Flat rate (construction)

In a construction contract, a lump-sum price refers to an agreed-upon total payment for a defined scope of construction work, which is fixed regardless of the contractor’s actual costs. Unlike a unit-price contract, in a lump-sum contract the contractor generally bears the quantity and cost estimation risks. For building owners, this type of contract offers cost certainty and predictability; for contractors, it requires careful cost estimation.

Types of Lump-Sum Contracts

A distinction is made between the detailed lump-sum contract and the global lump-sum contract. In a detailed lump-sum contract, there is a detailed bill of quantities; the price merely covers the quantities on a lump-sum basis. In a global lump-sum contract, a total scope of work (e.g., “turnkey single-family home according to the building specifications”) is agreed upon at a fixed price-the contractor has considerably more leeway in determining the scope of work. The latter model is widely used by real estate developers and prefabricated home builders.

In a lump-sum contract, the building specifications are the decisive document: they define the scope of work and thus the boundary between what is included in the fixed price and what can be billed additionally as a supplement. Incomplete, vague, or ambiguous building specifications create leeway for the contractor-at the client’s expense. We recommend that buyers of developer projects have the building specifications reviewed by an independent construction expert before signing the contract.

Risks and Delimitation in the Event of Changes

A lump-sum contract offers complete cost certainty only if the scope of services is clearly and fully defined. Changes and additional services (so-called “addenda”) that deviate from the agreed scope of work can break down the fixed price and lead to significant additional costs. According to VOB/B and the German Civil Code (BGB), the contractor is entitled to separate compensation for addenda. Builders should therefore carefully review the building specifications before signing the contract and demand comprehensive service descriptions.

Common pitfalls with supplements in practice: kitchen equipment not included in the price, missing outdoor facilities, unaccounted-for excavation volumes on difficult building sites, or expensive surcharges for specific material requests by the buyer. A lump-sum price only truly provides protection if all these items are clearly regulated in the building specifications.

Lump-Sum Price in the Developer Contract

In developer projects, the lump-sum price is the norm: the buyer pays a total price for the land and the building to be constructed. The developer bears the construction risk. The key document here is the real estate agent and developer contract (MaBV), which regulates progress payments based on construction progress and protects the buyer. Before signing, buyers should carefully review the building specifications, the list of fixtures and fittings, and the completion dates.

The MaBV protects buyers by linking the disbursement of equity and loans to verified construction progress: Payment is made only once the corresponding construction phase is actually completed. In total, the developer may invoice a maximum of 7 installments corresponding to defined construction phases. This legal provision protects buyers from total loss in the event of the developer’s insolvency.

Practical Tip for Homeowners in Nuremberg and Franconia

In Nuremberg and the Franconia metropolitan region, developer projects with fixed-price contracts are widespread-ranging from new row houses in Erlangen-Süd to condominiums in Schwabach. We recommend that buyers hire an independent building inspector before signing the contract to verify that the building specifications are complete and in line with market standards. Otherwise, missing features may appear as cost-incurring addenda.

In addition, we recommend checking the developer’s creditworthiness and their previous reference projects. Insolvency of the developer during the construction phase is rare but possible-and despite MaBV protection, this can result in significant additional costs and delays for buyers. In the metropolitan region, we work exclusively with solvent and reliable developers.

Frequently Asked Questions

Can the flat rate still be increased after the contract is signed?

Generally not-the flat rate is fixed as long as the agreed scope of work remains unchanged. However, change requests from the client or unclear service descriptions can lead to addenda that increase the total price. Transparent construction contracts with a complete scope of work protect against unpleasant surprises.

What is the difference between a flat rate and a cost estimate?

A cost estimate is a non-binding estimate; deviations upward of up to 20% are generally tolerated under the German Civil Code (BGB). A lump-sum price, on the other hand, is a binding agreement and can only be adjusted in the event of additional work or incomplete service descriptions. For clients, the lump-sum price is therefore the safer form of agreement.

Does the lump-sum price also apply to renovation work?

Yes, fixed-price agreements can also be used for renovations. However, this is riskier for existing buildings than for new construction, as unforeseen damage (e.g., mold, asbestos, deteriorated pipes) is billed as additional work once discovered. For extensive renovations, we therefore recommend a unit-price contract or at least a detailed definition of risks.

How can I, as a buyer, protect myself from hidden cost overruns?

The most important safeguard is a complete, precise scope of work that clearly defines the scope of services. Have the building specifications reviewed by a construction expert before signing the contract. Watch out for phrases like “at the contractor’s discretion” or “equivalent”-they give the contractor leeway regarding materials and workmanship that may deviate from your expectations.

What are typical cost traps in fixed-price contracts with developers in Nuremberg?

In the Nuremberg metropolitan area, we regularly observe the following cost traps in developer projects: First, special features-such as tiles above a certain price range, high-quality bathroom fixtures, or flooring on the upper floor-are offered as add-on options that appear to be standard in the model home. Second, outdoor features such as garden paths, terraces, and fencing are often not included in the flat-rate price and cost an additional 15,000 to 30,000 euros, depending on the size of the lot. Third, unexpected soil conditions in certain areas of Nuremberg-such as former floodplains along the Pegnitz or Rednitz rivers, filled-in depressions in Langwasser, or former industrial sites in Gostenhof-result in significant additional costs for foundation work and excavation, which are often not included in the flat-rate price. We recommend requesting a soil survey before signing the contract or including this as a condition in the contract. This precaution usually pays off.

Back to the Real Estate Glossary.