Construction company price increase of 25% – Expired fixed price guarantee

Hello everyone,

Yesterday we were together with the construction manager and sales consultant on our plot of land to do a site inspection. 5 minutes after arriving, our sales consultant informed us that the construction company is now charging a price increase of 25% and the increase could go even higher. I was shocked.

Our situation in brief: We had purchased a plot of land at the beginning of April 2021, the plot was located in a new development area and development was not complete until November 2021, then at the end of April 2021 we signed the single-family house construction contract with a 12-month fixed price guarantee. We were told that there would be a price increase in May 2021 anyway; furthermore, we feared at that time that interest rates would soon rise, so by the end of May 2021 we were done with the topics of plot/construction contract/financing. Since we could not do anything with the plot until the end of November 2021 and everything was delayed, partly due to scheduling with the construction company, the 12-month guarantee period is now over. We had already expected a price increase of about 10% and had set aside reserves accordingly, but 25% was totally unexpected yesterday, so a big surprise. The sales consultant then told us that we should write a slick letter to the managing director to possibly get some discount, roughly half of the 25% full price increase. Alternatively, we can also use the special termination right, but that means we have to pay 10% of the contract sum to the construction company, and then maybe sell the plot, accept penalties from the bank, etc. So, rather a bad option with serious financial consequences.

How is it with you? Have you also experienced such a large price increase? How are you dealing with it?

Oh dear, that of course doesn't sound good at all. By when was the development supposed to be completed, or was no timeframe given?

At the end of April 2021, we signed the single-family house construction contract with a 12-month fixed price guarantee.

Since we could do nothing with the plot until the end of November 2021 and everything was delayed, partly due to the scheduling of the construction company, the 12-month guarantee period is now over.

Were the delays due to the construction company documented? Because otherwise the fixed price guarantee would have to be extended.

Oh dear, that doesn't sound good at all at first. By when was the development supposed to be completed, or was there no deadline given?

We were aware that the property would not be ready until at the earliest the end of 2021, and I was heavily pregnant in April 2021 and would soon receive maternity pay/parental allowance. We had noticed on Dr. Klein that some banks did not accept parental allowance as income. If we had only signed the construction contract at the end of 2021, we would have anyway faced the price increase, plus higher interest rates plus problematic financing.

Would the delays be documented due to the construction company? Because otherwise the fixed price guarantee would have to be postponed.

Sure, we have everything in writing by email, e.g.: after the surveying, we waited 2 months instead of 3-4 weeks until we got a planning appointment. But all these delays due to the construction company are not enough to compensate for the time difference between the price increase and the price fixation with the building application. The biggest problem back then was that the plot was not ready yet and we couldn’t do anything at all.

Sure, we have everything in writing by email, for example: after the survey, we waited 2 months instead of 3-4 weeks to get a planning appointment. But all these delays caused by the construction company are not enough to offset the time difference between the price increase and the price fixing with the building application. The biggest problem back then was that the plot of land was not ready yet and we couldn’t do anything at all.

When was the plot of land ready, and what other delays were there afterwards?