Entering into a real estate renovation/building agreement might be an unpleasant experience for those who are not properly informed about the legal implications (Rights and Obligations) referable to each contractual part. Whether there are issues with incorrect execution of works, deviations from the agreed project or presence of defective materials, a professionally drafted contract represents the best protection and will keep the Investor out of lot of problems, reduce stress and often save you a considerable amount of money; and this is particular when the renovation/construction project is about a medium large size property which would take months to come to the completion.
Due to our experience in Construction Law and Building agreements, through the years we realized that a tailor made Building agreement should also include functional legal links/connections with the Letter of Engagement of the Project Manager; and this to upgrade the intensity of the legal protection of the Client/Investor and differently profile the legal responsibilities.
A building agreement drafted by an experienced property lawyer can also maximize the fiscal impact of the operation as well as helping the Client controlling his budget.
Penalty clauses and Deposit Guarantee mechanisms should also be part of it.
A brief legal overview
The Contractor is responsible for defects and unauthorized variation of construction works; If there are visible defects, the Investor should not accept the works otherwise will lose the right to claim on the guarantee. On the other hand, the acceptance of work does not compromise the guarantee if there are hidden defects. Such defects can be contested once they are discovered. In order to make a claim on the guarantee the client, through his lawyer, should do the following:
- Reporting the hidden defects within 60 days of their discovery
- Trying (if possible) to find a friendly agreement with the Contractor (ADR)
- Taking legal action within 2 years from the end of works
In case the Investor fails complying with these duties, then will lose the guarantee cover. In cases where the contractor would not point out the defects and behaves in bad faith, the term for the legal action is extended to 5 years. Once the defects and/or the unauthorized variations have been proven, the fault of the Contractor is considered as presumed and it becomes his responsibility to prove absence of negligence. According to article 1668 of the Italian civil code, in the case of visible or hidden defects the client is entitled to take 4 possible legal courses of action:
- Request correction of the defects and/or variations, the total cost to be borne by the contractor
- Request a reduction in price
- If the variations or the defaults are very serious, request the resolution of the contract
- Request compensation for damage.
Also read: THE BUILDER’S WARRANTY ON A PROPERTY: WHAT IT IS WORTH AND TO WHOM IT APPLIES – NEW BUILDINGS