Designing Deeds of Partition and Building Developers’ Contracts
We advise you concerning the partitioning of land and property for apartment ownership, particularly with regard to the following topics:
- partition plan and certificate of self-containedness
- deed of partition along with the rules of procedure for the owners’ association
- building specifications
- contract of sale / building developer’s contract
- reservation agreement
- sales agreement
Partition plan and certificate of self-containedness
The creation of the partition plan is the first step towards partitioning property for apartment ownership. Usually an architect is responsible for drawing the partition plans. When these plans are created and an application is made for the certificate of self-containedness, basic legal rules have to be taken into consideration and fundamental legal decisions have to be made concerning the partition project. We advise you on this and, at your request, we apply on your behalf for the certificate of self-containedness from the competent authority.
Deed of partition together with rules of procedure for owners’ association
The deed of partition sets out the future legal relationships between the owners in the apartment complex from the time when the ownership is established through to the time when the deed of partition is cancelled – generally, after more than 100 years. Because mistakes or deficiencies in the deed of partition can have a negative impact on the market value of the flats and because such mistakes – apart from one or two exceptions – can only be subsequently removed with the consent of all the apartment owners – something that is only seldom achieved -, the creation of a “good” deed of partition is a task that carries great responsibility. At the same time, the deed of partition is a complex and legally demanding set of clauses. One can only warn here against using a deed of partition that is “off the peg”. Every deed of partition should be designed to deal with the particularities of the given property. The partitioner or his legal counsel must be familiar with the particularities of the residential complex and must have sufficient experience in the law relating to apartment ownership and in the administration of residential properties to be able to draft legally effective clauses that are intelligible to both lawyers and non-lawyers and that are of practical use for the later administration of the properties.
It is part of our daily business to create new deed of partition and to deal with ones that have already been notarised. Based on numerous projects we have worked on, we have at our disposal a collection of clauses relating to a large number of topic areas and situations. This collection is constantly being updated as well. The following topic areas serve as an example:
- completion of the building in phases
- basement garages that encroach on the land of other parties
- split-level parking and shift systems for parking spaces
- subsequent conversion of attic space
- allocation of special rights of use
- maintenance and cost allocation clauses
- distribution of voting rights
- subsequent lift installation; distribution of costs for lift
- rules for use for commercial units
- powers of the property manager
- operation of combined heat and power units and solar panel installations
- authorisation of subsequent structural changes in the flat or in areas of the property that are communally owned
- owners abroad
- general opt-out clauses
- creating a sink fund
- rules of the house
- holiday lets
In the building specifications the developer sets down how he intends to construct or refurbish the building. For the most part, the building specifications are technical in nature. Nevertheless, they are of considerable legal significance. In contracts of sale, reference is made to the building specifications when it comes to defining what is intended to be built. This means that the building specifications become a constituent part of the contract of sale. For this reason, it has to be ensured that the contract of sale and the building specifications are perfectly calibrated and don’t contradict each other. Normally, building specifications consist not only of technical explanations but also of legal provisions. This concerns, for example, clauses concerning the technical rules (e.g. DIN regulations) that have to be applied, the quality of building materials, the powers of the building developer to make technical changes in the course of construction, and the realisation of special wishes on the part of the purchaser. Because these questions are of considerable importance, it must be ensured that the building specifications and the contract of sale correspond to one another on these points.
In drafting building specifications it is important to consider carefully which technical details should be included in the specifications and which shouldn’t. The building specifications should not describe the building work in a way that is too general, nor in too great detail. If the specifications concerning the building work to be carried out have gaps or are too general in nature, then the building work is at the discretion of the developer, but he bears the risk that, in choosing how to carry out the building work, he may overstep the limits of his discretion with the result that his building work doesn’t have to be accepted by the purchaser. By contrast, if the building specifications are more detailed than necessary, this brings with it the danger that the building work actually carried out will deviate unintentionally from the specifications or that particular details cannot be achieved or can only be achieved at unforeseeably great expense.
When it comes to refurbishing existing buildings, the building specifications should show clearly and unambiguously which constituent parts of the building and which technical installations the building developer is merely repairing (and not replacing) and which parts and installations are to be left untouched, i.e. neither repaired nor replaced. As far as the refurbishment of old buildings is concerned, it is highly recommended to provide information about sound insulation, questions of energy efficiency, the building shell, sealing the foundation and work to be carried out on pipes and conduits.
In all cases, the building specifications may not contradict any brochures which the developer or his sales executives circulate as part of their sales operation.
We support you in drafting legally correct building specifications that are fit for purpose and, in doing so, we can draw on our experience of building developers’ projects that have already been completed.
Contract of sale / building developer’s contract
A pre-condition for the unhindered sale of flats by the partitioner is a contract of sale that is specifically designed for the particular project. The German regulations for estate agents and developers [Makler- und Bauträgerverordnung – MaBV], the German regulations for housebuilding [Hausbauverordnung] and the German Civil Code [Bürgerliches Gesetzbuch – BGB] contain strict rules concerning consumer protection – and these rules must be adhered to. At the same time, the partitioner has several options for structuring the relevant contracts. This applies to, for example, the payment of the purchase price and the due date for payment, the acceptance procedure for the building work, the hand-over of the individually owned part of the property and the securities provided by the building developer. The range of options for structuring a contract depends, in particular, on the schedule for the building work, the way in which the work is organised in-company, and on the type of internal project financing used by the developer. Right at the early stage of planning the construction and finances for a developer or partition project, we recommend focussing on the options for the subsequent structuring of the contract of sale for the flats. We support you in contract design and the legal aspects of project planning.
Reservation agreements continue to be a popular sales method for estate agents and developers. However, a great number of reservation agreements that one might come across in practice wouldn’t withstand scrutiny in a court of law. In our experience, salespeople often have very different ideas of what a reservation agreement actually covers. This concerns the following points, amongst others:
- Who is concluding the reservation agreement on the vendor’s part and who will receive the reservation fee, the owner of the property or the estate agent?
- How high is the reservation fee and how is this sum calculated?
- For how long should the vendor’s side and the prospective buyer be bound by the agreement? Should a premature termination be possible and if so, on which pre-conditions and with which legal consequences?
- What happens to the reservation fee if the purchase contract doesn’t come about?
- In what way is the vendor’s side liable if it breaches its reservation obligation?
We provide advice on the legal limitations of reservation agreements and the options for their design, and produce a draft contract that meets your needs.
Sometimes, the developer and the partitioner commission an external service provider (estate agent) with the sale of the flats and they conclude a sales agreement for this purpose. The conditions of this sales agreement can have a considerable influence on the commercial success of the project for the partitioner, particularly if the sale of the flats does not proceed as briskly as planned. In the context of the sales agreement, the following points should be considered:
- How high is the fee of the estate agent? How is it staggered and when is it due for payment?
- What external commission is the estate agent permitted to receive?
- What efforts at advertising the property is the agent required to make and who bears the costs incurred by this?
- What responsibilities does the agent have above and beyond merely offering the flat for sale (e.g. subsequent customer care)?
- What deadlines are given to the agent for selling the property? What are the consequences if he fails to meet these deadlines?
- What procedures are in place for dealing with the data of prospective buyers?
- Does the agent have exclusive sales rights?
We design a sales agreement that meets your needs or we subject the agreement that has been presented to you to a legal analysis.