Guarantee Shoddy workmanship: your rights

What is the building contractor’s responsibility? 10 points you should study carefully in the construction contract.

by Jürg Zulliger 24 Aug 2016

Time is money: Make sure you don’t let the guarantee period pass by unused. Photo: Tom Huber

1. Construction costs

Do general contractors have to stick to their quotes?

Fixed prices agreed in the contract are binding. The key is the term “fixed price” and a defined project. But beware: services not originally included often suddenly appear on the final invoice. This is why you must check carefully which services are included in the fixed price and how much changes will cost. If no fixed price is agreed, the accuracy of the cost projection must be defined. The standards of the Swiss Society of Engineers and Architects (SIA) set various levels of accuracy (SIA 102: plus or minus 15 percent for cost projections, plus or minus 10 percent for cost estimates). These standards only apply when both parties explicitly agree to them.

2. Implementation

Who can guarantee that the construction will go according to plan?

Advertising on websites and pictures in brochures are certainly not binding. For apartment purchases, the notarized contract and associated documents, like building specifications, plans and construction standards, are essential. The seller has to guarantee construction in line with the specifications. As the owner, you are only in a strong legal position if the desired features of the building can be shown to be listed in the agreed contract.

3. Technology

Is an equipment supplier responsible for ensuring that it works problem-free?

The law sets out a guarantee period of two years. During this time, the contractual partner must make sure that the equipment – such as a heating system – functions correctly. When building, however, it is usually the installer, e.g. the heating engineer, rather than the manufacturer who is liable to the customer. If the installer wants to limit the guarantee or not provide one, you should switch supplier.

4. Handover date

Does the general contractor have to guarantee that I can move in on time?

Absolutely, unless the deadline is qualified through ambiguous wording or provisos in the small print. The phrase “desired handover date,” for example, is not clear enough. It can be tricky if the contractor only announces the handover date three months before completion. In short, it’s all about the contract here too.

5. Shoddy workmanship

What construction defects are covered by guarantee?

Defects include everything that differs from the contract, or could have been expected under “recognized building practice rules.” If you agree with the painter that he’ll prepare a surface thoroughly and apply two coats of paint, that’s exactly what you can expect. It would count as a defect if he only applied one coat.

6. Guarantee period

What is the difference between two-year and five-year guarantees?

Structural defects have a limitation period of five years from the handover date. According to the Code of Obligations, hidden defects that were not apparent on handover must be reported immediately on discovery. These also have a limitation period of five years from handover. SIA standard 118 is more generous. It permits defects during the first two years after handover to be reported at any time. Here, too, there is a limitation period of five years from handover. After the first two years, defects must be reported immediately, as under the Code of Obligations. It is important to note that SIA standard 118 only applies if it is explicitly agreed.

7. Exclusions

What are guarantee exclusions in a construction contract?

General contractors often refuse to accept responsibility for defects. They transfer rights regarding defects by craftsmen to the real-estate buyers. This sounds like an improvement, but is actually problematic. Legal experts doubt that such an assignment of rights is legally binding. This leaves buyers empty-handed – they don’t usually know who is responsible for a building defect. Zurich-based building advisor Othmar Helbling explains: “If there’s a problem with a flat roof, for example, it can be almost impossible to establish who is responsible.” Guarantee exclusions and the assignment of rights regarding defects leave buyers high and dry. Helbling’s recommendation is to only trust general contractors who accept responsibility for their own work and that of their craftsmen and subcontractors.

8. Energy

Can the general contractor guarantee low energy consumption?

If you specifically ordered a building that meets Minergie standards or another quality label, the general contractor must deliver this. “If the house doesn’t meet these requirements, the customer must be able to prove flaws in the calculation or construction,” Helbling says. Things are more difficult with energy consumption. The contract has to contain explicit assurances that a certain target value will be achieved for the house’s energy consumption. The guarantee options are limited, however, as energy consumption depends not only on the building but also on user behavior.

9. Changes

What are the risks of making changes during construction?

Changing specifications is very risky, and can quickly lead to disputes about the basis for calculations. To be sure of success, only start construction work when planning is complete and costs have been concretely defined. If there are changes later, a written quote detailing the costs would be absolutely essential.

10 Valuations

How accurate do expert opinions have to be?

Appraisers are responsible for the accuracy of their valuations. However, when it comes to estimates of market value, there are limits to accountability. If an expert values real estate on the basis of recognized assumptions, this still doesn’t guarantee that potential buyers will be guided by this.

Smart financing

Mortgage interest rates have long been at record lows. Which mortgage is best for you? A mix of Libor and fixed-rate mortgages often makes sense: you benefit from low interest rates and protection against rate increases. The most suitable mix for you depends on your interest rate expectations and risk profile.