Real estate: what can you do about delays or poor workmanship?

Building a house, buying one off-plan, or renovating a property are major undertakings that require the involvement of many tradespeople. Ideally, we’d like everything to go off without a hitch, but you must be aware that disputes between professionals and individuals are not uncommon. But what concrete action can you take in the event of delays or poor workmanship? We have put together a few ideas below.

So many different specific types of dispute could arise that we could never dream of covering every eventuality here. We have therefore chosen to use two examples to illustrate what a dispute may look like and the options you have to resolve it.

Work to renovate Patricia’s bathroom has been at a standstill for several weeks now. The builders are nowhere to be seen and delays are mounting up. Andy, meanwhile, only moved into his new house a few months ago and has just discovered a leak in his roof! What can Patricia and Andy do to respond to these problems and to whom can they turn? To shed some light on the topic, we met with Maître Dekhar, a solicitor and partner at the firm SD Law, specialising in construction law and consumer law.

Make enquiries before giving the go-ahead

Luxembourg has a vibrant building sector, but it is unfortunately not uncommon to experience delays and unexpected obstacles when building or doing renovations. Missed deadlines, leaks, cracks, and draughty windows are just a few possible issues. Be sure to take special care and do your research before jumping headfirst into this type of work.

Firstly, it is important to understand that responsibilities vary depending on the type of contract signed. For example, in the case of a new build, an individual can:

• • build a house to their own specifications by contracting a general builder, an architect or an entrepreneur to project-manage the various tradespeople. The individual is then considered to be the project owner.
  • go through a developer and buy a new property off-plan: off-plan sale (vente en état de futur achèvement – VEFA)* or sale on completion (vente à terme – VAT). In this case, the developer or the builder is the project owner.

“The professional, whether they are a builder, architect or developer, is bound by a duty to advise and inform before the contract is signed and during the execution period,” indicates Maître Dekhar. “The individual must not hold back if they have any technical or administrative questions so that they fully understand the project in terms of cost, construction timeframes and even insurance cover.”

In Andy’s case, for example, the work is covered by warranties that involve the responsibility of the project owner:

• • a completion bond (garantie de parfait achèvement): the project owner is responsible for one year after the work has been delivered for any defects identified and must repair them (leaking tap, water ingress, etc.).
  • a two-year warranty: they are responsible for two years after the work has been delivered for fixtures and fittings (everything except major structural work): doors, windows, shutters, boiler, plumbing, paintwork, etc.
  • a ten-year warranty: they are responsible for ten years after the work has been delivered for defects that jeopardise the structural integrity of the house: a large crack in the exterior, a sinking patio, a structural defect or issue with the staircase, etc.

Useful info: The project owner (individual or professional) may take out an additional 10-year liability insurance (Assurance Responsabilité Civile Décennale), which covers major structural work for ten years. They may also take out contractors all risks insurance (Assurance Tous Risques Chantier), which covers accidental damage that may arise throughout the construction period.

“This insurance is not compulsory, but it allows the project owner to cover themselves financially without having to wait to find out who is liable. In practice, serious professionals are insured against risk. However, the individual is advised to take out insurance if they are the project owner,” states Maître Dekhar.

Patricia needs to check the clauses in her contract to see whether daily penalties apply in the event of delays. In some cases, there will be a legitimate cause for such delays and they will not fall under the professional’s responsibility: severe weather conditions, staff strikes, force majeure and late payments by the individual.

Three key steps in the event of a dispute

Although every situation is different and depends on the type of contract, dispute and time at which it is reported (before or after the work is delivered), there are generally three key steps to take should a conflict arise.

Step 1: letter of complaint to the professional

If the delay in Patricia’s renovation work is not covered by an exclusion list indicated in the contract, she may claim financial damages from the professional per day of delay and, if applicable, demand that work resumes.

NB: “If no indemnity for late delivery is provided for in the contract, the client will need to prove that the professional is at fault and demonstrate a causal link between it and the damage sustained,” states Dekhar. “The damage in this specific case is the inconvenience caused by Patricia’s inability to utilise her bathroom for an excessive period”.

Andy, meanwhile, must flag the issues with his roof as soon as he discovers them and then give the builder or developer a set deadline in which to correct the anomalies reported. He is able to claim under the completion bond because the work was delivered less than a year earlier.

“To do so, the client will need to send a registered letter with acknowledgment of receipt urging the professional to fulfil their contractual obligations by complying with best practice. If the client does not feel comfortable with this,” adds Maître Dekhar, “they can turn to an association for the protection of consumer rights or a solicitor, who will use suitable expressions and apply appropriate pressure.

If the professional is willing to cooperate, an amicable solution may suffice. If not, there is no point taking this route.

Associations for the protection of consumer rights, such as the ULC or the Consumer Ombudsman, can try to resolve the situation. The former will write to the builder following due process and the latter will appeal to the parties to find common ground. If the professional is willing to cooperate, an amicable solution may suffice. If not, there is no point taking this route,” she advises.

If the professional does not want to take action, does not respond or blames a third party despite the letters and exchanges, it will be necessary to move to the second step.

An expert report may be a way of applying pressure to convince the professional to reach an agreement out of court.

Step 2: expert report and formal notice

“An expert report may be a way of applying pressure to convince the professional to reach an agreement out of court,” explains Maître Dekhar. “The expert will take note of the failings, give a technical opinion and estimate the cost of repairs as well as any capital losses in a specific report. It is important not to confuse this expert report with the bailiff’s report, which is obviously limited to a layperson’s perspective in terms of construction. The bailiff will only be able to identify obvious defects and will not offer any technical conclusions.”

Patricia and Andy have two options:

1. Amicable expert report: this is the option generally chosen when the professional is good-natured and wants a neutral expert to offer their opinion on the issue. The expert can be contracted directly by the individual. An official list of sworn experts is available to this effect on the Ministry of Justice’s website.

If the expert report concludes that there were unjustified delays or poor workmanship, formal notice must be sent to the professional as soon as possible.

“Formal notice is the last resort before going to court,” stresses the solicitor. “It can be drafted by the individual, but a letter written by a solicitor will carry more weight in the eyes of the professional. If the latter agrees with the expert’s conclusions and acts on them, then the dispute will be terminated at that point. On the other hand, if this final letter goes unanswered, the matter should be brought before the court immediately. However, in order for the report to be enforceable against the professional at fault, it must have been subject to a discussion in which a full hearing is given to both parties or the professional must have been present when the expert’s appraisal was made.”

2. Court-appointed expert report: this solution applies when there is a crisis of confidence between the client and the professional and if the situation is urgent. These are interlocutory proceedings in which the judge appoints an expert. In this case, the expert report will always be enforceable.

NB: “The statutory warranty period for bringing a case to court cannot be suspended or interrupted,” highlights Maître Dekhar. “The period for amicable action must be managed efficiently so that it is still possible to take the matter to court if it falls through.”

Some home, car or bank card insurance includes legal assistance for individuals, with a cap on legal and/or expert fees.

Step 3: legal proceedings

If no agreement has been reached once all these steps have been exhausted, court proceedings must be filed.

For Andy, the trial judge will hear the case in the district court in order to identify the responsibilities of the parties involved. In the case of a construction contract or an off-plan sale, the defect in Andy’s house is considered to be a “hidden” defect because it was detected after the one-month period from delivery. Legal action must therefore be taken within the warranty period of:

• • 10 years if the poor workmanship affects major work: framework, load-bearing walls, etc.
  • 2 years for minor works: radiators, plumbing, doors, shutters, etc.

However, if the defect or poor workmanship was identified prior to delivery (or less than one month after), it is called an “apparent” defect. Andy would have a 30-year period to take legal action.

⇒ These warranty periods begin as of the delivery date of the work and also apply for subsequent owners of the property.

For the delay in Patricia’s renovation work, legal action may be filed within 30 years unless stipulated otherwise contractually. The professional will be summoned before the magistrates’ court if the damage is estimated to be less than EUR 10,000 and before the district court if the damage exceeds EUR 10,000.

Useful info: “Some home, car or bank card insurance includes legal assistance for individuals, with a cap on legal and/or expert fees. This is a little-known but invaluable resource that we must not hesitate to use,” notes Maître Dekhar.

“A bad deal is better than no deal at all!”

To conclude, we cannot emphasise enough the importance of keeping a cool head despite the frustrations and possible anger you may feel in such disputes.

“It is always preferable for both the individual and the professional to resolve their dispute out of court and to communicate whenever possible,” advises Maître Dekhar. Court proceedings can often be lengthy, costly and increase frustration for both parties. As the old adage goes: a bad deal is better than no deal at all”. Consider yourself warned!

* VEFA (vente en état de futur achèvement): since the Covid crisis and the war in Ukraine, there has been an upsurge in delivery delays and VEFA disputes, with varying degrees of justification. It’s a good idea to be cautious before committing yourself to this type of contract, and to check beforehand that the property developer is serious and that its current projects are in good health.