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The largest conurbation is the Rhine-Ruhr region Germany is a federal , parliamentary , representative democratic republic. The German political system operates under a framework laid out in the constitutional document known as the Grundgesetz Basic Law. Amendments generally require a two-thirds majority of both chambers of parliament; the fundamental principles of the constitution, as expressed in the articles guaranteeing human dignity, the separation of powers, the federal structure, and the rule of law are valid in perpetuity.
The president , Frank-Walter Steinmeier 19 March —present , is the head of state and invested primarily with representative responsibilities and powers. He is elected by the Bundesversammlung federal convention , an institution consisting of the members of the Bundestag and an equal number of state delegates. The chancellor, Angela Merkel 22 November —present , is the head of government and exercises executive power through their Cabinet , similar to the role of a Prime Minister in other parliamentary democracies.
Federal legislative power is vested in the parliament consisting of the Bundestag Federal Diet and Bundesrat Federal Council , which together form the legislative body. The Bundestag is elected through direct elections , by proportional representation mixed-member.
So far every chancellor has been a member of one of these parties. In the German federal election, , the right-wing populist Alternative for Germany gained enough votes to attain representation in the parliament for the first time. The debt-to-GDP ratio of Germany had its peak in when it stood at Germany has a civil law system based on Roman law with some references to Germanic law. The Bundesverfassungsgericht Federal Constitutional Court is the German Supreme Court responsible for constitutional matters, with power of judicial review. The German penal system seeks the rehabilitation of the criminal and the protection of the public.
Germany has a low murder rate with 0. Two of the states are city-states consisting of just one city: The state of Bremen consists of two cities that are separated from each other by the state of Lower Saxony: Because of the differences in size and population the subdivisions of the states vary. As of [update] Germany is divided into districts Kreise at a municipal level; these consist of rural districts and urban districts.
Germany has a network of diplomatic missions abroad [] and maintains relations with more than countries. It has played an influential role in the European Union since its inception and has maintained a strong alliance with France and all neighbouring countries since Germany promotes the creation of a more unified European political, economic and security apparatus. The development policy of Germany is an independent area of foreign policy. It is formulated by the Federal Ministry for Economic Cooperation and Development and carried out by the implementing organisations.
The German government sees development policy as a joint responsibility of the international community. In absolute terms, German military expenditure is the 9th highest in the world. As of [update] the Bundeswehr employed roughly , service members, including about 9, volunteers. In peacetime, the Bundeswehr is commanded by the Minister of Defence. In state of defence , the Chancellor would become commander-in-chief of the Bundeswehr. The role of the Bundeswehr is described in the Constitution of Germany as defensive only.
But after a ruling of the Federal Constitutional Court in the term "defence" has been defined to not only include protection of the borders of Germany, but also crisis reaction and conflict prevention, or more broadly as guarding the security of Germany anywhere in the world. As of [update] , the German military has about 3, troops stationed in foreign countries as part of international peacekeeping forces, including about 1, supporting operations against Daesh , in the NATO-led Resolute Support Mission in Afghanistan, and in Kosovo. Until , military service was compulsory for men at age 18, and conscripts served six-month tours of duty; conscientious objectors could instead opt for an equal length of Zivildienst civilian service , or a six-year commitment to voluntary emergency services like a fire department or the Red Cross.
In conscription was officially suspended and replaced with a voluntary service. Germany has a social market economy with a highly skilled labour force , a large capital stock , a low level of corruption, [] and a high level of innovation. Germany is part of the European single market which represents more than million consumers. Several domestic commercial policies are determined by agreements among European Union EU members and by EU legislation. Germany introduced the common European currency, the Euro in Its monetary policy is set by the European Central Bank , which is headquartered in Frankfurt , the financial centre of continental Europe.
Being home to the modern car , the automotive industry in Germany is regarded as one of the most competitive and innovative in the world, [] and is the fourth largest by production. Of the world's largest stock-market-listed companies measured by revenue in , the Fortune Global , 28 are headquartered in Germany. Germany is recognised for its large portion of specialised small and medium enterprises , known as the Mittelstand model.
More than 1, of these companies are global market leaders in their segment and are labelled hidden champions. The list includes the largest German companies by revenue in With its central position in Europe, Germany is a transport hub for the continent. Germany has established a polycentric network of high-speed trains.
Germany is committed to the Paris Agreement and several other treaties promoting biodiversity, low emission standards, water management , and the renewable energy commercialisation. Germany is a global leader in science and technology as its achievements in the fields of science and technology have been significant.
Archived from the original PDF on 30 April The list includes the largest German companies by revenue in The German revolutions of —49 resulted in the Frankfurt Parliament establishing major democratic rights. Die Bundeswehr der Zukunft" in German. The Insurance and Reinsurance Law Review.
Research and development efforts form an integral part of the economy. Albert Einstein introduced the special relativity and general relativity theories for light and gravity in and respectively. Along with Max Planck , he was instrumental in the introduction of quantum mechanics , in which Werner Heisenberg and Max Born later made major contributions.
Germany has been the home of many famous inventors and engineers , including Hans Geiger , the creator of the Geiger counter ; and Konrad Zuse , who built the first fully automatic digital computer. Heinrich Rudolf Hertz 's work in the domain of electromagnetic radiation was pivotal to the development of modern telecommunication. The Wendelstein 7-X in Greifswald hosts a facility in the research of fusion power for instance. Germany is the seventh most visited country in the world, [] with a total of million overnights during In , over Berlin has become the third most visited city destination in Europe.
Domestic and international travel and tourism combined directly contribute over EUR Including indirect and induced impacts, the industry contributes 4. Germany's most-visited landmarks include e. The Europa-Park near Freiburg is Europe's second most popular theme park resort. With a population of The overall life expectancy in Germany at birth is Four sizeable groups of people are referred to as "national minorities" because their ancestors have lived in their respective regions for centuries: Approximately 5 million Germans live abroad Auslandsdeutsche. After the United States , Germany is the second most popular immigration destination in the world.
The Federal Statistical Office classifies the citizens by immigrant background. Regarding the immigrant background, In census, as people with immigrant background Personen mit Migrationshintergrund were counted all immigrants, including ethnic Germans that came to the federal republic or had at least one parent settling here after In the s and s, the German governments invited "guest workers" Gastarbeiter to migrate to Germany for work in the German industries. Many companies preferred to keep these workers employed in Germany after they had trained them and Germany's immigrant population has steadily increased.
As of [update] , the largest national group was from Turkey 2,, , followed by Poland 1,, , Russia 1,, , and Italy , Upon its establishment in , Germany was about two-thirds Protestant [f] and one-third Roman Catholic , with a notable Jewish minority. Other faiths existed in the state, but never achieved a demographic significance and cultural impact of these three confessions.
Germany lost nearly all of its Jewish minority during the Holocaust. Religious makeup changed gradually in the decades following , with West Germany becoming more religiously diversified through immigration and East Germany becoming overwhelmingly irreligious through state policies. It continues to diversify after the German reunification in , with an accompanying substantial decline in religiosity throughout all of Germany and a contrasting increase of evangelical Protestants and Muslims.
Geographically, Protestantism is concentrated in the northern, central and eastern parts of the country. According to the German Census , Christianity is the largest religion in Germany, claiming Other religions accounted for 2. According to the most recent data from , the Catholic Church and the Evangelical Church claimed respectively Islam is the second largest religion in the country. Other religions comprising less than one per cent of Germany's population [] are Buddhism with , adherents, Judaism with , adherents, and Hinduism with some , adherents.
All other religious communities in Germany have fewer than 50, adherents each. German is the official and predominant spoken language in Germany. To a lesser extent, it is also related to the North Germanic languages , and the extinct East Germanic languages , to an even lesser extent. Most German vocabulary is derived from the Germanic branch of the Indo-European language family. German is written using the Latin alphabet. German dialects , traditional local varieties traced back to the Germanic tribes, are distinguished from varieties of standard German by their lexicon , phonology , and syntax.
German is the most widely spoken first language in the European Union , with around million native speakers. The most used immigrant languages are Turkish , Kurdish , Polish , the Balkan languages , and Russian. Germans are typically multilingual: The Goethe-Institut is a non-profit German cultural association operational worldwide with institutes. It is offering the study of the German language and encouraging global cultural exchange.
Responsibility for educational supervision in Germany is primarily organised within the individual federal states. Optional kindergarten education is provided for all children between three and six years old, after which school attendance is compulsory for at least nine years. Primary education usually lasts for four to six years. A system of apprenticeship called Duale Ausbildung leads to a skilled qualification which is almost comparable to an academic degree. It allows students in vocational training to learn in a company as well as in a state-run trade school. Most of the German universities are public institutions, and students traditionally study without fee payment.
However, there are a number of exceptions, depending on the state, the college and the subject. Tuition free academic education is open to international students and is increasingly common. Germany has a long tradition of higher education. The established universities in Germany include some of the oldest in the world , with Heidelberg University established in being the oldest. In the contemporary era Germany has developed eleven Universities of Excellence: Germany's system of hospices, called Krankenhaus , dates from medieval times, and today, Germany has the world's oldest universal health care system, dating from Bismarck's social legislation of the s, [] Since the s, reforms and provisions have ensured a balanced health care system.
Currently the population is covered by a health insurance plan provided by statute, with criteria allowing some groups to opt for a private health insurance contract. A study shows Germany has the highest number of overweight people in Europe. Culture in German states has been shaped by major intellectual and popular currents in Europe, both religious and secular.
Historically, Germany has been called Das Land der Dichter und Denker "the land of poets and thinkers" , [] because of the major role its writers and philosophers have played in the development of Western thought. Germany is well known for such folk festival traditions as Oktoberfest and Christmas customs , which include Advent wreaths , Christmas pageants , Christmas trees , Stollen cakes, and other practices. In the 21st century Berlin has emerged as a major international creative centre. German classical music includes works by some of the world's most well-known composers.
During his tenure as violinist and teacher at the Salzburg cathedral, Augsburg-born composer Leopold Mozart mentored one of the most noted musicians of all time: Ludwig van Beethoven was a crucial figure in the transition between the Classical and Romantic eras. Robert Schumann and Johannes Brahms composed in the Romantic idiom. Richard Wagner was known for his operas. Richard Strauss was a leading composer of the late Romantic and early modern eras. Karlheinz Stockhausen and Hans Zimmer are important composers of the 20th and early 21st centuries. Germany is the second largest music market in Europe, and fourth largest in the world.
German electronic music gained global influence, with Kraftwerk and Tangerine Dream pioneering in this genre. Paul van Dyk , Paul Kalkbrenner , and Scooter. German painters have influenced western art. The New Objectivity arose as a counter-style to it during the Weimar Republic.
Other notable artists who work with traditional media or figurative imagery include Martin Kippenberger , Gerhard Richter , Sigmar Polke , and Neo Rauch. Major art exhibitions and festivals in Germany are the documenta , the Berlin Biennale , transmediale and Art Cologne. Architectural contributions from Germany include the Carolingian and Ottonian styles , which were precursors of Romanesque. Brick Gothic is a distinctive medieval style that evolved in Germany. Also in Renaissance and Baroque art, regional and typically German elements evolved e.
Weser Renaissance and Dresden Baroque. The Wessobrunner School exerted a decisive influence on, and at times even dominated, the art of stucco in southern Germany in the 18th century. The Upper Swabian Baroque Route offers a baroque-themed tourist route that highlights the contributions of such artists and craftsmen as the sculptor and plasterer Johann Michael Feuchtmayer , one of the foremost members of the Feuchtmayer family and the brothers Johann Baptist Zimmermann and Dominikus Zimmermann.
Notable sub-styles that evolved since the 18th century are the German spa and seaside resort architecture. Expressionist architecture developed in the s in Germany and influenced Art Deco and other modern styles, with e. Germany was particularly important in the early modernist movement: Consequently, Germany is often considered the cradle of modern architecture and design. Ludwig Mies van der Rohe became one of the world's most renowned architects in the second half of the 20th century.
German literature can be traced back to the Middle Ages and the works of writers such as Walther von der Vogelweide and Wolfram von Eschenbach. The collections of folk tales published by the Brothers Grimm popularised German folklore on an international level. German philosophy is historically significant: Many of Europe's best-selling newspapers and magazines are produced in Germany.
The German video gaming market is one of the largest in the world. German cinema has made major technical and artistic contributions to film. The first works of the Skladanowsky Brothers were shown to an audience in Director Fritz Lang 's Metropolis is referred to as the first major science-fiction film. The defining film genre in West Germany of the s was arguably the Heimatfilm "homeland film" ; these films depicted the beauty of the land and the moral integrity of the people living in it.
Various Germans won an "Oscar" award for their performances in other films. The Berlin International Film Festival , known as "Berlinale", awarding the " Golden Bear " and held annually since , is one of the world's leading film festivals. German cuisine varies from region to region and often neighbouring regions share some culinary similarities e. International varieties such as pizza , sushi , Chinese food , Greek food , Indian cuisine and doner kebab are also popular.
German cheeses account for about a third of all cheese produced in Europe.
Germans produce their ubiquitous sausages in almost 1, varieties, including Bratwursts and Weisswursts. Although wine is becoming more popular in many parts of Germany, especially close to German wine regions , [] the national alcoholic drink is beer. The Michelin Guide awarded eleven restaurants in Germany three stars , the highest designation, while 38 more received two stars and one star.
Twenty-seven million Germans are members of a sports club and an additional twelve million pursue sports individually. With more than 6. Other popular spectator sports include winter sports , boxing , basketball , handball , volleyball , ice hockey , tennis , horse riding and golf.
Water sports like sailing , rowing , and swimming are popular in Germany as well. Germany is one of the leading motor sports countries in the world. Constructors like BMW and Mercedes are prominent manufacturers in motor sport. Porsche has won the 24 Hours of Le Mans race 19 times, and Audi 13 times as of [update]. The driver Michael Schumacher has set many motor sport records during his career, having won seven Formula One World Drivers' Championships , more than any other. He is one of the highest paid sportsmen in history. Historically, German athletes have been successful contenders in the Olympic Games , ranking third in an all-time Olympic Games medal count when combining East and West German medals.
Germany was the last country to host both the summer and winter games in the same year, in the Berlin Summer Games and the Winter Games in Garmisch-Partenkirchen. German designers became early leaders of modern product design , with the Bauhaus designers like Mies van der Rohe , and Dieter Rams of Braun being essential pioneers. Germany is a leading country in the fashion industry. The German textile industry consisted of about 1, companies with more than , employees in , which generated a revenue of 28 billion Euro.
Almost 44 per cent of the products are exported. From Wikipedia, the free encyclopedia. This article is about the country. For other uses, see Germany disambiguation and Deutschland disambiguation. For the country from to , see West Germany. Federal parliamentary republic in central-western Europe. Show map of Europe. Germania , Migration Period , and Frankish Realm.
East Francia and Holy Roman Empire. Weimar Republic and Nazi Germany. History of Germany — German reunification and History of Germany since List of cities and towns in Germany and List of cities in Germany by population. Largest cities or towns in Germany Statistical offices in Germany 31 December Foreign relations of Germany.
Transport in Germany and Rail transport in Germany. Science and technology in Germany.
Demographics of Germany and Germans. Baroque Dresden Frauenkirche Evangelical. Gothic Cologne Cathedral Roman Catholic. German language and Languages of Germany. Friedrich , Wanderer above the Sea of Fog Franz Marc , Roe Deer in the Forest German literature and German philosophy. Forbundsrepublikken Tyskland Low German: Federalni Republika Jermaniya North Frisian: Since , the third verse alone has been the national anthem. There were also unions in other smaller German states happening independent of each other. The tax rate is eight percent of income tax and certain other taxes in Bavaria and nine percent in other states; in most cases the tax is collected by the state and in other cases data on church members' income is shared.
Archived from the original on 7 March Retrieved 8 March Statistisches Bundesamt Destatis , Retrieved 8 June Evangelical Church of Germany. Retrieved 6 December Archived from the original on 16 January Retrieved 24 October Archived from the original on 4 March Retrieved 25 November United Nations Development Programme. Archived PDF from the original on 22 March Retrieved 14 September Zippelius, Reinhold [].
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Archived from the original on 11 October New York University Press. A Concise History of Germany. Historical Dictionary of Austria. Volume 70 2nd ed. Archived from the original on 16 May The Journal of the Anthropological Society of Bombay. In Bowman, Alan K. The Cambridge Ancient History: X, The Augustan Empire, 43 B. Volume 10 2nd ed. Archived from the original on 23 December The crisis of empire, A. The Cambridge Ancient History. The Roman Empire and its Germanic Peoples.
Lives of the Popes: The Pontiffs from St. Peter to Benedict XVI. In recent years, however, research into a tremendous body of archival documentation has successfully filled the gap and has documented the extent to which, similar to early modern and Ancien Regime penal policies proper, Policey was not only a repressive control instrument, but also a pragmatic device for finding flexible answers to contemporary problems These processes include power arrangements and the exercise of power as well as exchange processes between the prison administration and the prison guards on the one side and the inmates on the other.
These exchange processes do not occur between members of the prison administration and the inmates alone but also, as Bretschneider observes, between the inmates themselves. These reconstructions were all the more urgently needed, given that German prison history shared the late start that is characteristic of German crime and criminal justice history.
The studies which have appeared recently cover a wide range of topics, such as the history of single prisons, the history of attempts to reform the prison and to improve the situation of the inmates Particularly problematic is a chronology which establishes the decades around as the period which experienced the gradual replacement of dehumanizing corporal punishments, including the philosophies and the strategies behind these punishments, with the rise of confinement.
Some of the studies stress that confinement was a common practice long before and that the practice and the philosophy of corporal punishment lasted far into the twentieth century. But German police history is not restricted to this specific topic A recent bibliography of book publications monographs and edited volumes comes close to two hundred titles, and this excludes the massive number of published studies on East German state security. In addition to the quantity, a number of qualitative aspects characterize this branch of crime and criminal justice history.
Similar to approaches in other areas, police history has moved away from its early focus on top-down perspectives to address the functioning of the police. The emphasis here is on police interaction with the public, even on what might be termed as the dependence of the police on the public so as to establish what the police themselves considered to be efficient policing. This aspect has been stressed in a number of studies on the relations between the Gestapo and the German population during the Nazi period.
Research on policing in the communist German Democratic Republic has also pointed to cooperative interaction between the police and the public. Another qualitative aspect is the involvement of members of the police institution in police history. Up until police history written by police existed largely as a kind of apologetic self defense, especially with reference to the role of the police during the Nazi period.
Since the s, however, a number of German police administrations have engaged in projects that have included the involvement of university-trained historians. These examinations have now been extended to the most important federal police administration in Germany, the Bundeskriminalamt. The latter has launched a project to explore its history from the s to the s. The focus is on the legacies of the Nazi period, and on what the continuities of personnel, crime control and prevention strategies meant for the work of the Bundeskriminalamt during these decades There is one remarkable study by Siemann that explored the beginnings of political policing during the first half of the nineteenth century Siemann scrutinized the archival material of the various German states and of the German Federation from until the founding of the Second Reich in He painstakingly reconstructed the phases and forms of the making of a modern political police in the German states.
In his view, this small circle of men became an extralegal institution. The dynamics of their task only too easily placed their discretionary police powers beyond any limits.
Interestingly enough, the Prussian authorities explicitly named this network of police officials as their model when they set out to crush the Social Democratic Party and to found a new a political police in The understanding of the police in this work was considerably influenced by an understanding of the Kaiserreich as a fragile coalition between traditional elites the military, the landed nobility, the state bureaucracy and sectors of the new bourgeois elites, mainly the industrial entrepreneurs.
In this book about the shaping of the state monopoly of power in Prussia between and , Funk seeks to relate the organizational development of the police, including its everyday practices, to the structures of the contemporary Prussian political system. Funk describes police development in Prussia as a correlate of the increasing economic, social, and political cleavages within the Kaiserreich.
The ruling old, and the new Prussian elites sought to cope with the threats to the economic and social order, perceived as deriving from the working class, by a number of policies and strategies, among them the quantitative and qualitative increase of the state police. Funk describes this development which included also efforts to increase the professionalization and the specialization of the police and attempts to strengthen police efficiency by gradually abolishing its welfare functions as occurring alongside the gradual transformation of local police forces into state police units.
Funk was among the first to trace the details of this bureaucratization and to reveal that it was not only a function of the institutional and organizational growth of the Prussian police in this period, but it was also a strategy to restrict police authority, in principle unlimited, by submitting it to bureaucratic rules of performance. This region attracted large numbers of transient, unskilled young male workers recruited from eastern parts of Germany to work in the coal mines. On the basis of extremely good local archive material, Jessen describes the attempts to modernize and professionalize municipal police forces.
He understands this modernization as a strategy to adapt the police to the growing control requirements created by urbanization patterns in the Ruhrgebiet. These patterns resulted in overpolicing, which was abolished only gradually. These Leitmotive pertain to the structural constraints which impeded the democratic development of the Republic leading to its failure and the Nazi seizure of power. The institutional and organizational developments of the Prussian police in the early years of the Republic were researched relatively early on, with the focus on the growth of the Prussian police in the turbulent years from to One of the key elements of police development in the Weimar period was the creation of a paramilitary anti-riot unit, the Sicherheitspolizei or SIPO.
The analysis of political attitudes and orientations implicitly includes the question of whether the police was one of the structural constraints on democratic development in Weimar. But the main focus of his book is on the way that the Kriminalpolizei radicalized its strategies and practices after the Nazi seizure of power up to the point where the fight against criminality meant the extermination of criminals Welfare policies and practices intended, for example, as aids for families, relied on rigid control of the behavior of those households that had become clients of the welfare agencies.
During the s, for example, the newly established female police acted as an institution not only to help endangered juveniles but also as agents for their surveillance and correction Alternatively they stressed the constraints of socioeconomic and political structures. People and institutions below the heights of command within the polity and society passed for victims of both manipulation and terror.
This view also offered a convenient way to explore the police and the criminal justice system. If German society in general, and numerous bodies and institutions in particular, had been forced to obey orders from above, then the police were no exception. It was the Nazis who had imposed special laws and orders which nobody dared to resist.
Accordingly, questions about the behavior of ordinary police officers were ignored. And as a follow on: Which modes of perception and which everyday practices made it possible that the overwhelming majority of police officials and state prosecutors, of judges and lawyers, not only stayed on but actively contributed to the execution of Nazi policies? In fact the police and the judiciary seem to have perceived the changes as the fulfillment of the goals that they had long sought. For decades, the preventive detection and exclusion of presumed aliens had been a central feature of policing.
To the police, public order in the locality blended seamlessly with the security of the Reich at large. Some parts of the criminal police and, most actively, the Gestapo,claimed and acquired unchecked powers with reference to the detention of suspects As a result of the customer's request for changes, the contractor is obliged to prepare an offer for the additional or reduced remuneration. If no agreement on the change and its remuneration is reached between the parties within 30 days after receipt of the change request, the right of the customer to unilaterally order the change arises and the contractor is then obliged to carry it out.
What was intended by the legislature as a maximum period of time in good faith, however, in practice provides the contractor with a 'torture tool'. The contractor can exploit the 30 days and, during this time, bring the site to a virtual standstill — this occurs in particular if the contractor does not carry out any work with regard to the supplementary performance under discussion during this period. This provides the contractor with the means to exert pressure to enforce favourable supplementary offers.
Both the amicable amendment of the contract and the amendment of the contract owing to a unilateral order naturally have an effect on the remuneration for work and services. Following the reform, the legislation now provides the parties to the construction contract with guidelines for the remuneration for the modified or additional services. If the parties cannot agree on the amount of the additional remuneration for the changes to the services, for example, the contractor can set 80 per cent of the additional remuneration specified in its 'amendment offer' Section , Paragraph 3, BGB for its instalment payments the instalment payment is a partial payment by a principal on its monetary debt, which is to be paid by it in the case of partial services rendered by the contractor.
This '80 per cent rule' compensates for a considerable part of the payment risk in change orders.
For the German version, I recommend the up-to-date version at http:// . der Bundesrepublik Deutschland, in VERBRAUCHERKREDIT UND .. focused on facilitating the enforcement of creditors' claims, not on relieving INSOLVENZORDNUNG-ENTWICKLUNG UND ENDPRODUKT AUS DER PERSONLICHEN SICHT. a) Preventive administrative securities regulation enforcement. 14 . Hazen, Thomas, Federal Securities Law, 3rd Edition, Federal Judicial Center, Die Entwicklung des europäischen Kapitalmarktrechts
The clarification of the actual additional remuneration claim should then take place in connection with the final invoice. However, this regulation has met with fierce criticism as it can be seen an invitation for the contractor to solicit fraud. A contractor, for example, who suspects that a dispute is imminent, may make an offer that amounts to per cent of the actual price: Or if a contractor simply has payment difficulties, it might make use of this 'instrument'.
However, the customer can also benefit from the regulation: The client can therefore pre-finance in the amount of 20 per cent. Forward deals in Germany principally consist of two components. The first component is a land purchase agreement, with the aim of transferring ownership of the land plot and the building to be erected. The second component is that the seller or project developer undertakes the obligation to construct the building usually on a turnkey basis. With regard to the date the purchase price is due to be paid, it is agreed either that payment will be effected entirely after completion for commercial properties after the first full rental payment received or that it will be paid in instalments according to the construction progress on the basis of an individually negotiated payment plan.
Without a proper prior waiver, the agreement of an individual payment plan is ineffective and the more buyer-friendly legal regulations apply. As a rule, the seller or project developer does not erect the building itself, but usually commissions a general contractor to fulfil the construction obligation under the forward deal.
To avoid liability risks, when drafting the contract care should be taken to ensure that the scope of the construction work owed to the buyer by the seller is passed on in full to the general contractor as complete as possible and without contradictions. This also applies to the dates and deadlines agreed in the purchase and general contractor agreement. The completion date and other significant deadlines should be adequate and contain a sufficient time buffer for unforeseen or unavoidable delays e. To minimise liability risks for the seller or project developer, it can be agreed that the seller assigns warranty claims against the general contractor to the buyer and is not liable itself.
Buyers may accept this after a certain time has elapsed after completion, during which the seller or project developer should be fully liable. In the development of commercial real estate, rental contracts are often concluded at a very early stage. The construction obligation assumed by the seller or project developer as lessor of the respective leased object must be covered by the general contractor's construction obligations and should correspond to the construction obligations owed to the buyer. Gaps in the construction obligation lead to considerable liability risks.
In project financing, a special purpose vehicle SPV is usually founded for the realisation of the project, which enters in all agreements in relation to the project. The SPV's purpose is strictly limited to the realisation of the project and conclusion of all project documentation, such as agreements with general constructors and all finance documents. A project finance transaction finances a special project. Generally, most of the costs are financed by loans, including syndicated loans for larger amounts. Currently, investors are keen to finance the entire project.
The participation of the investors is limited to their equity consideration and is therefore on a non-recourse basis. However, in some situations guarantees from the investors are required. The repayment of the financing is provided from the cash flow after completion of the project. The typical real estate project financing foresees a senior loan, junior financing in the form of a mezzanine loan or corporate or project bond, and a shareholder loan or an equity injection.
The usual providers of the senior loans are banks, insurers or senior debt funds. Senior financing in Germany usually covers between 60 per cent and 80 per cent of the costs of the project. Senior financing is divided into two phases: During the first phase no amortisation of the financing is agreed as no cash flow is generated. The interest is paid out of equity and shareholder loans, or is capitalised until the end of the construction phase.
To help project developers finance all of the acquisition and building costs, junior financing is important to close the gap between senior financing and project costs. Junior financing could be provided by mezzanine funds, private equity, or family offices or hedge funds. Furthermore, the preferred equity structures are common in the market, which are granted by special funds, hedge funds, private equity or debt funds. Alternatively, corporate or project bonds can be issued. Junior financing may go directly to the SPV or to the holding company. This structure has an impact on the regulations of the intercreditor agreement to be entered into by the senior financing provider, the junior financing provider and the shareholders, if shareholder loans were granted.
The intercreditor agreement provides for regulations in relation to the ranking of payments, prohibition of payment to the junior financers prior to completion, repayment of the senior financing, and enforcement of senior and junior security. Furthermore, this intercreditor agreement may contain the right of the junior parties to repay the senior loan and to take over the project. The finance transaction straddles the construction phase and the investment phase.
During the construction phase the financing providers bear the material risk as the project assets are not covering the liabilities, which means that the loan is used according to the necessary project steps. By this procedure the risk of the banks is mitigated as the value of the project assets rises with the progress of the construction. After the completion of the project the investment phase starts, in which the project generates cash flow, usually in form of rental income, which is used to repay the financing.
However, the risks remain for the financing providers as it is not certain that the project will generate sufficient cash flow for the repayment. The contractual basis for a forward deal usually includes the legal basis of the project, in particular the building permit, the plans floor plans, sections, etc. If rental agreements have already been concluded, these, including their facilities, in particular the landlord's building description, are also the contractual basis. The main reason for this is probably the German statutory law on General Terms and Conditions in Sections ff.
An interesting development with regard to procurement models for construction projects is the revival of partnering-based construction schemes. In , the construction industry tried to establish partnership models as a way out of the price war. For some years now, there has been a construction boom that is reversing the situation in the market, especially for building construction services. It can sometimes be difficult for employers to find suitable partners with whom they can realise construction projects.
In many cases, the traditional tendering procedure by the owner no longer leads to sufficient and suitable bids from the construction industry, at least not if the owner adheres to a budget that it has derived from outdated price ideas. Many employers have therefore been more open in recent years to finding partners for their projects with new approaches.
Employers often try to integrate contractors into a project as early as possible in the planning phase and involve them in the development of the pricing targets and the definition of the scope of the work. Against this background, the understanding of those involved in construction for cooperative and partnership approaches e. In particular, the guaranteed maximum price model with partnering elements is once again being used. The loans are secured by the pledges over the project assets and the shares of the SPV, and assignment of the rights under the project agreements to the banks and, subsequently, to the junior capital providers.
Furthermore, the direct agreements are concluded to enable the financers to enter into the project agreements and to complete the project in case the sponsor is not in the position or is not willing to do so. As the security over the project is not sufficient to cover the liabilities under the finance documents during the construction phase, the investors must provide personal security in the form of sureties and guarantees.
Furthermore, the investors' guarantees are usually required to cover cost overruns and delay. Risks, liability and securities obviously play a major role in forward deals. With regard to the sold property, the liability of the seller is generally excluded as far as possible, unless explicit guarantees e. It is normal to have a maximum liability limit for claims of the buyer.