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Judgement of ECJ: minimum and maximum rates of fees for architects and engineers (HOAI) are not compatible with EU law

This is a Press Statement issued by the Bundesarchitektenkammer – BAK (Federal Chamber of German Architects)

 

In its judgement of 4/7/2019, the European Court of Justice (ECJ) determined that the minimum and maximum rates of fees for architects and engineers (HOAI) are not compatible with EU law. This was despite the court confirming that minimum rates can help to ensure the high quality of planning services. However, the German regulation does not pursue this objective in a coherent and systematic manner, since planning services can also be provided by service providers without the latter having to provide proof of their professional aptitude. The ECJ does not consider the binding nature of the maximum rates to be necessary, since the German Federal Government has not sufficiently substantiated that a non-binding framework for pricing is not sufficient to guarantee consumer protection.

In the run-up to the ruling, the Federal Chamber of German Architects (BAK), the Federal Chamber of Engineers (BingK) and the organisation regrouping architects´ and engineers` associations for the HOAI  (AHO) had initially been able to persuade the German Federal Government to uphold the HOAI and to defend the binding minimum and maximum rates before the ECJ, and through that alone they were maintained for almost half a decade longer. Throughout the entire procedure, the BAK together with BIngK and AHO supported the German Federal Government with comprehensive legal and empirical-economic expert reports. The ACE, private builder associations and the BFB (German liberal professions) were also involved in providing political and presentation support. Unfortunately, all of these efforts have not been successful.

The obligation to comply with binding minimum and maximum rates must indeed be abolished as soon as possible due to the judgement. However, the HOAI can remain otherwise unchanged, since neither the performance plans nor the fee rates were the subject of the proceedings.

The judgement will undoubtedly have serious consequences. The BAK is therefore intensively examining which conclusions can be drawn from the ruling, in particular whether the “incoherence” objected to by the ECJ could be counteracted by restricting planning authorisation to architects and engineers. It is working with the BIngK and the AHO to minimise the impact of the ruling. These include proposals for the modification of the HOAI, to ensure that architects and engineers can continue to benefit from the usual, tried and tested fee structure. It is proposed that in the absence of any other express agreement, it is assumed that the average rates are considered to have been agreed. Unless otherwise agreed, the amount of remuneration must be commensurate with the nature and extent of the assignment and the performance of the architect. In the case of a dispute, the court of appeal (e.g. civil court or public procurement tribunal) should also be obliged to obtain an expert opinion from a chamber of architects or engineers.

Immediately after the ECJ ruling, the profession was provided with comprehensive information and support materials to minimise the uncertainty caused by the ruling, in particular with regard to its impact on existing and future contracts.

 

For further information on the ruling please visit the explanatory page.

 

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DIR 02/19 | Marsamxett Balcony Grant Scheme

Reference is made to the Expression of Interest (EOI) issued by the Planning Authority regarding the Marsamxett Balcony Scheme. Said EOI indicates that only those fees of periti who registered with the Authority will be reimbursed as part of the grant scheme, and this only up to €500.00.

The Kamra tal-Periti was not consulted on this EOI, and has the following observations:

  • This call is unprecedented, since it was never a requirement for periti to register directly with the Authority in order to be on some “list”. All periti, by virtue of their warrant, are eligible to submit applications on behalf of their clients, and do not require any form of endorsement or registration by the Authority.
  • The call guarantees that fees due to the periti who register with the Authority will be reimbursed directly by the Authority, up to the afore-mentioned cap. This means that unless periti are registered with the Authority, reimbursement to the applicant cannot be guaranteed; this cannot be accepted, not least because 80% of the funds come from EU sources. It also means that periti who are not on the list are disadvantaged since their clients cannot claim reimbursement of their fees.
  • The Authority has also taken it upon itself to decide what appears to be the appropriate fees for the services required, by establishing a cap on the amount that would be covered by the fund. In most cases, this will barely cover the fees required to undertake a survey of the property.

The Kamra tal-Periti has communicated with the Planning Authority regarding the above, and was informed that the creation of this register was deemed to  be required because a number of potential applicants were not able to engage periti to submit applications on their behalf, either because of lack of finance or because the periti they approached were not in a position to undertake the services required. The Authority also informed that the Kamra that the amount of fees covered by the grant was determined by the PPCD (Planning and Priorities Co-ordination Division). Despite the Kamra’s objections to the EOI, the Authority has not withdrawn said EOI, and the list of periti who registered is now available online.

Periti are reminded of their obligation at law to enter into a written agreement with their clients regarding the amount of fees due, clearly outlining the services to be carried out and the terms of payment (refer to the Kamra‘s Directive on this matter). Periti are also reminded that they are not obliged to receive payment for their services only after the grant is awarded, but at any time during the provision of the services that they deem fit, and that such dates are to be clearly stipulated in the agreement with the client.

 

Perit Simone Vella Lenicker
President

 

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CIR 02/10 | Tariff K and VAT

Reference is made to previous circulars and directives regarding the application of the schedule of fees as defined in Tariff K and the inclusion of VAT, as part of the Cost of Construction.

We wish to draw your attention that a recent Court of Appeal judgement has ruled that the amount of VAT is not part of the Cost of Construction and that it should not be included in the computation of the fees due to the perit squashing a previous court judgment delivered by the First Hall of the Civil Court which had decided in favour of the inclusion of the amount of VAT as part of the Cost of Construction.

The Kamra tal-Periti, whilst taking note of the decision reached by the Court of Appeal, does not agree with this decision. We hereby inform you that KTP is already in the process of seeking legal advice on the matter and will vigorously challenge this interpretation of the term “cost of construction” with legitimate means and in the appropriate quarters.

Furthermore, as we have informed you earlier, a Legal Notice dated 29th December 2009 determined that fees are no longer mandatory and may be established by written agreement between the client and the perit. In the absence of such agreement, the fees described in Tariff K are to stand. Also in this instance we are not in agreement with this unilateral decision taken by government and we are also here seeking redress through the appropriate channels.

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