A purchase and construction contract is the agreement signed when buying a new-build home that has yet to be built, combining two contracts in one document: the purchase of the land (or a share in it) and the contract to build the house. In the Netherlands it is known as a koop-aanneemovereenkomst; in other markets a broadly similar arrangement is used by developers.
Why two parts
The split has practical and tax consequences:
| Part | What you acquire | What you pay for |
|---|---|---|
| Purchase agreement | The plot or share in the land | Land price, usually paid in full at transfer |
| Building agreement | Construction of the house | Build cost, paid in stages as work progresses |
The build cost is paid in stage payments tied to completed phases — for example foundations, ground floor slab, shell, and completion. You are therefore not paying up front for work that does not yet exist.
What is normally covered
- The completion period, often expressed in working days rather than calendar days, so frost, permit delays and unworkable weather push the date back.
- Damages for late completion.
- A retention — part of the final payment is held back until defects listed at handover have been put right. In the Netherlands there is a statutory 5 per cent retention that can be held in escrow with the notary.
- A warranty scheme — where the home falls under a guarantee scheme, completion is insured if the builder goes insolvent, and warranty periods apply to parts of the house.
- Conditions precedent — contracts are often signed subject to planning permission, a minimum number of sales, and the buyer’s mortgage.
What to check
- Variations and options — the schedule of extras often arrives after signing. Budget a realistic range; kitchen, bathroom and an extension quickly add up to tens of thousands of euros.
- What is land and what is building — the split between land price and build cost has tax implications. Take advice from your own notary or solicitor, not just from the seller.
- The technical specification governs — not the sales brochure or the computer visual. Read the specification and the drawings, and watch for the phrase “or equivalent”.
- Construction interest — if the project started earlier, interest may be due on the land and on stage payments already fallen due. Ask about it explicitly.
- Mortgage condition — make sure the period allowed to arrange finance is realistic.
Related terms
- Tendering
- Contract
- Building costs
- Variations
- Omissions
- Handover
Want to know more about building terms? Visit our knowledge base at fredsdiyplans.com.