In the event of any defects...

In the event of any defects...

"In 2014 I bought a flat off-plan. It cost CHF 720,000, plus around CHF 40,000 in additional costs. According to the general contractor agreement with the builder, I have to pay a final deposit when the keys are handed over. The contract stipulates that SIA standard 118 and, subsidiarily, the Swiss Code of Obligations must be applied, and I would like to know whether I can deduct 10% from this final deposit to protect myself in the event of any defects.

Simone, Chêne-Bougeries

According to art. 363 of the Swiss Code of Obligations (CO), a contract for work and services is a contract by which one of the parties (the contractor) undertakes to perform a work in return for a price that the other party (the client) undertakes to pay. The contractor thus has an obligation of result. In the case of a general contracting agreement, the contractor is responsible for the project, the plans and the execution of the work.

In the construction industry, as in your case, the parties often agree to deviate from the statutory rules on warranty for defects by incorporating pre-formulated contractual provisions such as those set out in SIA Standard 118 into the works contract.

Articles 144 and 145 of this standard stipulate that, unless otherwise agreed, the contractor is entitled to monthly payments (instalments), which he may claim by submitting a request. The amount of each instalment owed by the client is equal to the value of the work carried out at the end of the month in question, less any instalments previously due, whether paid or not. However, art. 149 and 150 of the standard provide for a possible deduction to serve as security for the Employer for the fulfilment of the Contractor's obligations until acceptance of the work; in principle, the amount of this deduction is equal to 10% of the value of the services rendered at the end of the month in question.

The amount of the retention is due and must therefore be paid to the contractor when three conditions are met: the work has been accepted, the final account has been submitted and the inspection period has expired. However, SIA Standard 118 stipulates that before the retention payment is made, the contractor must provide a guarantee (security) for the liability he incurs for any defects that may be claimed during the guarantee period. This security consists of a joint and several guarantee from a reputable bank or insurance company, corresponding to 10% of the total sum of the remuneration owed by the client for the work as a whole (5% if this exceeds the amount of CHF 200'000.-, but at least CHF 20'000.- and at most CHF 1'000'000.-).

As long as this bank guarantee has not been provided, you can deduct from the final instalment claimed from you not the 10% of this last invoice, but the 10% of the total value of the contract.