CONSTRUCTION SAFETY
SECURITY IN CONSTRUCTION CONTRACTS
02.11.2017
Unless otherwise agreed, the building contractor's claim for remuneration is only due when the work is completed. Due to the firm connection between the building and the land, the client acquires ownership as soon as the work is constructed. This means that the usual security options, such as retention of title, are no longer available and the building contractor is exposed to a greater risk of insolvency of the building contractor. For this reason, the legislator has created a security claim for the building contractor for part of the outstanding remuneration claim in Section 1170b ABGB. Section 1170b ABGB is mandatory law and cannot be contractually waived by an agreement between the parties. However, the scope of application is limited in that Section 1170b ABGB does not apply if the building contractor is a consumer or a legal entity under public law (e.g. a local authority).
Security can only be demanded for work contracts in which the manufacture or processing of a building, an outdoor facility or a part thereof is owed. Security must be provided within a reasonable period of time to be set by the BU. Security can be demanded from the conclusion of the contract up to the point at which the full work remuneration has been paid. The due date of the work remuneration is irrelevant. Security can therefore also be demanded if defects exist after handover which prevent the work remuneration from becoming due.
Cash, cash deposits, savings books, bank guarantees and insurance can be used as security. The choice is up to the contractor alone. The maximum amount of security required is usually 20% of the contract price. For contracts to be fulfilled within three months, it is 40%. In addition to these percentages, the amount of the outstanding contract price must be taken into account. If the outstanding contract price falls below the percentages mentioned, the security claim is reduced to the amount of the outstanding contract price.
If the WB refuses to provide security, the BU has the right to refuse performance. If additional costs result from the associated downtime, these must be borne by the WB. In addition, the BU has the right to declare the contract rescission after setting a reasonable grace period. In this case, the BU is entitled to the entire fee less what it has saved by not carrying out the work, acquired through other use or intentionally neglected to acquire.