Proof of equity to prefab house company: questions experiences?

We also have this for 10% of the amount as a bank guarantee. The bank then hands over the guarantee to the company. However, not a cent will be paid out unless a. you initiate it yourself b. the construction company requests it and you confirm it with the bank.

That was the engineer. Overall relatively uncomplicated and I didn’t feel like I had no control.

The original guarantee wants the bank back, in case of disputes I was told an independent construction expert from the bank will come for arbitration if necessary (but then for a fee).

The bank then hands over the guarantee to the company. However, not a cent is paid out unless a. you initiate it yourself B. the construction company inquires about it and you confirm it at the bank

That is then not a normal guarantee, because the points you mentioned are extraordinary (says the banker in me).

We also have that as a bank guarantee for 10% of the amount.

10% is also completely fine. That is basically the final installment. The general contractor definitely needs some kind of security, no question. Such an amount usually doesn't drive you to ruin if it's unavailable for a few years. But here we are talking about contracts that provide for 100% or sometimes even 110%.

So if you are really in the situation where you have set deadlines, they have passed and now you are commissioning someone else. Or there is still money due, but work is still outstanding, the general contractor goes bankrupt.

Well, quite specifically. I have been living in the house for about 30 months. At the handover, defects or unperformed services were still identified. The house was handed over, the final installment was reduced by €10,000. I could simply do that because my money is in my account. Since then, I have pursued this with varying degrees of pressure, and in the meantime new defects have appeared. The fact is, to this day not all defects have been fixed and not all missing services have been provided. So I still have my €10,000, which I will only pay once everything is finished. And if it gets too much for me, I set deadlines and, if necessary, I carry out a substitute performance; I then pay the new craftsman with my €10,000 and the matter is settled.

How would it be if the €10,000 was held in escrow at the bank? I might not have the money for a new craftsman. Above all, I would have to worry about how I would ever get my €10,000 back. Because for that I need the consent of the general contractor. If he is stubborn and simply refuses, in the end only a lawsuit for approval remains. Years later, the judge tells me who has to bear which defect or not to what extent and how much money I get back – minus all court costs. But maybe that will only be told to me by the second or third judge if the general contractor is bored and just as persistent. And during all those years, I would not get into repaying the loan because it is not fully disbursed yet, so I end up paying commitment fees – which for me, concretely, are exactly six times as high as the loan interest.

When I have thought about all these things, then I quickly tend to release payment despite defects in order to sue to get my money back afterwards. And that is where the loop turns, see above.

Now you can expand the story as you like. A speeding-up factor in the decision process would surely be that the general contractor does not install the roof before the outstanding installment is paid and thus construction damage threatens. Or just come up with something yourself. A good contract is concluded on equal footing with mutual trust. That is already out of balance in construction anyway.

Imagine the builder suddenly has to cover larger expenses (car broken, mother has to go to a nursing home, unemployment) and then says, like Maike Schlecker: "There is nothing (i.e. no money) left."

And that is exactly why the general contractor wants a lock, guarantee, or something similar. He wants to make sure that you can pay for the construction, all the way to the last installment. Or – because almost everyone exceeds the calculated budget – a little bit more.

The general contractor can’t just go to your bank and say, "Here is the invoice, I'm done, please pay!"

In certain situations, yes he can, see #11. And that is exactly what you as the builder absolutely do not want, because your only leverage is gone.

You have been living in a house for 30 months that has defects justifying a retention of 10k? You can wait a long time for that and will also fail in court. Acceptance is likely to have occurred through conclusive conduct. If the defects were that severe, you would not have been able to move in.

What this has to do with the blocking of capital, however... well.