Architects run over the budget for a fixed price contract

Accomodation, House and Garden
21
1. Economic reasons DO NOT constitute force majeure. The point of a fixed price contract is that one fixes the price and the other assumes the price risk. If that does not work for one party or the other, you cannot call FM because it went against you. You would not be able to claim FM is everything was half price, they would tell you (rightly so) TOUGH LUCK

2. FM for war means that they need something and they can't get it because of the war. Materials from Ukraine or Russia for example. FM for pandemic means similarly that because of that specific reason which is out of their control they cannot deliver.

I would go fully aggressive and spend a lot on proper lawyers to get it on track. When you're talking construction, there are big amounts at stake, and every month you delay you pay extra rent etc. If they need something reasonable or are prepared to meet you halfway I understand getting on the table. So if this is stupid posturing before a negotiation, it's an awful approach but at least they might have something reasonable in mind. If they're just taking the piss, lawyer up, see what kind of balance sheet they have and go after them without remorse and with extreme prejudice.

In February the prices were already quite high on most raw materials, they delayed to give a you a quote for months, gave you one that was probably based on stale info, and now they want to go back on it? Screw those guys.

22
The architects won't go bust, but the part dealing with your building might...

Builders and architects often don't use their main company to do large building projects. They will use a related company with a similar name so that should it go pear shape they can pull up the drawbridge and walk away.

A colleague of mine bought a house in Baselland about a decade ago and sometime after it was discovered that the insulation between the foundation and the main walls had been forgotten. The house was a health hazard and had to be pulled down. The builders declared bankrupt, my colleague go SFA and the boys were of working on a new project within weeks.

23
Yes. The typical way to do it is that the developer (landowner, or engaged by a landowner) will set up a smaller limited company to develop just this project. When OP mentioned architect, I assume she meant the developer. OP's contract is with the developer.

The developer will then engage architects to design, engineers to do the engineering, and the main general contractors to build. Quite likely they have all worked together before.

The main general contractors will engage subcontractors. The piling guys, the kitchen guys, the flooring guys, the electricians, the carpenters, etc.

So now we have an inflation problem (which is about 7-12% in the construction industry, where previously profit margins of 5% is already considered quite good), and supply chain problems... what happens? The guys who do the real work suffer first, i.e., the subcontractors. But they are on fixed price contracts. These are small companies and they will probably go bust. Then the general contractors realize that the project will not finish unless they pump more money in, and they try to squeeze the developers, and the developers try to squeeze you. As Jim says, they can also declare bankruptcy for this small company, draw the bridge and walk away.

However, the developer will have a performance guarantee from the general contractors (otherwise banks will not finance the project). To get the performance guarantee, I would be surprised if the parent company did not have to sign a counter guarantee, so they can't simply walk away. I hope OP has seen such a performance guarantee (I asked for this when I bought, and I got it, both times).

So to sum up:

1. get together with the other buyers, and lawyer up

2. understand the setup of the developer. Who are they, who are the parent companies?

3. who are their financiers? ZKB helped finance the construction project of my current place.

4. find out if there are guarantees in place in case they go bust (this is called a Kaution, or a Bürgschaft). Usually the financiers require this as part of the security package.

5. so now you know their financiers, the performance guarantees, parental guarantees, you can demand that all of them do whatever they can to deliver that apartment at that fixed price. If they can't then do they have a reasonable suggestion? Eg., cancel the trees/bushes they were supposed to plant (just an idea).

I'm not an expert here, but some years ago I was involved in some infrastructure project financing. As a financier, I just made sure that my company get its money back if something went wrong (so I lined up a team of top lawyers on a retainer ready to quickly move in and grab everything, thus bankrupting the company), but as a (home)owner, you just want to move in, which puts the negotiations in a different light.

24
you are howard marks and i claim my £5!

https://www.ft.com/content/93102a3e-...d-f85e939055fe

25
Dear all,

Thank you for the discussion and suggestions. We contacted our legal insurance and they said our case is included so the insurance will pay for the lawyer representing us in this case.

We also got all the addresses of our future neighbours from the Grundbuch. However, we decided not to contact them for now as it will be easier for the architects to deal with just one unhappy client and probably they will be more reasonable if this is just us.

We also visited the building site. There many people working, we saw through the window that our apartment has already the warm floor installed (the pipes are inside the floor so we can imply from the height of the floor they all the pipes have been installed). So it is just the finishes that are left. For now architects moved the planned move in date by at least 3 month without guarantees and compensation for this 3 months (6k = our rent) as was written in the contract.

Should the Russia oil embargo happen they have one more FM to claim and this is my biggest fear. (Well apart from the WW3 and China invading Taiwan)

We will write the letter with a lawyer carefully so they cannot claim it as FM as we have predicted it.

I will keep posting here to update on our case and help other people in future.

26
Again, unless they sourcing materials from an affected area and that has been disrupted, they have no leg to stand on regarding FM. The force they're claiming is too major, should DIRECTLY affect their business, if not more specifically the completion of the project at hand. "Materials are now expensive", is not FM. Either they have some clause to adjust prices in case of big moves, or they will have to eat it. If they've structured the development through an SPV that they can throw to remote bankruptcy, and you believe that is an actual consideration, I'd keep them going with whatever means I could so they finish as much as possible, and then let them claim extra money. Better for them to do the work and then have a discussion about owing them money or not (that could be fought in court according to actual contracts), rather than them dropping the project and you sit on half-done property.

27
Here is a summary of when prices might be adjusted by the SIA (swiss society of architects and engineers) (albeit in German: Deepl is your friend):

https://www.sia.ch/fileadmin/Umgang_...usektor_DE.pdf

A lot depends on the wording of the contract. If you need a construction lawyer to have a look, PM me.

28
A lot? You mean like 2k or 50k? At 500 CHF per hour the budget is growing pretty quickly. Reviewing the documents and giving some very base advice will easily cost a few thousands already. Been there done that.

If your legal insurance doesn't cover that expense I'd wait till you get some additional info from the architect. If the additional expenses are under 10k it might be cheaper to swallow it up than start the legal battle.