Frustrating - Contract Cancelled

[Monty Burns]

I have just been notified that a unit that I brought off the plan in Moranbah has had the contract cancelled by the developer.

It was a property that from my DD would have had very good returns as well as CG. Even more so as I brought the unit when the dropped the price 50k over xmas

No reason given other than under clause of builders perogative.

No loss to me other than my time as the deposit will be paid back - touch wood.

My thinking is I will see these units up for sale in 6 months at a greatly increased price.

 

[GoAnna!]

What did the builder's out clause say exactly?

 

[Monty Burns]

I have typed this off of a PDF so any spelling errors are my own.

************

6.6 Approvals and Termination rights

(a) We may terminate this Contract at any time
by giving written notice to you if we are not
able to obtain any local government or other
statutory approval necessary for the construction, sale or use of the Development on terms wholly satisfactory to us.

(b) Despite any other provision in this Contract,
we may, in our absolute discretion, terminate
this Contract by giving notice to you by
30 June 2008.

(c) If the Contract is terminated under this clause
6.6, all money paid will be refunded and no
party will have any claim against the other

 

[boomtown]

The wording you have put up there doesnt look promising.

 

[yo yo ma]

Probably a sunset clause in the contract... they are commonly found in OTP contracts

Be aware of any sunset clauses that may allow your developer to withdraw from the contract. Although rare, developers sometimes activate sunset clauses when property prices have increased, terminate existing contracts, and sell the units for a greater profit.

http://www.somersoft.com/forums/showpost.php?p=355210&postcount=3

 

[Monty Burns]

It is annoying, I am entitled to get my deposit back which I am
waiting for. The gent who was developing this is a Queens Council so
I am pretty sure that the $$$ will be forth coming.

It is more the frustration of looking forward to the new property
and then being told that it is not going forward.

 

[DavidMc]

It's not uncommon for builders to get out of OTP purchases like this, especially if an apartment has experienced strong capital gains during construction.

Unfortunatley they've got bigger legal teams...

 

[Monty Burns]

My DD showed the units were way under priced.

So we can expect to see them up for sale in 6 months time for an
inflated $$$

 

[GoAnna!]

I wonder if they were getting sufficient sales to get finance through and now you have served your purpose. Or costs may have blown out in some way that makes settling on your purchase price unviable....or those extra profits may just be too tempting....

 

[Monty Burns]

From what I was told by the sales staff whole project had been sold early in the new year. There were 2 projects one in Moranbah and the other in Dysart.
Don't know if that project has been "cancelled"

A little bit of research shows that council approval was approved for the units in Moranbah.
I have also found expressions of interest for tradies to build the units with 2 different expiry dates with both dates expired.

It could be that they couldn't get builders, or could get more $$$ by delaying the sale for x months and then reselling.

 

[Medine]

Hi Monty,

What a shame! We've come across this a couple of times amongst our clients. In one case there was a clause like yours and nothing could be done to avoid the cancellation of the contract (in Queensland). The properties were then offered again to the original buyers at a much increased price (about $50k increase from memory) and our clients declined the offer .

We had another one in WA where there was no such clause but the developer insisted on re-writing the contract and pushing each purchaser to sign. The purchasers tried to organise a group action to fight it, but couldn't co-ordinate it with a disparate group of investors. They ended up paying $100k more than originally contracted . Given the market over there recently I don't think it worked out so well for them.

If it were me I wouldn't want to be buying a property from such a shonky operator. I'd be so worried about the quality of the place with business practices like that.

Cheers, Medine

 

[redwing]

Earlier Post

OTP Purchase Gone Wrong Link

Did you read about Saffron Apartments in the West?

Supposedly, that the developer has envoked one of the clauses in the contracts to increase the price of the apartments approx 30% or so?

People who expected some great CG are now facing the prospect of some hefty price increases

An article in the West says that the developer had envoked one of the clauses in the contracts to increase the price of the aparments from $400k to $520k and from $900k to $1.17m.

Stamp Duty was also paid

They were advertised as having good CG prospects during construction - Guess the developer realised he was right?

Deposits are refunded, however, Opportunity Cost is not


PS: Interesting Perth 2008 Developments Link

 

[Petal]

It's a win win for the developer. He gets to take a bunch of contracts to his bank to get the finance to build the place and then he has the sunset clause to cancel the original contracts and sell again at an increased price However if the price stays the same or drop the silly old purchaser can't get out of it