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For years, construction costs have been rising while residential construction has stagnated. In addition to interest and material prices, the thicket of technical requirements is regarded as a cost driver: thousands of standards and rulebooks have pushed the “usual construction standard”, in particular via the generally accepted rules of technology, ever higher – often beyond what is necessary for good, safe and practical living.
If the parties to a construction contract wish to agree a standard that remains below the quality standard usual for comparable buildings, they run the risk that this method of construction will be deemed a defect and that this will trigger the employer’s remedies for defects.
Opt‑in solution for reduced quality requirements
The draft bill seeks to provide relief and to increase legal certainty for agreements in construction contracts that deviate from the usual quality standard. The core is an opt‑in solution: the employer and contractor may, in text form, agree the application of a “statutory baseline standard (Building Type E)”.
Without this express agreement, the existing construction contract law remains applicable, with the generally accepted rules of technology and the quality level of comparable buildings as the yardstick.
Technical building regulations as baseline standard
If Building Type E is validly agreed, the yardstick for defect assessment shifts in two stages: Where the technical building regulations of the Länder contain specifications for characteristics, the building is free from defects to that extent if these requirements (baseline standard) are met.
A higher standard in the regulated areas (e.g. fire safety, ventilation, lighting) is disregarded in the assessment of defects unless the parties expressly agree a higher standard. Thus, what is required under public‑law building regulations becomes the civil‑law minimum standard in this area.
Tying into the Länder building regulations means that there is no nationwide “baseline standard”; rather, the location of the building and the applicable requirements at the time of acceptance are decisive.
In addition, it is envisaged that the baseline standard – and thus the requirements for freedom from defects – can be defined for further criteria not covered by the technical building regulations of the Länder by issuing an ordinance.
Below the usual standard: clear notice suffices
For areas not covered by the technical building regulations, the established system of Section 633(2) BGB continues to apply. Decisive remain the agreed characteristics, suitability for the intended or ordinary use, or – absent agreement – the characteristics usual for comparable buildings.
If the usual quality standard (in particular for reasons of cost savings) is to be undercut, the draft eases the previously strict requirements for an agreement on characteristics deviating from the generally accepted rules of technology: in future, a clear notice in text form, prior to contract conclusion, of the undercutting of the usual quality standard shall suffice to make a valid agreement “downwards”.
Further explanations of technical consequences and risks are, according to the reasoning to the draft bill, no longer required. The employer of a Building Type E structure is deemed to expect deviations and can obtain information on the implications as needed.
The measure for clarity is whether a reasonably informed employer can glean from the highlighted notice that individual characteristics are being undercut. Unlike criteria covered by the technical building regulations, the parties cannot rely here on a codified minimum standard. In each case, it will be decisive which deviation from the usual standard remains acceptable for a functional building.
In certain constellations – for example, where the essential planning specifications were provided by the employer or the deviation is obvious – a notice is (as has previously been the case) to be deemed unnecessary. As the contractor would bear the burden of proof in a dispute, careful consideration is required as to whether the contractor should in fact dispense with such notice.
Transparency notices in consumer building contracts
The draft also supplements the content requirements for the description of works in consumer building contracts, i.e. in the case of new builds or significant refurbishment works to existing buildings:
First, the works owed must be expressly labelled as works to the “statutory baseline standard (Building Type E)”.
In addition, the description must state the specific sound insulation standard and the cost savings resulting from the deviation from the usual quality standard.
No changes in tenancy and sale law
Amendments to tenancy and sale law are not envisaged in this draft either. The reasoning to the draft bill notes, inter alia, that the parties in tenancy and sale law can in any event agree deviating contractual arrangements at any time.
This leads to a lack of legal certainty in tenancies, as the statutory baseline standard (Building Type E) is not automatically deemed free from defects there. The same applies in sale.
In our view, this significantly hampers the intended benefits of the legislative change.Without legal certainty across the entire contractual chain, there is little incentive effect for simple and experimental construction.
Outlook: implications oft he draft bill on Building Type E
Whether these changes will in fact contribute to cost savings through simpler and experimental construction will be borne out in practice.
The absence of statutory anchoring of Building Type E across the entire contractual chain, including tenancy and sale law, entails considerable legal uncertainty. Also to be viewed critically is the “fragmentation” of the defect‑relevant baseline standard resulting from the differing regulations of the Länder.
At present, the Länder and associations can submit their statements on the draft. We will keep you informed of current developments and are happy to support you already now in simple and experimental construction.
Even if the current draft is implemented, the parties to a Building Type E contract – at any rate outside the technical building regulations – will need to exchange views on what is ultimately intended more than before and to record this contractually. Please feel free to contact us for this.
