Property developers: What you should know when buying a flat

Definition and tasks of a property developer

According to § 14 BGB, the property developer is to be distinguished from the building contractor and the builder by various factors. Whereas in the case of house construction with a general contractor or builder a concrete construction service is promised, the property developer acquires an undeveloped plot of land in order to build on it afterwards. Accordingly, it promises not only the construction work but also the transfer of ownership. The developer, on the other hand, acts as the client of a construction project, but unlike the property development company, he does not finance it at his own risk. Since property development activity is subject to the trade and property development ordinance, it is subject to authorisation. It is not restricted to certain types of real estate, so it is possible to purchase condominiums as well as commercial properties or a single-family house from a property developer. Property development companies do not usually carry out construction activities themselves, but hire construction and craft companies for this purpose and then coordinate their work.

The property development contract

The contract with the property development company is a hybrid of a contract for work and a contract of sale. This is significant for the claims arising from it, because in a purchase contract only the transfer of the land is owed, whereas in a contract for work and services only the construction work is owed. The property development contract, in contrast, includes both and has the effect that you as a buyer can, in case of doubt, assert claims for defects for both the purchase and the construction work with one and the same company. Since a transfer of land is part of the property development contract, the conclusion must be notarised. Subsequent amendments to the contract must also be notarised. Another special feature of the property development contract is that it is possible to withdraw from the entire contract. This is not the case if the purchase contract and the contract for work and services were concluded separately.

Advantages and disadvantages for real estate buyers

There are several advantages for property buyers when they buy a flat or a house from a property developer. For example, building with a developer promises a modern standard in terms of technology and a low investment requirement for the future, as it is a completely new property. If the property has not yet been completed, it may also be possible to incorporate your own wishes regarding furnishings and room planning. In addition, the property development company takes care of all permits and monitoring of the construction process, so that you as a buyer save yourself the hassle of dealing with construction companies or authorities and at the same time know that the tasks are being managed professionally and expertly. However, this advantage can also become a disadvantage at the same time, because you are handing over a lot of responsibility here. If the property development company is not reliable or does not coordinate sufficiently with you to act in your best interests, there may be unpleasant surprises after the purchase. It is therefore important to look for reliability, good references, experience and a detailed description of services when choosing a contractor. This will ensure that you find a builder who suits you best.