The contract is not subject to mortgage approval so this is not an option for me. That part of the contract was deleted.
To Mrs. B, I have heard that is true but not first hand.
Has anybody pulled out of a contract to buy an apartment and been pursued??
- Thread starter frankor2
- Start date
The contract is not subject to mortgage approval so this is not an option for me. That part of the contract was deleted.
To Mrs. B, I have heard that is true but not first hand.
Who deleted it? And if it was the developer, why did your solicitor not protect you on this one?
Unfortunatley frankor2 it sounds like you have no valid grounds to get out of the contract so you will have to wait and seem.
I think the size of the developer comes into play and who their solicitor is as to how they deal with matters once you don't complete. You will undoubtedly get a few threatening letters first. Remember your solicitor may have only quoted you a fee based on a standard conveyance so anything on top of that will increase the legal fees for you.
I personally think that specific performance is arguably not the best way for developers to proceed as usually people require mortgages to buy property. But in this climate it may be their only option or face being wound up by their creditors.
I think the size of the developer comes into play and who their solicitor is as to how they deal with matters once you don't complete. You will undoubtedly get a few threatening letters first. Remember your solicitor may have only quoted you a fee based on a standard conveyance so anything on top of that will increase the legal fees for you.
I personally think that specific performance is arguably not the best way for developers to proceed as usually people require mortgages to buy property. But in this climate it may be their only option or face being wound up by their creditors.
It is not usual. It is a matter for the purchaser as to how they fund their purchase. When I am acting for a vendor I have enough problems without taking on board the purchasers.
The harsh reality is that some people agreed to buy properties and are fully bound in , in a legally binding contract. They may have problems obtaining finance or they may quite simply have decided (in an acutely "blonde" moment) that actually they don't feel like completing.
Contracts are binding. People should not sign them if they do not intend to be bound.
And before anyone says, cor I can't believe their solicitor allowed them to .........can I remind everyone of the spirit of personal responsiblity which I think has been one of the great casualties of the Celtic Pup.
mf
I completely accept that the contract is legally binding. I did intend to be bound when I signed 2 years ago. I am not completing and will suffer the consequences as to complete would mean acquiring a property for 500k+ which has a current market value of 400k. The market value is probably way off as currently, there is no market for new apartments. Based on current rents, using a rental multiplier of 18, the property is worth €345,600, assuming rent of €1,600 per month which is on the high side for a 2 bed. There is really no other way to value when there is no market.
If I close the sale, I will pay stamp duty as an investor of 24k then lose min 120k but could be much more on the capital side.
So, my argument is this.....
Is it better to suffer the consequences of non performance which may amount to very little in reality to avoid a loss of €150,000 ++??
I believe the developer in question is very overstretched and may be forced by his bank to reduce contract prices to ensure the units complete as to do so would reduce the bank's exposure to his development. Lower profit per apartment to the developer but better for the bank.
To finish, I did not buy willy nilly or have a blonde moment. I have several buy to lets and have a business in the industry. Renting apartments / houses is a long term investment however this one does not make sense from any angle apart from the obvious one of not getting sued!
"To finish, I did not buy willy nilly or have a blonde moment. I have several buy to lets and have a business in the industry. Renting apartments / houses is a long term investment however this one does not make sense from any angle apart from the obvious one of not getting sued!"
OK - so you are an experienced property investor. So, you, more than anyone else knew precisely what your risks were. You went ahead. Now you are not completing because it makes more financial sense not to.
You are absolutely entitled to try and negotiate your way out of this and, if you can buy at a lesser price, well done. However if you decide not to complete for the reasons you outline, you are an obvious target for the developers to come after.
mf
OK - so you are an experienced property investor. So, you, more than anyone else knew precisely what your risks were. You went ahead. Now you are not completing because it makes more financial sense not to.
You are absolutely entitled to try and negotiate your way out of this and, if you can buy at a lesser price, well done. However if you decide not to complete for the reasons you outline, you are an obvious target for the developers to come after.
mf
I say good luck frankor2 and let us know how you get on. I appreciate your position and would absolutely try and do the same.
Bottom line is that you've got to look out for your own interest first and foremost, not the builders, and you should drag it out as long as you can unless they issue proceedings against you.
I think MF missed the spirit of your post a bit as you seem to fully recognise your legal position but wanted to find out what happens in reality.
Bottom line is that you've got to look out for your own interest first and foremost, not the builders, and you should drag it out as long as you can unless they issue proceedings against you.
I think MF missed the spirit of your post a bit as you seem to fully recognise your legal position but wanted to find out what happens in reality.
But do they really. I think that the mf1 is trying to make the point that the OP hasn't a leg to stand on legally. The developer will be will within his rights to force the OP to complete. It's not a case of a first time buyer with no assets and can't get a mortgage.
I'll probably get panned for saying this but I will anyway. Investments fall and rise. Just because property investing was a "sure thing" in the last few years doesn't mean that it was always going to be. You can't buy shares and then suddenly give them back later because they have decreased in value
. You may have to take the hit on this one just like the way you were quite happy to take the profits from the increases in value of your other investments.
M
mercman
Guest
cgc -- well said
I agree with you but I think the OP realises this and as you say investments rise and fall and as this was an investment the best result for the OP would be not to complete the purchase from an investment point of view so you can't blame him for asking about the likelihood of being sued.
Ok I'll play along. Of course I can't blame him for not wanting to lose money but that boat has long sailed. Lets put the shoe on the other foot. Lets pretends we are back in the good old times when house prices were rising. The developer realises the apartment is now worth €100,000 more than what he signed contracts with the investor 2 years previous. He now decides hold on i'll not complete the deal with this guy and I'll find someone else who will pay the current higher price. What would be the OPs reaction in this case?
As i see it the investment was made when the booking deposit was paid and the contract was signed to complete at X price. Its the attitude of some "investors" or "property speculator" or whatever name you want to give people who thought that buying property was a win/win situation where they would be making huge profits indefinitely that i find baffling. Shock/horror the property market is declining, investments fall as well as rise
. Do they really think that a developer will go "ah sure that okay, I'll just find someone else to buy it a the lower price, don't worry about it". That MAY happen with 1st time buyers with no chance of getting the original mortgage or any assets but an investor with assets who signed a binding contract to complete? By the way I'm not an investor, I'm a recent first time buyer myself in the last 6 months. I'm not taking the side of the developors, in fact I have little sympathy for either developers or "investors" in the current climate. You reap what you sow.
I agree with what you say cgc about prices rising / falling but again in your example the options for a purchaser would be to look for specific performance or the contract or walk away. The same options are open here for the developer.
It just seemed to me that this thread turned into more of a complaint about the OP not grasping the implications of the contract rather than the original question as to have developers actually sued yet for non-completion.
I have neither sympathy nor antipathy for developers or purchasers but in today's climate the OP's question is justified I'm sure you'd agree.
It just seemed to me that this thread turned into more of a complaint about the OP not grasping the implications of the contract rather than the original question as to have developers actually sued yet for non-completion.
I have neither sympathy nor antipathy for developers or purchasers but in today's climate the OP's question is justified I'm sure you'd agree.
So for the sake of argument, let's say I am the developer of this apartment. The market value of the apartment has now potentially fallen to somewhere between 345,600 and 400,000 ( difficult to gauge). But I have a binding contract with an individual who has multiple buy to let properties. If I pursue this individual I will either force him to complete at the original 500,000 plus price, or I will get a judgement against him for my costs, plus any damages I incur, including loss in the market value on the resale at a lower cost. And I know I can enforce that because I can get a judgement against him and worst case register it against his other properties and go for a well charging order forcing the sale of those other properties until I get my money.
The alternative is that I simply forfeit the deposit and don't pursue the rest of the money.
Difficult choice?
The alternative is that I simply forfeit the deposit and don't pursue the rest of the money.
Difficult choice?
As has been answered on pg1, as yet no-one has ended up in court, but developers are currently doing due diligence on sample cases, to ensure they have legal grounds to proceed.
We will see these cases in the coming months; fed via the papers just like the repossession cases.
Why would a developer want to void an existing contract?
Go to court and sell at the agreed price, or void the contract and end up with yet another unsold property, which now needs 100k taken off it just to get some interest.
They can and absolutely will go to the courts. Otherwise people will start defaulting on signed contracts left right and center.
The other alternative is that the developer reduces the contract price to reflect a more favourable price to the purchaser.
The first option is great in an ideal world except that in the current climate the banks are in trouble with developers, this is well publicised so now that we are not in an ideal world, my opinion is that the bank will not wait for the developer to go through the motions of using the courts for redress. They bank cannot afford to wait this long.
I really doubt that a sensible builder will just forfeit the deposit and walk away as it leads to one more unsold unit.
By using carrot & stick.....reduced price but no court...both parties could get a deal. A bit of a lob-sided deal but one all the same.
This is not completely fair to the builder, i accept this unreservedly but we are in difficult times. The media would be all over a builder looking to break a contract in the boom to secure a higher price and the fact is that he wouldnt be able to but on the other hand, I find it hard to see the media relishing a story of a builder taking an action against an investor.
The first story is page 1, the second is page 7.
I would question if developers can bring mass action style claims against groups of purchasers but it will be interesting to see what the courts think.
My own experience is that developers try and negotiate to sell for a lower price to the purchaser first and foremost with a confidentiality clause. A lawsuit could take years to reach a verdict and if it is a specific performance claim the property cannot be dealt with in the meantime. Also developers are getting sued by their own suppliers etc and could bewound up prior to the action reaching court.
Also a court order and the purchaser actually having any money are two different things which would be the reason for proceeding against some purchasers only rather than against them all.
My own experience is that developers try and negotiate to sell for a lower price to the purchaser first and foremost with a confidentiality clause. A lawsuit could take years to reach a verdict and if it is a specific performance claim the property cannot be dealt with in the meantime. Also developers are getting sued by their own suppliers etc and could bewound up prior to the action reaching court.
Also a court order and the purchaser actually having any money are two different things which would be the reason for proceeding against some purchasers only rather than against them all.
David_Dublin
Registered User
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The developers were happy enough to facilitate gazumping though. I know that this only happened when a booking deposit was paid and before contracts were signed. But the fact that people had sale agreed on properties and then were asked to pay more suggests a less than crystal clear conscience on the part of the developers. frankor2 being an investor means that little sympathy will come his way, though I do feel very strongly for FTB's etc who may never pay off the negative equity they find themselves in should judgements go against them in these types of cases. I hope that judgements dont put them in such situations.