Purchase and construction agreement

Purchase and construction agreement

When a newly built home is purchased, a purchase and construction agreement is concluded between the parties. This agreement sets out the arrangements between the buyer and the contractor (often a project developer). A purchase and construction agreement includes all rights and obligations regarding the purchase of the plot of land (purchase agreement) and the construction of the home (construction agreement). A standard template is often used for the purchase and construction agreement. Nevertheless, it is important that any deviating points in the agreement be legally reviewed. This includes agreements regarding construction time, additional or reduced work, suspensive conditions, resolutive conditions (financing contingency), guarantee and warranty schemes, deviating provisions, and other information that becomes part of the contract (brochures, artist impressions, scale models, etc.).

The moment a dispute arises (or threatens to arise) during the development of a new-build home, it is advisable to seek legal advice immediately. This allows for an immediate assessment of the legal options. If a contractor or project developer is faced with a liability claim or complaint, our legal specialists can immediately help consider the possibilities.

Questions regarding the purchase and construction agreement? Contact us.

Two agreements in one: purchase and construction legally analyzed

Legally speaking, the purchase and construction agreement is not a single contract, but a combination of two interconnected agreements. The purchase part concerns the transfer of the land or the apartment right and falls under the rules for purchase (Title 7.1 of the Dutch Civil Code). The construction part concerns the building of the dwelling and falls under the rules for contracts for work (Title 7.12 of the Dutch Civil Code). Because both parts are linked, exercising a right in one part often affects the other. We carefully assess this connection so that you do not unintentionally relinquish one right by invoking the other.

Consumer protection: mandatory law regarding the construction of a home

If the home is built on behalf of a consumer, the special protection provisions of Articles 7:765 to 7:769 of the Dutch Civil Code apply. These provisions are mandatory law: they may not be deviated from to the detriment of the consumer. For instance, pursuant to Article 7:766 of the Civil Code, a cooling-off period of three days applies after the signed agreement has been handed over, during which the consumer may terminate the contract without giving reasons (often extended to one week in standard contracts). In addition, the cooling-off period of Article 7:2 of the Civil Code applies to the purchase of land. For commercial clients, such as a property developer or investor, these protection rules do not apply, and contractual freedom is greater, which actually requires extra care during negotiations.

Installment payments: pay in proportion to the construction

For a new-build home, you pay the contract sum in installments linked to the progress of construction. The law protects the consumer in this regard: a consumer client may not be required to make a payment that does not correspond, at least approximately, to the state of construction. With a deviating or standard payment schedule, it is important to check whether you are not anticipating work that has not yet been performed. We review the installment schedule and the associated guarantees before you sign.

Delivery, delivery points and the maintenance period

Delivery is the moment at which the home is deemed delivered and the risk passes to the client (Article 7:758 of the Dutch Civil Code). During the inspection, you record delivery points: defects that the contractor must repair. In principle, the contractor is no longer liable for defects that you should reasonably have discovered at the time of delivery. Subsequently, a maintenance period usually applies (typically three months in standard contracts) during which you can still report defects. Since the entry into force of the Quality Assurance in Construction Act (Wkb) on January 1, 2024, a fourth paragraph has been added to Article 7:758 of the Dutch Civil Code: the contractor remains liable even after delivery for defects that were not discovered at the time of delivery, unless they are not attributable to him. In the case of a consumer, this may not be deviated from to their detriment. Read more about liabilities regarding defective construction.

The 5% rule: suspension of the final installment

One of the most powerful instruments available to the client is the 5% ruling under Article 7:768 of the Dutch Civil Code. You may withhold a maximum of 5% of the contract sum from the final installment(s) and deposit this amount with the notary instead of paying it to the contractor. You do not need to prove that actual defects exist: the deposit acts as leverage to compel the contractor to carry out repairs. The deposit expires after three months, unless you invoke the general right of suspension under Article 6:262 of the Dutch Civil Code in a timely manner; in that case, you must inform the notary of the amount for which the deposit must be maintained. Invoking the right too broadly or too narrowly can be costly; we guide both buyers and contractors through this delicate interplay.

Guarantee and warranty schemes: Woningborg and SWK

Most purchase and construction agreements are concluded based on a standard contract including a guarantee and warranty scheme from Woningborg or the Stichting Waarborgfonds Koopwoningen (SWK). Such a scheme offers, among other things, a completion guarantee in the event of the contractor's bankruptcy and a repair guarantee for defects for an agreed period. Only sign an agreement that includes a valid warranty certificate. We verify whether the scheme is actually applicable, whether deviating provisions in the contract do not undermine the guarantee, and whether brochures, technical specifications, and drawings have correctly become part of the agreement.

Disputes: Arbitration Board and the competent court

The model contracts from Woningborg and SWK often stipulate arbitration: disputes are then settled by the Arbitration Board for Construction Disputes instead of by the ordinary courts. It is important to know which procedure applies to your contract, as the arbitration clause determines where and how you must assert your rights, and time limits may expire. Our lawyers litigate before both the Arbitration Board and the civil courts, while our in-house counsel guide you in the preceding phase regarding correspondence, notices of default, and settlement negotiations. See also our page on additional and reduced work and the right of retention.

From international corporation to the baker on the corner

Whether you are an international property developer realizing hundreds of homes, a real estate investor, a contractor, or a private individual purchasing their first new-build home: at MKB Juristen, lawyers and in-house counsel work together as a team on your case. We review your purchase and construction agreement before signing, advise on deviating provisions, assist you with disputes regarding completion, additional or reduced work, or defects, and litigate where necessary. This page falls under our Construction Law. Questions about your purchase and construction agreement? Please contact us.