Payment plan: How many installments?

We are in negotiations with several general contractors. The loan agreement has already been signed. Part of the loan agreement is the following payment schedule:

30% after completion of the basement ceiling
25% after acceptance of the shell construction
25% after application of the interior plaster
20% after acceptance for use

However, our preferred partner requests 14 interim payments:

4% after completion of earthworks
6% after completion of the base slab
10% after completion of basement ceiling
10% after completion of the ground floor ceiling including backfilling of the working space
7% after erection of the roof truss including completion of masonry
7% after completion of roof covering including roofing work
7% after installation of windows including exterior windowsills and shutters
6% after completion of rough installation (electricity, heating, plumbing)
9% after completion of non-load-bearing walls
8% after completion of interior plaster
5% after completion of screed
8% after completion of electrical, heating, plumbing, interior stairs
8% after completion of exterior plaster
5% after handover of the house

The general contractor refuses to deviate from this. To me, this is a sign of insufficient liquidity, right? It can't be common practice, can it?

Hello,

Part of the loan agreement are 4 installment payments... Our preferred partner, however, wants 14 installment payments... The general contractor does not want to deviate from this. To me, this is a sign of insufficient liquidity, right? It can’t be usual, can it?

First of all, your financing bank should adapt to the installment payments of your general contractor and not the other way around; especially since the payment steps mentioned here are among the best I have read in a long time. I would push your financier hard, no question about it.

On the other hand, you should think about how a general contractor is supposed to manage different construction projects simultaneously when he is expected to advance up to 30% of the construction sum for all projects - always with the sword of Damocles of non-paying clients hanging over his head? And finally, if you are worried about your general contractor’s liquidity, allow me to ask the modest question why you haven’t checked him already?

Best regards

What do you mean by "should go into advance payments"? He must!!! That's how it is regulated by law. Payment plans that require the client to make advance payments are immoral. If the contractor cannot or does not want to do that, he should sell bread rolls, but not build houses.

Hello,

That is how it is legally regulated. Payment plans that require the builder to pay in advance are unfair.

You surely have the legal basis for this claim at hand?

Best regards

Come on, construction expert. You are from the industry and are well acquainted with the relevant regulations. The fact that you, of all people, write conflicting posts here and demand that the bank simply comply with the BU payment plan without comment does not exactly demonstrate objectivity.

641 Building Code - Due date of payment.

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Hello home builder,

Your posted link for interested users was certainly well meant; it would definitely be informative! Unfortunately, I cannot leave it as it is, as on the one hand it directly links to a lawyer's homepage and on the other hand I have not found any notice on their pages that would permit linking.

Kind regards

Construction expert

Hello again,

Come on, construction expert. You are from the industry and well acquainted with the relevant regulations. That of all people you write contradictory posts here and demand that the bank adjusts to the payment plan of the general contractor without comment does not exactly demonstrate objectivity. 641 Building Code - Due date of payment.

I think I probably did not express myself clearly enough.

The payment plan offered by "C&C" on the part of their general contractor is finally a payment plan that is fairly divided for the builder. Their financing bank should—certainly if construction financing is part of their everyday business—not torpedo this by "their own proposals for installment payments." Upon completion of the shell construction, "C&C" would therefore have made 51% of their contract volume in the form of installment payments; the lawyer mentioned in the distant link also points to the rough rule of thumb of 50% after shell completion. I therefore by no means write contradictory posts, but nevertheless take the liberty to respond appropriately to disproportionate demands.

Recently, I have increasingly noticed that many banks react to the public criticism they have received in the past; this is commendable! But only if no new hurdles are created by this new approach. It is undoubtedly good that every general contractor/subcontractor can only invoice installment payments if, on the other hand, a value for the builder equivalent to the installment payment has been created. What is not good, however, is when banks try to enforce their own payment plans even when the payment plan submitted by their customer gives no reason for objection.

I wrote "...how a general contractor is supposed to reconcile various construction contracts when he—always with the Damocles sword of a non-paying customer hanging over him—should advance up to 30% of the construction sum on all contracts?..." knowing the payment plan that the financing bank allegedly suggested to "C&C" for enforcement. With only 4 installment payments, no general or subcontractor is sustainably viable in the long term, because they usually serve not only one construction site but often several. One way or another they advance payments and also bear responsibility for employees and reserves on the side; every builder ideally wants a subcontractor/general contractor who has been active on the market for a long time at their side, so the business must also be run according to commercial principles to make a long-term market presence at all feasible. Since, however, since the boom of the internet in Germany there are not only 80 million national coaches but almost as many "construction experts," the "sport" of withholding the last payment has in many cases spread evenly over all installment payments. This means the future of a fundamentally reputable subcontractor/general contractor in many cases looks anything but rosy.

I am still diligently working within my modest possibilities to make it a little more difficult for the black sheep of our industry to enforce their questionable understanding of customer satisfaction. But I do not see that now everyone should suffer under their reputation, certainly not a general contractor who voluntarily offers a payment plan named in the post by "C&C" to their customers. That was all I meant in my obviously too brief post.

Incidentally—it should be mentioned correctly—the paragraph you quoted is not the only one that deals with the topic of installment payments in the Building Code, but also § 632a; overall §§ 631 - 651 deal with contracts for work.

Kind regards