Construction project with a developer without an official building plan, is a down payment required?

If you sign now – have you already received and reviewed the construction service description, the other contracts, and payment plans? You are already committing yourself to the developer – who knows what astronomical prices he might demand later?!

We already have the construction service description and an initial offer for the house as well as a non-binding total cost estimate, but all of this is still in the early stages and an initial offer that now needs to be detailed gradually. Therefore, I find it questionable to commit to the developer with such a high amount at this point.

Hello,

In a neighboring village of our big city, a construction site is currently being planned ... the company that wants to develop the area with single-family houses is also selling the plots ... we have already had 2 meetings with the company, where the development plan was presented to us and we also decided on a plot. Now the company wants to conclude an agreement with us for the payment of an installment of 20,000 euros, with which the plot is supposedly reserved for us.

In principle, I am not in favor of such an approach, but I am always surprised that this down payment model still seems to be working.

"The spouses .... will commission the contractor to build a single-family house city villa ...

If it is purely about securing the building plot, there are simpler options that on the one hand are binding but on the other hand still leave exit scenarios for the client (you); for example, in case a viable financing does not come about.

What do you think? To which places can I possibly turn to gain a bit more security?

There are only two options, since the development contractor is also the seller: take it or leave it. In my opinion, the seller will not accept a legal objection; especially not if building plots in this area are scarce and therefore in demand.

I would advise you to keep your distance from this "offer" as it was presented. It is understandable to me that the seller does not want to go into advance with a large sum (acquisition of the land from the municipality and development). What is not understandable is that he does not want to document it via approximate parceling and thus sale through a notary – preferably with a building obligation. Often, such contracts include additions like: "the exact plot size will be known after surveying by the surveying office xyz and will trigger additional or reduced costs at the agreed square meter price of 'x' euros." Likewise, the probable amount of development costs is addressed and minimum and maximum limits are named, according to which, in case of later development of the building area, costs in the amount of "x" euros have to be paid.

By the way, it is a Russian roulette. The construction costs have just increased by an average of 3%; nobody knows what will happen in 2016/2017. Only one thing is foreseeable: construction costs will certainly not stagnate or decrease. This additionally raises the question of securities for me. What service does the builder (BT) currently offer, based on which BB and at what cost? In my opinion, you are not only taking the risk of having to write off TEUR 20 (by the way, I would insist that this money has to be repaid with interest if it does not come to execution), but also buying a pig in a poke. That is clearly too much risk for me!

Rhenish greetings

Not a single euro without a correspondingly valuable consideration. Quite simple.

Thank you very much for your answers. They reinforce our feeling that we should not sign the agreement or contract and first try to proceed with the developer as things are. If he now stalls and insists on a down payment, that will be a sign for us to withdraw.

Congratulations on your insight - I wouldn't know if we had the guts to draw a quasi-final line like that with scarce plots!

Realistically, I also see the risk of a cost explosion, because "friss-oder-stirb" will almost certainly come.

Status update: For now, it continues with the developer, although the unsigned agreement did not exactly please the developer's representative and he was noticeably cold during the conversation, at least he did not insist on signing it. Nevertheless, the situation/progress is now as follows:

[*]Rough planning of the house until the conclusion of a contract for work
[*]The contract for work is to be concluded as soon as possible according to the developer's plans; only then will he guarantee us the plot of land
[*]Only after the conclusion of the contract for work and the development of the construction site will he conclude the purchase contract for the land with us; the contract for work is suspended and ineffective until then and only becomes effective when financing is secured and the land purchase contract is signed. This ensures that only those who will actually build with him will buy land.

But it is true that in a way this is a "take it or leave it" option. With a developer-free plot, one could calmly approach various construction companies after purchase until the ideal offer is found. In the above scenario, this option does not exist and you are at the mercy of the developer, for better or worse. Sure, he makes a professional impression, but if something goes wrong... Not to mention the costs. Due to the bait of the land, he can ultimately set a higher price than perhaps without the land-binding.
Currently, we are looking for other building plots but are not really finding anything. The plot mentioned above is located far outside the city gates, but offers a quiet, rural setting. Two alternatives would be somewhat closer to the city on a regenerated barracks site or a building plot near a four-lane access road. Neither is ideal. So we are now in the unpleasant situation that the developer is pushing a bit, nice alternatives are not really available, and we are asking ourselves "yes or no," will something better come along, is this already the optimum?
Therefore, a small side question to the forum: How do I find suitable building plots? Driving around and searching only works to a limited extent since we have two small children who quickly start complaining when we cross the city. Also, there isn’t necessarily a "for sale" sign everywhere. Knocking on neighbors' doors at existing building gaps is out of the question for me, I’m too shy and would feel very strange, especially since surely others have already done that before me. Internet portals often offer "only" bait offers from construction companies with great houses at bargain prices on non-existent or terrible plots.
It’s like cursed: We have the desire but just can’t find anything suitable!