Every renovation comes with a cost. But when that cost turns out to be twice what you expected, it's hard not to feel disheartened. In this article, you will learn how to avoid such a situation and what to pay attention to when entering into a works contract, as well as during the renovation itself.
The family of Maksim and Svetlana Fedorov (names and surname changed) were originally from Russia. They had lived their whole lives in Novosibirsk, until one day the head of the family, Alexei, a major entrepreneur, decided to take his business international. He had long dreamed of doing so, and Germany was, as it happened, well suited to his goal. Alexei quickly found partners in Hamburg, and things got moving. At first, he managed to coordinate everything directly from Russia, but at some point that became quite difficult, and the family, having weighed the pros and cons, decided to move to Germany.
Important to know
Under §§ 631–635 BGB, the remuneration under a works contract is deemed agreed unless the parties have expressly agreed otherwise — but this does not relieve the contractor of the duty to justify the price.
Once settled in Germany, they wasted little time deciding to buy a private house near Hamburg. It was a splendid house: two storeys, high ceilings, with a summer house, a garden, a children's playground and a garage. The only trouble was that it apparently hadn't been renovated since it was built. In short, the house was in less than ideal condition. Major renovation work was essential. Since the Fedorov family wanted to move into the new house as soon as possible, they decided to start the renovation right away. For this purpose, they hired a painting and decorating firm, "Müller" (name changed). The workers were to finish by the first of August. Svetlana very much wanted to move into the newly renovated house before the children's school holidays ended, so that the family could move in calmly and the children could then go off to school.
Despite the tight deadline, Müller agreed to take the job. After assessing the scope of the work and taking the necessary measurements, the firm gave the family a preliminary cost estimate for the renovation work (Kostenvoranschlag). The estimate set out in detail the upcoming renovation work agreed with the family, along with the prices for the services the firm was offering. The total sum under this estimate came to 11,000 euros. On Maksim and Svetlana's instructions, the firm was to carry out painting and plastering work throughout the house, the garage, and the summer house, which included plastering the façades and interior rooms, filling and priming the ceilings and walls, wallpapering the walls, painting the walls, polyurethane decorative elements — ceiling cornices and skirting boards — and certain other minor works.
Without wasting any time, the firm got straight to work on the house. The Fedorov family took little interest in the progress of the work and generally tried not to get too involved, only bringing materials — dry mixes, paints, primers — and occasionally giving instructions. Before long, however, Maksim and Svetlana noticed that the renovation work was going too slowly, and that they were unlikely to make the first of August deadline. To speed things up, they hired a second firm to take over the work on the garage and the summer house. They agreed with Müller that it would keep working on the house, and, in exchange for the garage and summer house being handed to the other firm, Müller would carry out additional work in the kitchen, applying a special "Venetian plaster" finish. Traditional Venetian plaster is a very complex application technique. It's no surprise, then, that such plasterwork, given how demanding it is to apply, requires more labour. The family, however, gave this no thought. Believing everything had been agreed, they simply waited for the renovation to be finished.
Several months later, a colossal amount of work had been done. The builders had really outdone themselves. Everything was beyond praise, and the Fedorov family had no complaints whatsoever. On the contrary, they were delighted and were looking forward to moving into the new house. What's more, the other firms they had hired had also finished their work on time by then.
A few finishing touches later, Müller gave the family an invoice — the so-called Abschlagsrechnung. It stated a sum of 11,900 euros, whereas the preliminary estimate had come to 11,000 euros. The family was not at all troubled by the difference, since certain changes had been made along the way. Naively believing this to be the invoice for the completed work, they paid it right away and said goodbye to the workers. Unfortunately, they did not yet know that an Abschlagsrechnung is only an interim payment for work completed so far.
Some time later — six months on — the director of Müller appeared at the door of their new house, which still smelled of fresh paint. They had never met him before. All negotiations and approvals had always gone through the site foreman, who, according to the director, was his right-hand man. The director, however, had not come to congratulate the happy family on their new home. He brought with him a final invoice (Schlussrechnung) for a total of 26,000 euros. The invoice also accounted for the sum the family had already paid (11,900 euros). This meant the Fedorovs still owed the painting firm a further 14,100 euros — more than twice what they had already paid.
Shocked by this turn of events, Maksim and Svetlana categorically refused to pay the invoice, believing it must be some kind of mistake.
But that was not the end of the matter. For an entire year afterwards, the director kept trying to get them to pay for the completed work. Ultimately, having received no response from the Fedorovs, he turned to a lawyer. Attempts through the lawyer also failed to resolve the matter, so he filed a claim with the court.
Meanwhile, Maksim and Svetlana, together with the children — who had by then settled into the new house — moved to the Czech Republic. Maksim's business was growing steadily and soon expanded beyond Germany. In Hamburg, things weren't going well for the children at school, the language was proving extremely difficult to pick up, and Svetlana herself was not happy with life in Germany. After visiting Prague several times — a city known for its large Russian-speaking population, affordable prices, and beauty — the family decided to move there.
By that point, they had already managed to sell the house. In fact, the sale had taken place shortly before Müller's director went to court. The transfer of ownership had not yet been recorded in the land register (Grundbuch), since at that point only an application for a priority notice (Vormerkung) recording the buyer's future transfer of ownership had been filed.
By the time the Fedorov family came to our firm, the regional court (Landgericht) had already issued a default judgment (Versäumnisurteil), since the defendants had failed to appear at the hearing, ordering them to pay the sum claimed — 14,100 euros. Maksim and Svetlana insisted they had never received the summons. By that point, however, they were already living in Prague, and their mail was being forwarded to friends. Our clients, of course, swore that their friends were very reliable and always passed on their mail immediately. But the deadlines had already been missed. What's more, the case file we requested showed that the summons had in fact been delivered to the defendants.
Without delay, we filed an objection with the court against the judgment issued in the parties' absence. In German civil procedure, once such an objection is filed, the matter reverts to ordinary contentious proceedings. In the subsequent hearing of the case, we put forward the following arguments:
First, the measurement of the house's surface area submitted by the claimant did not correspond to reality. Second, our clients and Müller had originally agreed on a price of 11,000 euros, and our clients believed this to be the fixed price for the work. Third, any instructions our clients gave were given only within the scope of the work already agreed, and the additional instructions arose solely because the renovation of the garage and summer house had been withdrawn from Müller's scope by the clients — meaning these instructions ought to have been credited against the work that was withdrawn. To establish this, during the proceedings we attempted to call the firm's site foreman as a witness, since all the work approvals had gone through him. As it soon turned out, however, he had since taken over the firm himself and, understandably, was not willing to testify against himself. Fourth, we pointed to the odd circumstance that the director had only turned up with the final invoice six months later. The claimant explained this by citing a serious health condition, saying he had spent the entire period in hospital and had only carried out the necessary calculation once he had recovered.
Under German law, the rules governing works contracts are found in §§ 631–635 of the German Civil Code (Bürgerliches Gesetzbuch – BGB). Under § 631(1), under a works contract "the contractor is obliged to produce the promised work, and the customer is obliged to pay the agreed remuneration." Under § 632, "remuneration is deemed to have been tacitly agreed if, in the circumstances, the work can only be expected to be carried out in return for remuneration" (para. 1); "if the amount of the remuneration is not fixed, remuneration corresponding to the going rate is deemed to be the agreed remuneration, or, in the absence of a going rate, the usual remuneration" (para. 2).
The main difficulty, however, lay in the fact that German case law in most cases favours the contractor. If the work has been completed and no complaints have been raised about its quality, then payment is simply due. In our case, our clients were entirely satisfied with the work carried out. Whether or not individual instructions had actually been given by the clients was, in that light, secondary. The work had in fact been performed, and so it had to be paid for. And even if, in fact, there had been no additional instructions that increased the scope of the work, payment would still be due for the work performed under § 632 of the German Civil Code. As a result, the court did not even consider the question of whether the renovation work had to be paid for at all. It considered only the extent to which the work stated in the final invoice had actually been carried out. And here, our clients could not say specifically which work had been done and which had not — hardly surprising, since it is extremely difficult for someone with no expertise in renovation work to answer such a question.
The only way to get to the bottom of the situation would have been to commission an expert report, but that would have cost around 3,000 euros. Even if the expert had concluded that the work really had been done but, say, the stated surface area had been overstated by 10–20%, the invoice amount might have been reduced — but only by that same 10–20%, no more. And the cost of the expert report itself would have fallen on us had we lost. In addition, we studied in detail the provisions of the German Construction Contract Procedures (Vergabe- und Vertragsordnung für Bauleistungen — VOB), from which it followed, for example, that the area of windows is not deducted from the total wall area, since window reveals — which also require renovation work — are taken into account, and their area often covers the entire window opening. Naturally, our clients, not being experts, were unaware of such nuances and believed the area subject to renovation to be significantly smaller than what the other side claimed, given how many windows their house had. Having discussed the question of an expert report with our clients, we therefore decided not to spend any further money on it.
By that point, Svetlana's nerves could no longer take the strain. She cried in court and pleaded for it all to be over. Having weighed up the situation, assessed the chances, and discussed everything once more with our clients, we decided to close the case with a settlement. After negotiating with the other side, we managed to secure a reduction in the amount claimed. The final sum came to 8,000 euros.
Another reason for agreeing to a settlement was the fact that, after the court issued its original default judgment, the painting firm had registered a charge over the house and the plot of land, in the amount of 14,100 euros, in the land register. It was something of an unfortunate coincidence of timing. Although the house had been sold before the litigation began, the formal transfer of ownership had not yet been fully completed — only an application for a priority notice recording the transfer of ownership of the land to the buyer had been filed, and our clients remained the registered owners at that time. An entry recording a charge on a property means there are restrictions on transactions involving it: the owner may not sell, exchange, or gift the property without first having the charge removed.
This meant we needed to act quickly to prevent the sale from falling through.
To sum up, we would like to share a few tips that will prove useful when entering into a works contract:
- Try to agree the scope of work with the contractor as specifically as possible from the outset.
- Whenever you communicate any new instructions or adjustments regarding the work, immediately clarify whether carrying them out will be included in the agreed price.
- When the contractor issues an invoice, pay attention to whether it is an interim invoice or a final one.
- Try from the outset to agree a fixed price with the contractor for the work. Many firms will, of course, refuse to do this, since various changes often occur during the course of the work — but it is usually possible to at least agree that the contractor will issue invoices as the work progresses.
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