Behavior in case of imminent delay by the property developer

Hi,

There is no clause in the contract regarding damages for delay.

Oops.... you unfortunately have a serious problem. In principle, this allows him to postpone the start of construction until kingdom come. Yes, he is then in default and you can say "bad developer, you are in default." But as long as no contractual penalty has been fixed, that doesn’t do you much good. In the end, you will probably be glad if you can terminate the contract free of charge. He can simply leave you dangling.

In other words, I wouldn’t count on any compensation payments to you. Your goal will rather be to get out of the contract without having to pay damages to the developer.

Since you apparently did not see a lawyer before signing the contract, I would strongly advise you to consult a lawyer now.

Good luck,

Andreas

we are facing the following situation: In mid-2022, we bought a terraced house from a local developer. In the project, besides some terraced houses on an old garden area, a multi-family house with condominiums is also to be built. The plot is legally divided. The latest handover date according to the contract is 18 months after receiving the building permit. The developer informed us at the end of 2022 that the construction of the terraced houses was approved, which results in a handover in May 2024. At the same time, we were told that construction would start in March 2023.

Until today, nothing has happened on the plot. No money has been paid either, since payment is made according to the broker and developer ordinance. I regularly contact the developer, but receive no concrete information, only the promise of an "internal clarification." According to the developer, the construction of the multi-family house was also approved in June 2023, whose rainwater retention basin is to be used by the terraced houses as well. According to the developer, construction is now planned for November 2023, which would mean less than 6 months until turnkey handover. Bathrooms and tiles are also part of the developer's services.

A total of 4 houses + 12 apartments.

To summarize: the "delay" is only assumed but has by no means occurred yet. A row of 4 terraced houses is to be built as a complement to a twelve-family house, whose rainwater retention basin is to be shared. Only one of the four terraced houses has been sold so far. Thus, it is clear: 1. what is the dog and what is the tail in this overall project; 2. that a contract termination / reversal with penalty fees and the like compared to four built but three yet unsold terraced houses would be peanuts. As speculation, I add that 3. the retention basin could be a requirement of the terraced house row building permit, possibly with a suspensive effect (meaning that the permit is formally still pending). From your point of view, annoying, but under proportionality aspects you are here a lone wolf howling at the moon. I do not expect that damages will make you historically rich here, and realistically expect an offer of a settlement after approximately four to six months delayed move-in.

Since you apparently didn’t see a lawyer before signing the contract, I would strongly advise you to hire a lawyer now.

Before accepting being hopeless on a lawyer's letterhead, I would first inquire with the legal expenses insurance about coverage. My guess at the answer is: "none" (advice regarding a damage that has not yet occurred).

Hello everyone and thank you for the assessments. You can surely imagine that the situation is quite stressful for us.

That the developer, as feared by , does not have to fear any consequences at all, does not seem so clear to me - a brief research at least shows a clear obligation for me as a layperson to compensate for any resulting damage. Of course, I cannot assess what else the developer can still extract from their pocket or how difficult it will be to enforce this obligation.

The assumption of a reversal / settlement expressed by had crossed my mind some time ago as well. However, I am surprised that the developer hasn’t approached this already. The sale has not been going through for months, and we have always indicated willingness to talk. So far, the damage incurred is the property transfer tax, and there would be costs for a reversal at our bank.

The house is not a dream project of ours, but functional. If we had to part with it, it would be okay, but I would prefer not to be left bearing the costs. I read your recommendations as suggesting to wait for the conversation with the managing director and, if it is not offered by the developer, to bring up a reversal at that point?

That the developer, as feared by @andimann, does not have to fear any consequences at all does not seem so clear to me – a brief research results at least for me as a layman in a clear obligation to compensate for any damage incurred.

If the contract says nothing, it is not high seas immediately, but first the Civil Code.

But of course I cannot estimate what else the developer might be able to squeeze out of his pocket and how exhausting it will be to enforce this obligation.

I do not see him needing to pull anything out of his pocket, as I suspect, as mentioned, that the approval is still pending due to the retention basin not yet being constructed, i.e., a condition (or a feature guaranteed in the building application) has not yet been fulfilled.

I had also had the suspicion expressed by @11ant of a reversal / settlement some time ago. But I am surprised that the developer has not yet come around with it. The sale has not been going well for months, after all,

A certain ketchup bottle effect is completely normal in such projects, and the starting flag for the excavators stays in the pocket until quota X of the units is sold. That is nothing that makes a developer get upset. Day-to-day business.

I read your recommendations as to wait for the conversation with the managing director and there, if it is not offered by the developer, to bring up a reversal?

At least my recommendation is rather to read as wait and have some tea, even if you understandably do not have the professional distance of the developer. Quite clearly I would still keep the air force on the ground. I do not see any grass growing yet in my crystal ball that the developer would bring up the word reversal. You say yourself that he is currently expecting construction to start in November, so he will not get an increased heart rate before October, and no sweating fits before Martinmas bonfire either. Since I consider my speculation regarding the “postponing” retention basin very likely, I also assume that, contrary to your belief, the clock has not started yet and the developer has no reason to panic.

Before having oneself written as hopeless on lawyer's letterhead, I would first ask the legal protection insurance about coverage. My guess of the answer is: "none" (consultation due to a damage not yet occurred).

There will be 100% no coverage here, since construction law is not included in any legal protection insurance. A separate policy (e.g. with ÖRAG) must be taken out before the start of construction. It also cost us a four-digit premium, but it is worth it. One can only wish the original poster to be financially well-positioned if it comes to the double burden due to installments, commitment interest, rent, etc. Extremely unfortunate situation from which you will not get out that easily as I fear. In your place, I would therefore now invest 200€ and have myself advised by a specialist lawyer about the options and legal situation based on your contract. Then you will know exactly where you stand.