Current developments and decisions in construction

Germany has strict regulations for building construction, which are often perceived as obstacles to innovation and efficiency. The draft bill for the ‘Draft Act to Facilitate the Construction of Buildings under Civil Law (‘Building Type E Act’ for short) aims to create a new legal framework to promote technical progress and reduce construction costs. But does this draft actually bring the hoped-for relief, or does it create new legal uncertainties? In this article, we take a look at the main innovations and challenges of the draft. Our focus here is on the civil law regulations that the legislator plans to modify as early as the beginning of 2025.

Problem: Overregulation in the construction industry

The starting point for the draft law is as follows: The construction industry in Germany is often perceived as over-regulated

Many see a core problem in the ‘recognized standards of technology’ (r.s.o.t.), which cannot always be clearly defined, but which nevertheless play a central role in construction projects. Agreeing deviations from these recognized standards of technology in individual cases is often a challenge for those involved in construction. This is because, according to established supreme court case law, the contractor must inform the client in particular of the consequences and risks associated with non-compliance, unless these are known to the client or arise from the circumstances (BGH, VII ZR 65/14). In practice, such agreements therefore entail an increased need for regulation and at the same time harbour legal uncertainties with regard to their effectiveness.

The most important new features of the draft law

The so called ‘Building Type E Act (Gebäudetyp-E-Gesetz)’ aims to ease the burden on the construction sector by standardizing presumption rules and facilitating agreements that deviate from the recognized standards of technology. The draft bill provides for several amendments to civil law that are intended to make the realization of construction projects simpler and more legally secure.

1. Codification of the recognized standards of technology

(§ 650a III BGB new version)

One of the main changes is that a rebuttable presumption rule will be implemented in Section 650a BGB for certain construction standards. The legislator wants to differentiate between construction standards that ‘contain safety-related specifications’ on the one hand and standards that ‘purely reflect equipment and comfort features’ on the other. Only the first group of construction standards is to be given a presumption of conformity to the effect that these are generally recognized standards of technology.

Nevertheless, the draft bill does not specify which construction standards are ultimately to be covered, which could lead to difficulties in practice. The demarcation of the two aforementioned groups of technical building standards will also present a challenge in practice without further concretization by legislators or case law.

2. Introduction of construction contracts for buildings (§ 650o BGB new version)

In order to make it easier for contractors to deviate from the recognized standards of technology, the draft bill also provides for the introduction of a new type of contract. Within the framework of that special construction contract for buildings (‘Gebäudebauvertrag’), only ‘expert’ contractors are to be enabled to enter into agreements on the quality of the construction of ‘buildings’ that deviate from the recognized standards of technology under simplified conditions.

The scope of application of this new type of contract cannot be clearly defined, at least according to the current status of the draft bill.

In contrast to general construction contract law, the material scope of application does not extend to all structures, but is limited to ‘buildings’ and the associated outdoor facilities or parts thereof. Pipes, roads and other objects not intended for human access that are not suitable or intended for the protection of people, animals or property are therefore not covered.

The personal scope of application also currently raises questions, particularly due to the restriction to ‘expert’ contractors. In this respect, the explanatory memorandum to the draft bill states that only contractors who have knowledge of the recognized standards of technology as a result of technical training are to be covered. However, it is not sufficiently clear, which exact requirements are assumed. Therefore it seems to be necessary to further specify this aspect in the course of the legislative process or, at the latest, through case law.

3. Facilitation of quality agreements.

The first simplification envisaged by the legislator concerns the conclusion of quality agreements. In future, it should be possible for expert contractors to agree on a deviation from the recognized standards of technology without the contractor having to inform the customer of the risks and consequences associated with this deviation.

This means that the contractor no longer has to inform the customer of all relevant eventualities that may occur in the event of the agreed deviation. However, the parties must still agree expressly or through conclusive behaviour that a deviation from the standard terms and conditions is to take place. In order to ensure legal certainty, it is therefore still advisable to at least specify in text form which characteristics of the construction work (1) are to deviate from which recognized standards of technology (2) and which requirements are to be owed instead (3). Only regarding the resulting risks, instructions are no longer required under the planned new regulation.

4. Modified definition of defect (§ 650o III BGB new version)

Another significant innovation concerns the concept of defects. Here the draft bill provides for a special regulation whose scope of application is to be limited solely to the new contract type (‘Gebäudebauvertrag’). The concept of defects in the general law on contracts for work and services and in construction contract law therefore remains unchanged. The following modification of the concept of defects also only applies if the parties have not reached a specific agreement on quality prior to execution.

If, in such a case, the execution of the construction work deviates from the recognized standards of technology, there is – in legal terms – still no defect, provided that the following two conditions of the new regulation of Section 650o III BGB are met.

Firstly, the contractor must have already notified the customer prior to the execution of the construction work that a construction deviating from the recognized standards is to be executed and the customer must not have immediately objected to the deviation after this notification.

Additionally, the executed construction works must – despite the deviation from the recognized standards of technology – guarantee an ‘equivalent’ construction in the long term, with regard to the ‘safety and suitability of the building’ for the contractual or otherwise customary use.

Due to the numerous new and legally unspecified legal terms, these prerequisites already entail some uncertainties in practice. For example, the first requirement raises the question of how much time the customer may take to object – in particular whether the involvement of a planner is justifiable. The requirements for the ‘equivalent execution’ also appear to require clarification and regulation. It is however recognizable that the legislator seems to focus on very specific aspects of the quality of the construction work – which are the aspects ‘safety and suitability’, while other conceivable quality characteristics, such as aspects of aesthetics, should be irrelevant in the event of deviations from the recognized standards of technology. The question, which of these legal categories individual technical aspects of the construction work ultimately fall into is nevertheless left open by the draft bill. In this respect, the field is therefore open for further concretization through case law, practical contract drafting and the assessments of experts.

5. Evaluation and conclusion

Despite all the criticism, the draft bill can be considered a progress. The partial elimination of obligations to provide information between entrepreneurs is a positive development. Nevertheless, numerous questions remain unanswered. A central problem is the various undefined legal terms that are to be introduced by the draft. These would lead to uncertainties in practice and thus create an increased need for consultation and regulation.

Above all, however, the question arises as to how the standards agreed within the framework of a ‘Gebäudebauvertrag’ can be passed on along the usual contractual chain if they deviate from the recognized standards of technology. After all, executing contractors rarely work directly for the end customer. Not only in the case of any subcontractor chains, but also in the event of a subsequent sale or lease of the constructed building, the parties must also be able to pass on any existing deviations in a legally effective manner. The initial issue of which consequences and risks need to be clarified would therefore remain to be solved in these cases.

After all the draft Building Type E Act is a first step towards easing the burden on the construction industry. However, the draft includes numerous new legal uncertainties. It is uncertain whether these will be resolved by the time the new regulations shall come into force at the beginning of 2025. It therefore remains essential for clients and constructors to draft contractual agreements carefully and to agree in detail any possible deviations from the recognized standards of technology.