What are the risks of building with a general contractor?

The fact check: Where the real dangers lurk

The risks for general contractors can be divided into legal, financial, and qualitative categories. Here are the most critical points.

1. The risk of double payment (construction lien)

This is probably the most dangerous of all risks for general contractors in Switzerland.

The scenario: You transfer your installments to the general contractor on time. However, the general contractor runs into financial difficulties and does not forward the money to the electrician or bricklayer.

• The consequence: According to Swiss law (ZGB), tradespeople have the right to register a construction lien on your property if they are not paid.
• The shock: Even though you've paid the general contractor, you have to pay the tradesman again to avert the lien (and thus a possible foreclosure). You're paying twice.

This specific scenario is one of the existential risks for general contractors , against which you must protect yourself contractually (e.g., through direct payments to subcontractors).

2. The insolvency of the contractual partner

If your only contractual partner goes bankrupt, the construction site comes to a standstill.

With an architect-designed house, only one link in the chain fails. With a general contractor's model, the head fails.

• Construction halted: It could be months before it is clarified how things will proceed.
• Additional costs: You have to find a new contractor to take over the half-finished construction site. This is always more expensive than the original plan.

The risk of insolvency is one of the classic risks for general contractors , which occur especially in companies that lure customers with aggressively low prices ("dumping offers").

3. The "Black Box" of Costs (Change Order Management)

One of the often underestimated risks of hiring a general contractor is the lack of transparency. You're buying a fixed price. But what exactly is included?

• The building specifications: Often the descriptions are vague ("high-quality tiles"). If you then want a specific tile, you're told : "That's not standard, it costs extra."
• The change order trap: Because the general contractor (GC) often calculates tightly with a fixed price, they earn their money through change orders (requests for modifications). A request that costs 500 francs with an architect often costs 1,000 francs with a GC (including the GC's fee surcharge).

Anyone who believes that a fixed price is the end of the line underestimates the financial risks for general contractors when plans change.

4. Conflict of interest in construction management

Who controls the quality on the construction site? In the general contractor model, the general contractor provides the site manager.

• The conflict: The construction manager is paid by the general contractor. His goal is to build the house as cheaply as possible for the general contractor. He primarily represents the interests of his company, not necessarily yours.
• Quality defects: If defects are covered up or resolved "cheaply," you often only notice them years later. The lack of independent quality control is one of the quality risks for general contractors .

5. Limited flexibility

The risks associated with general contractors also affect your freedom.

Once you've signed the contract, you're a "passenger." You can no longer simply switch tradespeople because you don't like the painter. You have no right to give instructions to the subcontractors.

• Selection of tradespeople: The general contractor often chooses the cheapest subcontractor, not the best. You usually have no say in the matter. If the subcontractor's quality is poor, you're trapped by the constraints of the general contractor's contract.

Strategies for minimizing risks

You can't eliminate the risks of hiring a general contractor , but you can manage them.

Contractual protection

The contract is your only weapon against the risks of a general contractor .

• Detailed building specifications: Define every detail (brand of fixtures, price per square meter for parquet flooring) before signing. Anything not in the contract is not the general contractor's responsibility.
• Payment plan: Pay only according to construction progress. Never pay more than the actual cost of the work. Large down payments without corresponding value significantly increase the general contractor's risk in the event of insolvency.

External Control

Don't rely on the general contractor's site manager.

Hire an independent building consultant or site inspector. They will check the quality on the construction site and uncover defects. This costs money, but in the long run it saves you a lot of stress and reduces the quality risks for the general contractor .

Financial transparency

To minimize the risk of double payment:

Demand proof from the general contractor that they have paid the subcontractors before you transfer the next installment. Alternatively, stipulate in the contract the right to direct payments to the tradespeople. This is the most effective protection against one of the biggest risks associated with general contractors .

Conclusion

Building with a general contractor can be stress-free if you know the rules of the game and choose the right partner. However, the risks associated with general contractors are real and can be costly. The biggest misconception is that a "fixed price" automatically equates to "security." Without a watertight contract and external oversight, you're trading convenience for a loss of control.

The risks associated with general contractors, such as construction liens or opaque change orders, require a vigilant client . Check your partner's creditworthiness, define the standards precisely, and seek independent assistance for the final inspections.

If you are unsure whether a general contractor's offer is calculated fairly or whether the price is proportionate to the market situation and quality, it is worth using Loft 's data analysis to put your project on a secure foundation and obtain a neutral second opinion.

Glossary

• General contractor risks: The totality of financial, legal and qualitative risks (e.g. insolvency, construction defects) that arise when the construction responsibility is delegated to a single contractual partner.
• Construction lien: The right of tradesmen in Switzerland to secure their claims on the property of the building owner , even if the owner has already paid the general contractor – one of the central risks for general contractors .
• Change order management: Calculating additional costs for changes made after the contract is signed. Opaque change orders are among the most common financial risks for general contractors .
• Subcontractors: Tradespeople hired by the general contractor. Since the client has no contract with them, they have no direct right to give instructions, which limits flexibility and is one of the risks associated with general contractors .
• Construction specifications: The document that defines which services are included in the fixed price. A vague description is the source of many risks for general contractors .