Project-based new construction
Many new homes are built by developers. They purchase land, take care of the building permit and contract the contractor. The developer sells the land to the buyer and the contractor enters into a separate construction agreement with the buyer. In this triangular relationship, it is not always clear who is responsible for construction errors made by the contractor. This lack of clarity is especially true if the construction error is caused by a design error.
Buyers who buy a home with a Woningborg certificate can submit disputes to the courts or to the Arbitration Board. Because the Council of Arbitration provides an accessible and – for the home buyer – inexpensive procedure, many disputes about defects in new construction homes are handled by the Council of Arbitration.
Board of Arbitration: contractor responsible for design errors
Quite a few Arbitration Board rulings have been published recently on the question of who is responsible for design errors in project-built homes. In disputes between the buyer and the contractor, the contractor usually takes the position that he did not create the design, so he cannot be held responsible for design errors.
The law provides that the client is liable if a construction defect is caused by errors or defects in documents (specifications, construction drawings, etc.) originating from the client. The rationale is that it is unreasonable to saddle the contractor with a problem for which he is not ultimately responsible. In project-based construction, the question is to whom errors in the specifications or construction drawings provided to the contractor should be attributed. The construction contract has two parties: the buyer-client and the contractor. If the contractor builds according to specifications and drawings received from the developer, it would be defensible to say that the contractor bears no responsibility for those documents, and thus the risk of those errors lies with the client.
The Board of Arbitration sees it differently. The fact is that the specifications and drawings did not originate from the client. The Arbitration Council answers the question of who is responsible as follows. In project-based construction, the client is not involved in the creation of the design of the house. The contractor performs the work according to documents received from the project developer. This means that, in the relationship between the client and the contractor, the contractor is responsible for the design. Even if he did not create that design himself.
The contractor is often left with the damage
If this means that the contractor suffers damage by having to carry out repair work or pay compensation to the client, the contractor will therefore have to recover his damage from the project developer who provided him with the design. In practice, this is problematic because project developers generally agree with the contractor that they cannot be held liable for anything related to the building contract. So in that case, the contractor is left with the damage.
Source: COA Feb. 7, 2020, No. 81523
This article was written by Mr. Rudolf van Binsbergen , affiliated with the Real Estate and Government Practice Group.
