Problems with construction company. Need urgent help!!!

Hello

We are facing a probably big problem. I am not an expert, but this is my assessment.
We have signed a contract with a construction company for the new build of a semi-detached house. All contracts were signed last November. The company started building this year without the second buyer (for the other semi-detached house).
Today I spoke with the company owner (it is a very small company). He told me the following:
He will most likely have to file for insolvency. He lost almost a six-figure sum last year because the builders at some point could no longer pay.
The bank informed him that he must not allow himself any major expenses this year. The bank had previously promised him that he would get financing for the second semi-detached house (we are financing the other half).
Another builder, who is also having a house built by the company, strangely can no longer pay after the first invoice either. For this reason, the company no longer receives money from the bank.
He wants to see the head of the bank again on Monday and talk to him.

We have already paid the first installment of €45,000, but only after completion. This sum included the land and earthworks.
Meanwhile, the shafts have been set and the ground floor completed (both sides).
Since we have already paid the land with the first installment, it belongs to us anyway, just like the started half of the house.

What happens now if he really files for insolvency? We are very afraid. Many questions run through our minds.

Have we lost our money?
How will the house construction continue?
If yes, when can it continue?
How does it continue?

If we had to continue alone now and only finish our side, is that even possible? I can’t imagine that.

The company owner told me that it is no problem. It would then be that one side belongs entirely to us and we can finish it, and the other side belongs to the bank.
What they then do with it is their business. Whether they sell it as soon as possible in this condition or just leave it as it is for now, he does not know.

He just said: It is a fact that we should not worry because we have not lost and will not lose the money and we can continue ourselves even if we finish our side alone and the other side remains as is, even though so far only the ground floor exists.

What do you say?
Would be grateful for any quick advice, as we are really desperate!!!!!!

No one has a clue? :-(

Hello andy1983,

first of all, it would be important to know what kind of company you are building with. Is it a general contractor or a property developer? You are the landowner if you are listed in the land register. Are you? If you are listed in the land register, then we are already a HUGE step further, because the land then belongs to you and of course also the buildings on it.

But then it gets tricky! If the construction company really has to file for insolvency, then you have to finish the construction yourself. Anything but easy! In any case, you should keep in contact with the (insolvent) construction company. You absolutely need all plans, current tenders, etc. As many documents about your house as possible! This will probably "save" you additional costs of several thousand €, because they will not have to be created again. You also need to contact the banks immediately. First, your bank, to explain the situation and possibly arrange the loan conditions (possibly a longer interest-free period or similar, or also a possible increase in the credit limit) and of course the bank of the other house, because you are both in the same boat. Completing a semi-detached house alone is absolutely stupid, so you have to get the bank on board and find a solution together with this bank on how you can finish the house together. It is also easier for the bank to find a buyer if the house is already finished and the neighbor is also looking for a buyer...

You now also have to take the step to see a lawyer (for construction law)! A possible insolvency administrator will try with all legal means to get as much money from you as possible. You have to be prepared for that! It must be ensured that you can finish your construction and enforce your claims. The lawyer will also discuss the legally correct further procedure with you.

Overall, the insolvency of the construction company is more than unpleasant, because it not only causes work but ALWAYS additional costs! If additional costs of only about 20k€ arise in total, you can be glad! Lucky is he who has a construction completion guarantee/insurance. If you have such a thing, then report the damage immediately! Under no circumstances should you make further payments to the construction company now! A possible overpayment should be avoided. If there are still works running, then contact these subcontractors so that they can receive money directly from you and the money does not get lost at the construction company...

To finish your house, you of course need expertise. That as a builder you usually do not bring is normal. So you have to organize a new construction company or go to an architect who organizes the further completion of the house for you. This is where the documents come into play again. Who is the site manager? He has thousands of pieces of information for you that are important for you. A meeting between this site manager and your new construction company/architect is more than sensible!

However, there may also be other curious things. If heating systems, stairs or similar have already been installed, then you should secure them (lock the house!). It is not uncommon for construction companies to take "their" materials out of the house again if they have not been paid.

I wish you much success in the further construction of the house and of course lots of strength for this time. In any case, get all possible support! Friends, acquaintances, relatives, colleagues, etc. You will probably need this support. It is important that you act QUICKLY. Maybe you should take a few days off to arrange important appointments such as visiting your lawyer as quickly as possible.

I hope to have helped you with this information for the time being.

Best regards

Thank you so much for your reply. It has already helped me a lot. To add a few things. General contractor or developer? What do you mean by that? I really can’t imagine what that is. I’m totally confused right now.

We are registered in the land register. So the land belongs to us. It has already been paid for: the land and the groundwork. The second payment was supposed to be made after the shell was completed (but it wasn’t paid because it is not finished yet). The shafts and the ground floor are already completed, so these will belong to us too, even though they have not been paid for.

Tomorrow I have an appointment with the company. I will receive all documents. As well as all offers from the individual companies (heating installers, tilers, etc.) that were previously negotiated with the construction company. The head of the company said that we will definitely be able to take over these offers, since the individual companies also want to keep their orders.

The situation with the banks is clear. My bank actually already knows because my wife works there. I will definitely get in touch with the other bank (owner of the other half). Hopefully, they will want to complete the half-house and not try to sell it as is.

About going to a lawyer?! We do have legal protection insurance, but I heard we can’t use it for this because supposedly something like this cannot be insured. Why would the insolvency administrator come to us?!?!?!?!? We have nothing to do with this?!?!?!? We have our half and that’s it. Or not???????

Unfortunately, we don’t have a construction completion guarantee. That really annoys me because I never knew about such a thing. Yes, I know, my own fault!!!!!

Regarding completion, my idea was that we do it ourselves. My father is a trained bricklayer and built his own house 13 years ago. So he should still understand something about it. Relatives and friends would also definitely help who have already been involved in house building. For any kind of questions, we can talk to the current company boss and site manager anytime.

According to the company boss (a sort of friendship has developed), if we continue to build it ourselves, we should save money and not have to pay more (hope he’s not telling nonsense). He said that we have already made a sort of profit because the shafts are set and the ground floor is completed and we haven’t paid for it yet. Additionally, there is the amount that should be his profit.

What do you (singular) say about this? Which documents are important to get? Which must not be missing? What can the insolvency administrator do to us?

I have an appointment with the construction company tomorrow. So I urgently need an answer again!!!!!!!!!!!

Thanks, guys

Going to a lawyer?! Although we do have legal protection insurance, we apparently can't use it for this, as I heard you supposedly can't insure something like this.
Why should the insolvency administrator come to us?!?!?!?!? We have nothing to do with this?!?!?!?! We have our half and that's it. Or not??????? I have the appointment with the construction company tomorrow. So I urgently need an answer!!!!!!!!!!!

Hello Andy,

everything you write here doesn’t sound good – good contact with the contractor or not; once he has filed for insolvency, the rules change.

WHAT you urgently need to do now is not ask for help here or go back to the contractor again, but see a lawyer (attorney) who is familiar with “new construction of single-family homes/construction law” and “insolvency law.” No one is allowed to give you legal advice here, as in Germany that is exclusively reserved for the consulting professions!

Even if you believe that you have already bought the plot of land including the ground floor – paid according to construction progress – this does not necessarily mean that this corresponds to the truth; it primarily depends on the wording of your notary/contractor agreement. For example, under which conditions the contract (VOB/Construction Code) was agreed upon and from which point you are actually the owner!

If your contractor is who you think he is, he will understand that you – since you apparently have no idea about contract structure – consult a lawyer and support you in this endeavor. Once the insolvency administrator is involved, it may happen that even your lawyer will no longer be able to keep your half-finished shell out of the insolvency estate. Then you will not only be stuck with your debts but will have neither the land nor the started shell, as everything is counted towards the insolvency estate to satisfy the creditors.

Even if these advisory costs are not covered by recent legal protection insurance policies: it is money well spent.

Kind regards

But I am listed in the land register after all?!