Regulate the use of subcontractors during construction.

• Real Estate
• SME

The involvement of subcontractors can have undesirable side effects. It is therefore important that the contractual partners agree on the admissibility of and dealings with subcontractors from the outset. These regulations must be clearly stated in the contract.

A construction project often involves many different actors. Keeping an overview is often challenging. It can become particularly confusing when subcontractors are involved.

If a client wants to build, he concludes a contract for work with one or more companies. The contractor then owes the completion of the agreed work and the client the remuneration for the work. If the (primary) contractor, in turn, calls in an entrepreneur to perform certain services under the contract for work and services, the called in entrepreneur is referred to as a subcontractor. The subcontractor has normally only concluded a contract with the contractor and not with the builder. This leads to the following claims and obligations: The building owner still owes the contractor the wages for the work and can only demand the work from the contractor. The contractor is still obliged to provide the work without defects. He is also liable to the client for defects caused by the subcontractor. The subcontractor owes the contractor the faultless execution of the work owed under the contract (usually part of the “main work”). He can only demand the remuneration owed from the contractor.

The constellation of client – contractor – subcontractor is particularly problematic for the client and the contractor.

The contractor is, so to speak, caught between the two fronts: If he delivers a work to the builder which is afflicted with defects caused by the subcontractor, he has to take responsibility for these defects vis-à-vis the builder. On the other hand, he must claim the defects from the subcontractor. In the worst case, the contractor is therefore confronted with two legal proceedings.

The building craftsman’s lien is particularly critical for the building owner. If a builder-owner does not pay the wages owed to a company working on the construction site or supplying materials, this company can have a craftsman’s lien registered on the property (on which he worked) of the builder-owner. According to case law, subcontractors also have the possibility to register a craftsman’s lien. This possibility exists regardless of whether the builder has paid the contractor or not. As a result, the building owner may have to pay the subcontractor’s wages twice – once to the contractor and once to the subcontractor. Although the client may in turn have recourse to the contractor, this may involve considerable costs.

There are possibilities to contractually insure against some of the risks associated with subcontractors. A prerequisite is that the client is aware of the various risks when negotiating the contractual modalities and negotiates skilfully. Prematurely concluded contracts or unclear contractual clauses can result in considerable expenditure of time and money.