1. Overall
The provisions on contractor's remuneration claims are included in Chapter V of the Bust Registration Act “The consumer's uttering”.
Some of the provisions are recognized from the professional standards (NS 8407 mv), while others bear the impression that the law is provided for, among other things, protecting the rights of consumers.
A common provision is that the consumer and the builder shall pay the agreed remuneration, cf. Section 41, first paragraph of the Code of Civil Procedure and Section 26.1 of NS 8407.
Derimto is the opposite solution when it comes to index regulation. It follows from NS 8407 paragraph 26.2 that contract amounts are to be regulated unless otherwise agreed, whereas it follows from section 41, last paragraph of buofl., that index regulation must be specifically agreed. In addition, there is a form requirement that the index regulation agreement be in writing; if so, that agreement must be in writing.
2. Details of agreed remuneration
2.1 Freedom of contract
The central provision is buofl. § 41.
As long as the parties have agreed on a specific remuneration — typically a contract sum that is fixed — the Bust Registration Act does not lay down guidelines for the amount of remuneration. In other words, you can get paid well for your work as long as you have agreed a certain amount.
It will be different if you have not agreed on a specific amount for the work.
2.2 Bill work
Section 41, second paragraph of Buofl contains the general rule in contract law that the work must be done on account unless otherwise agreed.
In that case, the contractor gets a claim to have their covered “necessary costs” added “et rimeleg markup”.
The Bustad Registration Act does not have as detailed rules on bill work as those we find in, for example, NS 8407 paragraph 30.
Since the rules on bill work belong to the unwritten contract law, one can obtain a lot of relevant knowledge about what is the correct procedure by reading our article on NS 8407 item 30 (Bill work) which exists here.
It is important to note that the law on bustad entry does not contain rules on the continuous submission of documentation (timesheets, bills of materials, etc.) for control to the consumer.
This should not become a “resting pillow”.
It follows from Section 48, first paragraph, that a consumer “may serve as a condition for payment of instalments and ultimately require the contractor to submit a number which can be controlled”.
A contractor who has submitted invoices without supporting documentation during the construction period may thus be faced with a requirement for such documentation as late as in connection with the final settlement.
Entrepreneurs should therefore take this into account from the outset and continuously ensure that specified timelines, material sheets, etc. are drawn up and stored as a basis.
Ideally, this should be submitted as a basis for the individual invoices whether the consumer requests it or not.
2.3 Price estimates
It follows from Paragraph 41, third paragraph of Buofl., that the parties may alternatively agree that the works be carried out on the basis of a price estimate.
All contractors should be aware of bufol section 41, the last paragraph of which states that the contractor has the risk of doubt if the consumer — at a later date — were to claim that the price estimate is a fixed price.
Entrepreneurs should therefore ensure that price estimate agreements are settled in writing and that it is expressly stated that the price is a price estimate.
When a price reduction is agreed it is important to note that the final price for the agreed work cannot exceed the price estimate “substantially” and under no circumstances beyond 15%, cf. buofl. § 41, third paragraph.
The parties may agree on a limit other than 15%, but in that case this must be stated “Impression Games”and, of course, this should be stated in the written agreement.
2.4 Value Added Tax
As in any other consumer situation, the stated price shall be considered to include VAT unless “the consumer must have known that detoxification was not appropriate”, cf buofl § 41, fifth paragraph.
“Must have known” is a very strict condition and it is not sufficient to plead that the parties agreed that the price was exclusive of VAT.
As previously stated, it will be the contractor who has the burden of proof. Therefore, the entrepreneur should not bet on anything, but let it be stated in writing if prices are given excluding VAT.
3. About addition and amendment works
In the case of alterations and additional works, the starting point is that the parties either agree on the remuneration of the contractor for the additional work in “the originating agreement” or by the conclusion of such an agreement in a particular, “written agreement on amendments or supplementary work”, cf buofl § 42, first paragraph.
In other words, the main rule is that the remuneration must be agreed before or at the same time as the additional work itself is ordered.
This is a regulation that is primarily intended to protect the consumer from major surprises after the additional work has been carried out. Accordingly, the legislature has also clarified that such an agreement must be “in writing”.
The standard contracts between professionals have no corresponding rule. In these contracts, the main rule is essentially the opposite in that the contractor is obliged to carry out the changes even if the parties do not agree on the consideration, cf. NS 8407 paragraph 31.3, second paragraph (the “jumping obligation”).
If the contractor and the consumer have not concluded such a written agreement on the remuneration for a specific additional work, the consequence is that the contractor is not entitled to additional remuneration at all.
In fact, an exceptional provision has been introduced in section 42, second paragraph of the Buofl.
From this it follows that the entrepreneur may still require adjustment of the remuneration in two cases.
The first option is where the contractor has made a claim for an addition in response to the consumer's order for a supplement, cf. buofl. § 42, second paragraph letter a. Such a claim should be in writing and unambiguous since obscurity and orality as a general rule are beyond the entrepreneur who should know better than to rely on oral agreements with the consumer.
The second option is where the consumer “had” to understand that the ordering of the supplement would entail a claim for additional compensation, cf buofl § 42, second paragraph letter b. This is a safety valve and it should be handled accordingly. By that is meant that an entrepreneur should not rely on being saved by this provision. That consumer “had to” understand implies fairly stringent evidentiary requirements and it is the contractor who has the burden of proof for that. Secondly, there can be quite a big difference between what the consumer may have to understand that something would cost, and what the total cost actually was.
Our advice is therefore that the contractor handles all change requirements from the consumer by agreeing in writing the cost. Ideally, you agree on a fixed price for each change, or you give a clear price estimate. In both cases, this is done in writing and the consumer's written acceptance should also be ensured so that no doubt can be raised about the parties' agreement afterwards.
4th. Additional compensation in other cases
In buofl § 43 there is a separate provision that can be used by the contractor if he incurs costs as a result of “relations on the part of the consumer”.
The provision makes no mention of examples of what kind of relationship this might be.
We are familiar with this type of issue in contractual relations between professionals.
Contracts such as NS 8407 have provisions for this in paragraph 22 (Participation of the builder), paragraph 23 (Risk of conditions in the ground), paragraph 24 (Builder's choice of solutions and other engineering) and paragraph 25 (Review of the builder's performance by the General Contractor. Notification obligation). Furthermore, we refer to the provisions in paragraph 34.1.3 concerning special notification of increased costs for rigging and operation as a result, inter alia, of plunders and heft on other works, etc.
We have written a good deal about this in articles included in the collection for NS 8407, and refer in particular to the article “Remuneration adjustment” which can be read here.
We do not go deeper into this issue because there will probably rarely be many, and far from significant, demands arising from such conditions.
In most cases, apartments are erected and then the individual consumer has virtually no influence on the construction process.
The provision on additional remuneration in other cases is probably primarily applicable where the consumer owns the land, where the consumer projects and the contractor carries out his works as an execution centre, or where the consumer has organised himself with several other contractors.
To the extent that a consumer chooses to carry out his project where such elements become relevant, there is a greater degree of probability that circumstances will occur that make buofl § 43 relevant, than where it is only the construction of apartments under the contractor's own direction.
5. When should the consumer pay?
In construction contracts between professional parties, normally the contractor will perform works on a property owned by the builder.
A payment plan is agreed that ensures the contractor continuous payment as values are added to the builder's property, and then a settlement is made at the end.
In residential construction, the rules are far more complex.
Very often, the entrepreneur owns the property on which it is being built. This is at least the case when it comes to apartments, and regardless of whether the apartments are organized into owner-sectional condominiums or condominiums.
In any case, the common denominator is that none of the apartment buyers own the land on which the apartments are built. This means that a consumer who had to pay anything to a contractor before the takeover would lack certainty about what is paid.
The main rule of the bustad entry law is therefore that the consumer should not pay until “the contractor demanded it after the takeover”, cf. buofl. § 46, first paragraph.
However, there is an opportunity to agree otherwise, and that is stated in the same provision.
First, there are those cases in which the works are added to the property of the consumer. In such cases, it follows from section 47 of buofl that the entrepreneur may invoice (and the consumer pay) as the consumer is supplied with the values for which it is invoiced. It must not attach a sales pledge or other encumbrances on materials for which it is invoiced, and in any case it must remain 10% before the takeover.
These rules also apply to those cases where an agreement on the transfer of property with a construction clause is concluded. Then the property must be deeded to the consumer before invoicing as the works progress, cf. buofl § 47, second paragraph.
A third option is that the entrepreneur places a self-debt guarantee against the consumer, which he receives as security for his payments, cf. buofl. § 47, last paragraph. This is primarily applicable in cases where the consumer does not have title to the property, but where the contractor nevertheless demands payment as the works are carried out.
By requiring such an advance payment as buofl section 47 provides for, the contractor saves considerable financial costs in part, and can thus provide the contractor with a smaller liquidity burden.
In addition, you insure against the risk that the consumer will not be able (or will) pay when the building is completed.
6. The Final Settlement
It is only when the works are completed and the housing handed over that the contractor gets the right to send his claim for final settlement to the consumer.
In the professional standard contracts, contractor has a deadline of two months to submit his claim for final settlement.
The Bustad Listing Act does not have a corresponding rule, and the entrepreneur can thus submit his claim whenever he wishes. We would equally discourage a contractor from waiting very long because the willingness to pay tends to decrease the longer the time that passes. If a consumer disputes the final settlement claim, a longer period of time from the performance of the individual works until the claim is contested may make it more difficult to document their claim than where the dispute is quickly “on the table”.
The central provision of the bustad entry act is buofl section 48.
In the first paragraph of the provision, it is established that a consumer may require the contractor to present a bill “capable of control”, and such a claim may also be made in connection with the final settlement.
In the second paragraph, a provision is made that is recognized from the standard professional contracts.
It follows from Section 48, second paragraph of the Buofl., that an entrepreneur cannot claim a correction of the final settlement claim after the consumer has received the claim.
From this there are two exceptions, namely that the contractor has made reservations about subsequent adjustment/change or that the consumer had to understand there was a mistake.
Accordingly, our advice is that the contractor spend some time making sure everything is in place when first submitting his claim for final settlement. To avoid any doubt, we would also recommend that the contractor set up his final settlement claim in the same way as when having a professional counterpart. This creates clarity and a complete overview which is at least as important when the builder is a consumer.
To the extent that one does not know the rules on final settlement in, for example, NS 8407 paragraph 39, our article on the subject can be read here.
When the consumer has received the contractor's claim for final settlement, it follows from section 48, third paragraph of buofl, that the consumer must submit any objections to the contractor no later than one month after receipt. If the consumer does not do so, the final settlement claim shall be deemed accepted.
From this there are two exceptions.
If it follows from the agreement of the parties that the parties had agreed on a lower remuneration, then this part of the claim may be revised even if more than one month has passed.
The same applies if the contractor's claim is considered unreasonable.
Whether a claim is unreasonable or not will depend on a judgment in which a number of different factors come into play. We would also consider that such assessments are only applicable if one does not have an agreed amount to relate to, and where the works have been carried out on account.
Our advice is that the entrepreneur is careful to keep the consumer continuously informed about the cost development, submits documentation, etc.
