Construction company insolvent, how to proceed further?

Hello Ike,

the construction company, whether large or small, slipping into insolvency during the construction phase was and is, especially currently, never to be ruled out. Many are shaking because of that.....
The same thing happened to me as to you, with the "biggest" German construction company 10 years ago.

First of all - thank you, thank you, and thanks again to all your guardian angels that you were able to move into a finished house. Your problems are manageable, but not without difficulties. I can gladly share my experiences with you....

1. Find a trustworthy lawyer who specializes in construction law - I know it costs, but it won’t help otherwise - you will need him!
2. From now on, under no circumstances pay the construction company or the insolvency administrator even a cent without consulting your lawyer.
3. You have a right to withhold payment in the amount of three times the anticipated costs of defect remediation – but here the lawyer is needed because details matter.
4. Under no circumstances give up your completion guarantee – only return it in consultation with your lawyer – it is your only insurance for defect remediation.
5. You can forget about the five-year warranty.

In the final phase before the insolvency of the construction company, only the cheapest subcontractors are used and everything is cut back. The subcontractors usually do half-hearted work – due to the impending payment default. Payment difficulties spread extremely quickly in this industry. The chances of construction defects in such a project are usually disproportionately high.

Therefore, my advice is to get your expert who thoroughly inspects your entire construction (including Blower Door with thermal imaging analysis) and prepares a list of defects.
This and the open acceptance defects or outstanding services from the construction contract are your claims against the completion guarantee or outstanding payments to the construction company/insolvency administrator.
This usually leads to a court case, so – if it hasn’t happened yet – don’t seek advice in forums, but go to a lawyer.

Good luck

Find a trustworthy lawyer who specializes in construction law

In the event of insolvency, I would not put the lead in the hands of the construction lawyer.

In the event of insolvency, I would not put the lead in the hands of the construction lawyer.

Of course, who else. It is not about the insolvency but about the matters arising from the construction contract/construction project. I have been through this – over years. Whether the contact person is the insolvency administrator or the contractor – is legally irrelevant. Please do not speculate or guess here. The insolvency administrator will also appoint a specialist lawyer for construction law against the OP.

It depends on what kind of company it is/was, and what kind of insolvency. Even the best construction law lawyer can’t squeeze anything out of an empty toothpaste tube. You don’t have to throw good money after bad. I assume that 11ant was getting at that. (?)

We currently have a similar case: construction accepted, preliminary insolvency administration. We still have defects outstanding. We are unsure whether we should take legal advice for a mid four-figure amount (our defect retention including 2x pressure surcharge), as lawyers don’t work for free.

Enlighten me where they should be. In principle, set-off is foreign to the nature of insolvency proceedings.
The insolvency administrator has to throw themselves like a lioness in front of the assets of the insolvent debtor.

I have read on the internet that all claims that are valid before the actual insolvency can be set off within the scope of the insolvency, so the prohibition of set-off in Paragraph 95 InsO paragraph 1 sentence 3 is not supposed to apply. That means, if you have justified claims before the actual insolvency (i.e. deadline set – no reaction – substitute performance with costs), these are set-off capable.

3. You have a payment withholding right in the amount of three times the expected defect rectification costs – but a lawyer is needed here, as it depends on the details.

I now believe the pressure surcharge is only at factor 2. Furthermore, the pressure surcharge probably should not count for set-off, since it is intended to ensure that the defect is remedied, and if the company ultimately refuses this, you can presumably only offset damages for actual defect rectification costs?

Of course, who else. It's not about the insolvency but about the concerns arising from the construction contract/construction project.

Very bold statement. Insolvency law is very complex and complicated. There are lawyers who exclusively work in insolvency law for a reason. I would rather negate your statement. Because in this case, it is about matters of insolvency law.

For example, if the client was aware of an impending insolvency, the insolvency administrator can also just reclaim tens of thousands of euros within the framework of a recourse claim.

There are really severe cases. For example, employees had to repay to the insolvency administrator their wages received from the employer retroactively for 6 months. You then possibly pay that back and sit without wages for 6 months. Insolvency law, after all.