Property development contract

Since, in addition to the building, the land on which it is built also either becomes the property of the purchaser or is encumbered with a heritable building right after completion of the project development by the developer, a property development contract always comprises two different types of contract: a purchase contract or heritable building right contract for the land, and a contract for work and services for the construction work. For this reason, a property development contract is always what is known as a mixed contract from a legal perspective.

In addition to preliminary observations and the object of the contract – i. e. the land and the construction work to be performed – a construction contract always also contains the specifications, in which the construction of the building is laid down from the architecture to the interior finish including any custom-made items agreed. This is supplemented by details of the purchase price and the due date of the individual instalments, which the developer may only invoice after successful completion of specified construction phases. In addition, a property development contract also includes information on the developer’s liability, including the declaration of exemption, which is obligatory under Section 3 of the Real Estate Agent and Developer Ordinance and with which the developer’s bank exempts the property from what is known as the global land charge.

If the sale of the land is part of the property development contract, it must also be notarised because in Germany a transfer of land is not considered to be legally completed until the signatures have been officially certified.

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