Investor Guide
2026-10-10 09:35

Forward Deal (buying during construction): A Discount in Exchange for Risk

A forward deal is the purchase of a store still under construction: the investor signs with the developer before completion and pays either the whole price on completion (forward purchase) or in instalments during the build (forward funding). In return for construction risk and delayed income — in our experience, the store opens 9–15 months after signing — the investor can negotiate a discount and influence the building's quality.

What it is

The legal regime depends on the payment terms. If the developer sells the plot with a building it has yet to build (a developer contract, Bauträgervertrag, § 650u BGB) and takes money before completion, the Brokers and Developers Ordinance (MaBV) applies. Four conditions must be met before the first payment, among them a priority notice (Auflassungsvormerkung) and a granted building permit. The money then flows in up to seven instalments as construction progresses (§ 3(1), (2) MaBV), or earlier against a bank or insurer guarantee (§ 7(1) MaBV). If the investor first buys the land and commissions the building under a separate contract, the deal as a rule falls outside the MaBV (see Part 6 of the series German Prime Retail).
Exhibit 1. Forward funding adds paid instalments to the risk and the developer's interest saving to the discount
Forward purchase
Forward funding
Payment
Whole price on completion
Instalments during construction
MaBV payment rules
Nothing to regulate: the developer holds no buyer money
Instalments under § 3 MaBV or a guarantee under § 7 MaBV
Buyer's risk
Project delay or failure, deferred income
The same, plus instalments already paid
Grounds for a discount
The buyer commits early and bears the timing risk
The same, plus the developer's saving on construction finance

Why it matters to investors

A developer building with the investor's money saves much of its construction-loan cost. In our example, an average balance of €4 million over a twelve-month build at 5% a year costs €200,000 in interest alone — 2% of a €10 million price (Part 6). Experienced buyers bring this figure to the table and press for part of the saving in the price.
The MaBV limits the sum at risk but does not protect against delay or failure. Leases for new stores usually set a long-stop date after which the tenant may withdraw. The priority notice secures the claim to the plot, not the money paid: a buyer who exits a stalled project is left with an unsecured refund claim unless a § 7 MaBV guarantee covers it. A buyer entered in the commercial register — a German limited-liability company (GmbH), for example — can waive the MaBV protection only in a separate document (§ 7(2) MaBV). Our advice: only in exchange for an equivalent guarantee.
The main advantage is control: an independent technical adviser monitors the build up to acceptance (Abnahme). Acceptance starts the five-year limitation period for building defects (§ 634a(1) no. 2, (2) BGB). For a defect known but not reserved in the acceptance record, the buyer keeps only a claim for damages (§ 640(3) BGB).

What to check

• A final building permit, no longer open to challenge.
• A signed lease: opening date, rent start and long-stop date.
• A payment schedule under § 3 MaBV or a guarantee under § 7 MaBV — and no waiver of protection without an equivalent guarantee.
• Agreed independent technical supervision, with its report ready before the acceptance date.
• The developer's accounts and its earlier stores for the same chain: defect lists and how fast they were cleared.
Related terms: MaBV · Bauträger · Abnahme · Auflassungsvormerkung
Sources: MaBV §§ 3, 7; BGB §§ 634a, 640, 650u, 650v; Gordon Real Estate Group, "German Prime Retail", Part 6; Gordon Real Estate Group transaction experience. Legal position as of 10 October 2026.
Photo: Annie Spratt / Unsplash
This entry is general information and not legal or tax advice.