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What is a purchase/contractor agreement?
When parties agree that one of them will provide a piece of land and construct or finish a building on it for a fee, there is a contract for the purchase of the land on the one hand and a contract for work on the other hand with regard to the building. The part relating to the purchase of the land is governed by the legal rules of sale. On the part that relates to contracting work (building and delivery), the rules of contracting work apply. Therefore, it does not make much difference in practice whether one speaks of two linked contracts (purchase and contracting) or of one compound contract to which the rules for purchase and the rules for contracting apply in part.
Consumer protection in a purchase/contracting agreement for a home
If there is a purchase/contract between a consumer and a contractor for the purchase of land and the construction of a home, specific legal rules apply. This article will therefore specifically deal with the purchase/contracting agreement between a consumer and a contractor or project developer for the purchase of land and the construction of a property intended as a home. These rules are there to protect the consumer. Therefore, the parties may not deviate from these legal rules.
Legal rules for a purchase/contracting agreement between a contractor and a consumer for the construction of a (new) home
An order to contract work for the construction of a home commissioned by a consumer must always be entered into in writing. The consumer then has a reflection period and can dissolve the purchase/contracting agreement without consequences within three days. This statutory cooling-off period a consumer buyer also has when buying a house. Furthermore, the law provides that the principal is only obliged to make payments to the contractor that correspond to the progress of the construction or the value of the goods transferred to him, such as building materials. However, the principal may be required to deposit 10% of the contract sum with the notary or provide substitute security, such as the provision of a bank guarantee. Conversely, the client may withhold 5% of the contract sum from the last instalment or final payment and deposit this amount with the notary. The last instalment often has to be paid to the contractor only after completion. If the client does not find any defects within three months of completion, he can ask the notary to transfer the deposit amount to the contractor. The consumer owes no interest on the deposit amount over that three-month period. If the consumer does discover any defects, or if he wants to suspend payment for any other reason, the consumer must inform the notary of the amount to be deposited. If it is decided through a binding decision that the amount must be released to the contractor, for example following an (arbitration) procedure, or if the contractor provides substitute security, such as a bank guarantee, or if the client agrees to the payment, the notary can also proceed to pay the deposited amount to the contractor.
Model purchase/contracting agreement and common agreements
Most purchase/contracting agreements for the purchase of land and the construction of a home are concluded using a model agreement. If the client is a consumer, the model agreement may not deviate from the above legal regulation. Furthermore, the purchase/contractor agreement will also contain provisions on the purchase price and contract price, what the payment terms are, when the construction must be completed (the number of workable days) and when the delivery must take place. Usually there is also a guarantee or deposit scheme included and the liability of the parties is regulated as well as what should happen if the parties disagree (a dispute resolution). There may also be resolutive conditions in the purchase/contracting agreement, such as a reservation on financing.
Real estate lawyer Rotterdam
Do you have more or other questions about your purchase/contract agreement? Or has a dispute arisen between client and contractor, please contact the real estate lawyers of LVH Lawyers. They assist both contractors and principals and can provide you with legal advice. If necessary, we will initiate proceedings.