The private client: consumer construction contract, developer contract and budget

The law defines it narrowly. "Consumer construction contracts are contracts by which the contractor is obliged by a consumer to construct a new building" (s. 650i(1) BGB; unofficial translation, as are all quotations in this article), or to carry out substantial conversion works on an existing building. The contract "requires text form" (s. 650i(2) BGB).

For budget planning, classification is the first check. The wording refers to the construction of a building. A consumer who awards individual trades to different contractors should therefore not assume without checking that each of these separate contracts triggers the protective rules of ss. 650i et seq. BGB. Whether a project follows public law or private law rules is a different question, covered in the article on how the fields of law divide in construction.

The Baubeschreibung (building specification) becomes part of the contract. The information on the construction work in the pre-contractual building specification "becomes the content of the contract", unless the parties have expressly agreed otherwise (s. 650k BGB). If the building specification is incomplete or unclear, the contract is interpreted in the light of all the circumstances, in particular the standard of comfort and quality of the rest of the specification; doubts about the work owed are resolved against the contractor.

This is the consumer's strongest budget rule. What is in the building specification cannot later be charged by the contractor as a variation. Conversely, it only protects what it describes. A specification that leaves floor coverings, sanitary fittings or external works open shifts these items into sampling and special requests, in other words into additional costs after the contract is signed.

The contract must also contain binding information on the date of completion, or on the duration of the construction work (s. 650k BGB). For the budget this counts twice over: paying rent on two homes, commitment fees and bridging finance depend on the completion date, not on the contract price.

Check before signing	Why it affects the budget
Text form observed	form requirement of s. 650i(2) BGB
Building specification complete for all trades	what is described is in the price; what is missing becomes a special request
Sampling budgets with an amount per item	makes open items verifiable
Completion date or construction period binding	financing and housing costs depend on it
Payment plan with instalments by progress of work	check the 90 per cent limit and the 5 per cent security

Under a consumer construction contract, the total of the instalments may not exceed "90 per cent of the agreed total remuneration" (s. 650m(1) BGB), including remuneration for additional work under s. 650c BGB. At least 10 per cent therefore only falls due once the client has accepted the work and a verifiable final invoice has been submitted (s. 650g(4) BGB).

For the client this is a built-in retention. It must still be provided for in the financing, because the final payment will certainly come, only later. A client who aligns the financing plan with the instalments and forgets the final payment ends up with a gap that is not a cost increase but a planning gap.

Independently of this, the general rule of s. 632a BGB applies: the contractor is entitled to instalments only up to the value of the work performed in accordance with the contract, evidenced by a statement. The client should not sign, without checking it, a payment plan that makes instalments due ahead of the progress of the work. How a payment plan is structured overall is covered in the article The payment plan: instalments and security.

On the first instalment, the consumer must be given security "for the timely completion of the work without material defects in the amount of 5 per cent" of the agreed total remuneration (s. 650m(2) BGB). At the contractor's request, it is provided by the client withholding the instalments up to the total amount of the security (s. 650m(2) BGB); it can also be provided by a guarantee or a promise of payment from a credit institution or credit insurer (s. 650m(3) BGB).

If the remuneration increases "by more than 10 per cent" as a result of instructions or other changes to the contract, further security of 5 per cent of the additional remuneration claim must be provided on the next instalment (s. 650m(2) BGB). This is also an early warning signal: once this threshold is reached, the changes are no longer a side issue but are shaping the budget.

Under a consumer construction contract, the contractor cannot demand a Bauhandwerkersicherung (builder's security) from the consumer (s. 650f(6) BGB, with an exception for a building supervisor who has control of the financing funds). The position is different for a commercial client; there, the security belongs in the budget as a cost item.

The following example is entirely made up and serves only to show the calculation. A consumer enters into a consumer construction contract with a total remuneration of EUR 400,000.

Step	Calculation	Amount
Maximum total of all instalments	90% of EUR 400,000	EUR 360,000
Security on the first instalment	5% of EUR 400,000	EUR 20,000
Instructions during construction	additional remuneration	EUR 50,000
Checking the threshold	EUR 50,000 of EUR 400,000 = 12.5%, so more than 10%	top-up due
Further security on the next instalment	5% of EUR 50,000	EUR 2,500
New maximum total of all instalments	90% of EUR 450,000	EUR 405,000
Minimum final payment	EUR 450,000 minus EUR 405,000	EUR 45,000

The figures show what belongs in the financing plan. Not the EUR 400,000 of the contract, but the EUR 450,000 after changes, split into instalments of up to EUR 405,000 and a final payment of at least EUR 45,000.

With the designer, too, the consumer has two information rights that affect the budget. Both require text form and come to nothing if the client is unaware of them:

• The special right of termination after the target-finding phase: When the architect submits the planning basis and the cost assessment under s. 650p(2) BGB, the client may terminate the contract; the right "expires two weeks after submission of the documents" (s. 650r(1) BGB). For a consumer, it only expires if the architect informed them in text form, when submitting the documents, of the right of termination, the time limit and the legal consequences. After termination, the client owes only the remuneration for the services performed up to that point (s. 650r(3) BGB). The target-finding phase itself is covered in the article The target-finding phase: planning basis, cost assessment and special termination.
• The negotiability of the fee: If the Besteller (the client, as the BGB calls them) is a consumer, the architect must point out in text form that a fee higher or lower than the values in the fee tables can be agreed; if this notice is not given, a fee at the basic fee rate is deemed agreed for the basic services agreed between the parties, in place of a higher fee (s. 7(2) HOAI, the Honorarordnung für Architekten und Ingenieure, or fee regulations for architects and engineers). How fee agreements have been structured since the 2021 reform is explained in the article on fee agreements since the 2021 reform.

Anyone buying from a Bauträger (developer) gives up several of the instruments a client uses to steer the budget during construction. Section 650u(2) BGB reads: "Sections 648, 648a, 650b to 650e, 650k subsection 1 and sections 650l and 650m subsection 1 do not apply."

Excluded provision	What the purchaser lacks as a result
s. 648	free termination of the contract
s. 648a	termination for good cause under this provision
ss. 650b to 650d	right to instruct changes, statutory adjustment of remuneration, simplified interim injunction
s. 650e, s. 650k subsection 1, s. 650l	also excluded; details not set out here
s. 650m subsection 1	the 90 per cent limit on instalments

The consequence for the budget is clear. The purchaser has no right to instruct changes under s. 650b BGB and no free termination under s. 648 BGB. Changes are only possible by agreement, that is, at the price the developer offers. The budget is therefore decided before signing: through a complete building specification, special requests fixed with a price and a checked payment plan. Instalments under a developer contract follow their own rules, which this article does not cover.