Not settling on settlement date

[GreenTreeFrog]

Maybe but I know this person well and understand their decision.

There were three things that needed to happen for the deal to work a) secure finance b) find a tenant for their Warriewood property or sell it c) find a place to rent in their current area that will accept a dog. They wanted to stay in the area as they have school aged children. None of these things happened so it has been decided too many things are against them.

He has been investing for a long long time and feels that cutting his losses at this point is the best way forward.

Mick - if it were me, I would be forging forward with another broker and other options. But the decision isn't mine, I can only advise.

I really appreciate everyone's input, this has been a terrifically educational experience for me too!

 

[Ausprop]

PS..........Unless there is a structural policy reason, ANZ would be close to my last lender attempt for anything even marginally curly.............

perhaps the subject of a new thread... are anz actually any good at anything?

 

[Aaron_C]

We used to go to ANZ all the time. But now they've changed BDM and now they get none of our business - bunch of useless muppets indeed!

 

[GreenTreeFrog]

I agree! We had problems with them about two years ago, I learnt a LOT of valuable lessons form the experience.

 

[GreenTreeFrog]

The buyer got an email from the vendors solicitor on Friday afternoon, stating that they will sue for all costs if the buyer fails to settle, including the difference in price if they sell for less.

So they are currently up for:

Deposit: $115k
Interest: 12% per month on 1.2 mill until sold.
Shortfall: Difference between what they bought for and what vendor now sells for.
Legals: All legal costs
RE Agent Commission: Not sure about this one but presume the new commission if the property is resold would be a cost the buyer has to wear.

The buyer is under the impression these costs would first come out of the $115k deposit, I think not. They vendor gets that $115k then sues for all others costs on top of that. Can anyone clarify?

 

[sunshine]

The buyer is under the impression these costs would first come out of the $115k deposit, I think not. They vendor gets that $115k then sues for all others costs on top of that. Can anyone clarify?

I can confirm the deposit will count towards NOTHING. All the extra costs are on top of losing the deposit, and another biggie is legals. The purchaser will be throwing at least another $50k down the gurgler in legals, if it goes to court than add another $70k on top of that $50k.

If the purchase price is $1.2, in reality they could sell for $900k and sue the purchaser for the $300k difference.

GTF I went through a very similar thing about 3 years ago, I can tell you in hindsight we would have done things very differently. A HUGE lesson for us.

Good luck to the purchaser, if it was me doing it again, I would push forward with the purchase and then look at the options.

If they are definately not going to go ahead get a VERY GOOD solicitor, NOW. Find someone who has done this before, I probably can't stress that one enough!

Sunshine

 

[Terryw]

Yes I would think they would lose the full deposit paid as well as the other costs mentioned.

Even if they have paid just 5% deposit they could be up for 10% too depending on the wording.

 

[tom32]

Interest: 12% per month on 1.2 mill until sold.

Are you sure?

That sounds way too much?

Could the legal people tell us if their are similar rules around sale contracts to other contracts where liquidated amounts cannot be punitive, but must be a genuine pre estimation?

The 115k will be chicken feed if that term is valid...

Sunshine / terry, I would have thought the 115k would go toward damages, otherwise it would be unjust enrichment, wouldn't it? Could you run that line on it? Are you allowed to profit from the other parties breach? I know in practice profiting fro a breach can happen but this seems too extreme to me but only speaking from logic in normal contracts no knowledge around RE sale contracts.

agree 100% with you that they should be finding a good lawyer. Suddenly $500.00 an hour seems like good value...

 

[Terryw]

Are you sure?

That sounds way too much?

Could the legal people tell us if their are similar rules around sale contracts to other contracts where liquidated amounts cannot be punitive, but must be a genuine pre estimation?

The 115k will be chicken feed if that term is valid...

Sunshine / terry, I would have thought the 115k would go toward damages, otherwise it would be unjust enrichment, wouldn't it? Could you run that line on it? Are you allowed to profit from the other parties breach? I know in practice profiting fro a breach can happen but this seems too extreme to me but only speaking from logic in normal contracts no knowledge around RE sale contracts.

agree 100% with you that they should be finding a good lawyer. Suddenly $500.00 an hour seems like good value...

I think it is probably 12% pa.

 

[Ausprop]

we're all flying a little blind as we are not privy to the contract. The ones I have done in WA are, the loss is the minimum of the deposit, but it does count towards anything in excess. The interest component is nullified once a termination is issued. the vendors must mitigate loss by attempting to get the best resale price possible (tough one to argue here).

For asset protection it is best to buy in a $2 company then do a nominee at settlement. that way if it goes pear shaped, as it so often does, then you can walk away from your deposit at least.

These guys are probably looking at $200k to high $300's? It will hurt.

Good solicitor? get one to look for contract weaknessses, but to be honest you could save the cost and head into mediation yourself.

 

[GreenTreeFrog]

Sorry yes 12% pa which is still $10k per month!

 

[GreenTreeFrog]

Can anyone advise where I can find the actual law that states the fees and penalties are on top of the loss of the deposit as the purchaser has been told these come out of the deposit first.

 

[Propertunity]

Can anyone advise where I can find the actual law that states the fees and penalties are on top of the loss of the deposit as the purchaser has been told these come out of the deposit first.

Broadly speaking this is covered by Contract Law. All of the penalties are specified in the contract of sale they signed. You can read all the standard penalties in a NSW standard contract. Special conditions can also be added on separate pages in any particular contract.

 

[Terryw]

Property Unity is correct.

In NSW this would be covered by the standard Contract of Sale under cl 9 and subclauses. Vendor keeps the 10% deposit and can sue for any definiance on resale and any reasonable costs and expenses.

(These clauses could have been modified by the parties however).

 

[GreenTreeFrog]

Conveyance has advised:

The deposit is applied against any deficiency on resale as per clause 9.3.1.

Damages under a contract is complex and it all depends on whether they sue you for re sale deficit or breach of contract.

Not sure about other fees and costs associated with re-selling etc.

 

[tom32]

Sunshine / terry, I would have thought the 115k would go toward damages, otherwise it would be unjust enrichment, wouldn't it? Could you run that line on it? Are you allowed to profit from the other parties breach? I know in practice profiting fro a breach can happen but this seems too extreme to me but only speaking from logic in normal contracts no knowledge around RE sale contracts.

Thanks for updating us gtf.

In a normal contract (when I say normal meaning between two commercial parties so not as much legislative crap) even if a term was present say for a liquidated amount it would still have to be based on a genuine pre-estimation of loss.

A punitive term like losing 10% plus costs does not seem to be genuine pre-estimation at all. All costs sure and perhaps all costs plus a markup for admin but not all costs plus 10% of the contract sum. A term saying we expect 40% losses based on other failed sales would be valid perhaps even if the actual loss was say only 5%. It must however be a genuine pre-estimation in any event.

In this case take the 115k as a liquidated amount though not the limit of their liability unfotunately a liquidated minimum amount. i.e. they will lose at least this but it does count toward total damages even common law would see to that in my opinion unless their is some crazy regulation here preventing much case law coming to bear around liquidated damages.

To not have that would see the seller profit from a breach which is not usually satisfactory in contracts in such a simple manner. It can happen of course but not this openly. You have to at least pretend it is equitable.

 

[Propertunity]

Std NSW contract penalties

Standard NSW contract penalties for a defaulting purchaser are in the attached.

 

[tom32]

Standard NSW contract penalties for a defaulting purchaser are in the attached.

Cheers.

While it does not actually say the deposit would go toward the damages for a breach if clause 9.3 was used, it would by default occur anyway. Indeed I don't see why you even need a clause to tell you that you have the option to sue for damages for breach, this is an automatic right? I guess this is to prevent the 10% deposit being seen as the only remedy for a significant breach? I guess it would appear without Cl9.3 to be a liquidated damages provision which usually exhausts your rights to a larger award of damages unless it is expressed that that option exists.

Like that original chestnut for contract law robinson and harmon, the assessment for damages for breach by a court should put the wronged party back into the position so far as money can, that they would have been in if the contract had been properly performed. This means no worse but importantly in this case no better as well. Keeping the deposit under clause 9.1 would go toward an assement of damages in clause 9.3 even if its not an express term in the contract.

 

[GreenTreeFrog]

The extension settlement date has now been and gone (it was this week), the buyer has decided to pull out of the deal and wear the consequences of any loss. No word form the vendor yet.

 

[BV]

We used to go to ANZ all the time. But now they've changed BDM and now they get none of our business - bunch of useless muppets indeed!

Hopeless finance approval team.
Had problems with them 15 years ago.
Took all my business away and never went back