Notary escrow account for house construction

Hello forum,

I am currently about to start building a house with a developer. The payment must be made by me according to certain construction phases. Now the developer is offering me a notarized escrow account that costs me 600 euros if I want this service. After a construction phase, I transfer the money there and have 14 days to report problems (construction defects) to the notary. If I do not report anything, the money automatically goes to the developer. Otherwise, it requires clarification and the money remains with the notary. Is such an account even sensible? If I notice construction defects, I can simply withhold the payment or at least reduce the amount. Has anyone had positive or negative experiences with this? Can one save money this way and invest it elsewhere?

Best regards,
Pille

Hello Pille,

a notary escrow account is usually used when purchasing a used property to ensure the subsequent transfer of ownership free of encumbrances. In the case of a new construction project, I have not yet experienced that a notary escrow account was agreed upon for the individual installments.

Usually, a bank guarantee from your builder’s bank is provided there. But of course, this costs the construction company money, and you are supposed to pay for the notary escrow account! Also a kind of cost shifting.

As you already correctly point out, you do receive invoices based on construction progress, don’t you? Then you can also directly transfer the amounts to the builder for fully completed services...

You are already the owner of the property, aren’t you (i.e., registered as the owner in the land register)?

Best regards

M. Thiemann

Hello,

I only found out about the existence of the guarantee after signing the contract. Unfortunately, the developer does not provide such a guarantee but refers to the escrow account at the notary. It does give me some "gut feelings," but we hope for a smooth construction process. Unfortunately, it is too late now.
We had already purchased the land beforehand and are the owners. The payment becomes due only after the service has been rendered. That is why I have been thinking about whether this account makes sense, especially since it costs quite a lot of money and we are more or less on the safe side by paying after the service has been rendered.

Best regards,
Pille