs and potential impacts on the completion date.

Payments according to construction progress: Protection through the payment plan

The purchase price in a developer contract is not usually paid in full upfront. According to the German Brokerage and Developer Ordinance (Makler- und Bauträgerverordnung), the developer may only demand payments once certain legal safeguards are in place. These include, among other things, a valid contract, the registration of a notice of conveyance (Auflassungsvormerkung), and the secured release from any existing encumbrances on the property. The individual installments are then based on the actual progress of construction and can be divided into up to seven partial payments.

Before each payment is made, it should be verified that the invoiced construction phase has actually been completed. If there is any uncertainty, independent construction supervision can be helpful. Additional payments for special requests should also be clearly agreed upon and not anticipate any construction progress.

Properly handling acceptance, defects and warranty

By accepting the property, the buyer essentially confirms that the work has been performed in accordance with the contract. At the same time, the five-year limitation period for claims based on defects typically begins for buildings. Therefore, the property should be thoroughly inspected before acceptance. Any defects found should be documented in a written report with a precise description, a deadline for their rectification, and, if applicable, photographs.

Significant defects may prevent acceptance. In the case of minor complaints, buyers should expressly reserve their rights and not release the final payment prematurely. Expert guidance can prevent recognizable problems from being overlooked or imprecisely documented.

Are you planning to buy a property from a developer? We support you in the preparation, organize the most important documents, and guide you through the purchase process. Get in touch!

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

Photo: © Wordliner/Image created with OpenAI's ChatGPT

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