GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
7.6 Liens or Encumbrances in the Event of Non-Payment Contractors of a construction project (or parts of such) may acquire a right over the proper - ty, comparable to a lien, in the form of grant - ing a mortgage on the property to secure the contractor’s remuneration ( Sicherungshypothek des Bauunternehmers ). However, this is only applicable if the buyer is also the owner of the relevant property on which the construction work is performed and the work, the value of which is to be secured, has already been per - formed. In addition, the contractor may claim a lien ( Werkunternehmerpfandrecht ) on movable items the contractor has been instructed to cre - ate or modify for the buyer. Once the contractor’s payment claim has been satisfied, it is obliged to approve the deletion of the encumbrance in the land register and to For all building projects, the necessary build - ing permits must be obtained before the start of construction work. This includes the official approval of necessary fire safety standards and other technical certificates by the building authority or the responsible engineer. In some, but not all federal states, the building project is formally accepted by the building authority after completion. In some instances, if the building is intended for a specific commercial or industrial purpose, a business licence must also be issued. return the movable item to the buyer. 7.7 Requirements Before Use or Inhabitation
the amount of the insurance coverage or to the extent of purpose or gross negligence. 7.4 Management of Schedule-Related Risk Under the Civil Code, the contractor is liable for construction delays if they are caused negli - gently or wilfully. Furthermore, the parties may agree on contrac - tual damages ( Vertragsstrafe ) for the delay of contractually agreed milestones. In this case, the parties agree on a certain amount the contractor has to pay for each day’s delay after the breach of a milestone, with a usual maximum cap of 5% of the overall fee. The parties may agree intermediate milestones or the finalisation date of the construction work, which will be subject to liquidated damages. According to High Court judgments, the maximum amount of damage per day may be 0.25% of the net purchase order for the finalisation of construction work, and 0.15% of the net purchase order for any agreed inter - mediate milestones. In any case, the liquidation damages must be deducted from any damages for delay of works under the Civil Code. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance A warranty bond of 10% of the net fee is market standard to secure the performance of the con - tractor’s work until completion. From completion onwards, a warranty bond of 5% of the amount of the final invoice for malp - erformance within the liability period is market standard. Generally, warranty bonds are provided as bank guarantees.
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