OTP Developer Dirty Tricks - the 'sunset clause' game

Discussion in 'Legal Issues' started by wombat777, 6th Jun, 2015.

  1. wombat777

    wombat777 Member

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    Developer tricks to watch out for when buying off the plan...

    http://www.news.com.au/finance/real...clause-cash-grab/story-fndban6l-1227385761594
     
  2. Perp

    Perp Member

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    Will be very interesting to observe.
     
  3. Truly Exotic

    Truly Exotic Property Deal Finder

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    "Kaymet Corporation cited a number of factors as contributing to the delay of the 94-unit complex, including water problems, high winds holding up construction, and council interference.
    A company spokesman told news.com.au if they allowed the 34 buyers to have the apartments at the original price, they stood to lose between $50,000 and $60,000 per unit. The other 60 units are currently being rented out by Kaymet Corporation.
    ?The job cost us nearly double what we planned for,? he said. ?It?s cost us another $2 million in [lost] rent over the last two years [that the units have been vacant]. The contracts very obviously stated that either party can rescind if we didn?t finish in 2? years.?
    Asked whether he thought it was unfair for the buyers to have to pay more for apartments they bought in good faith, the spokesman said: ?They can have them, but they have to compensate us for the extra work on the job. It?s not our fault. We paid a lot of money and if it costs us more than what we sell for, where is the fairness? They have to compensate us or they can?t have them.?
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    god this attitude really gets my blood boiling!!!

    hope the developers lose
     
  4. Scott No Mates

    Scott No Mates ...and people wonder why?

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    Developer's risk is what it is called. If they ballsed up the original guesstimate for what it would cost to build, hold etc then it is their problem (unless of course there is a sunset clause in their favour).
     
  5. Ausprop

    Ausprop Member

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    this type of thing was all the rage in Perth in 2007 and the courts were inundated with it. I spent 8 years in the court system trying to enforce specific performance on one contract. Knowing what I know now I would advise these people to just walk away and move on with their lives.

    Then it goes full circle, the market crashes and buyers are fine tooth combing their contracts looking for outs. The best out is a slight variation in the strata plan - put that at the back of your mind for 12 months time!
     
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  6. Ausprop

    Ausprop Member

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    amongst some other outs... one to look for is the one that goes on about "the seller may terminate this contract where it unable or unwilling to comply with any condition imposed upon it by....." - all unfettered, in its opinion etc etc
     
  7. ej89

    ej89 Member

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    My mate bought OTP townhouse in oran park 2 years ago and the builder from thatcher homes has been avoiding him for the past 6 months as it was meant to be completed by christmas last year but it hasnt even started construction.. We went to meet the builder at the land today and the grub didn't rock up. My mate is so stressed he'll get stung by the builder that he wants to rush to buy something else in Oran Park.
     
  8. Perp

    Perp Member

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    What does his lawyer say? Does his contract have one of these clauses? Does it contain a "best endeavours" clause, requiring the builder to take all reasonable steps to complete in a timely manner?
     
  9. wombat777

    wombat777 Member

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    Wow. Seems like this sort of dodgy behaviour is becoming standard practice.

    There have been other incidences of this sort of behaviour for land releases in North Kellyville.

    http://www.smh.com.au/nsw/sydney-re...rs-leave-buyers-in-lurch-20150509-ggujfd.html
     
  10. ej89

    ej89 Member

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    Just has a sunset date which is end of this year I think.
     
  11. averagesg

    averagesg Member

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    This is not surprising. A while ago, my solicitor told me of a development in Hurstville as well where the developer either wilfully or unknowingly made unauthorised amendments to the DA plans despite it being knocked back before by the council. I suspect the developer knew there was no chance in hell of it being successful and wanted to use that tactic to have the existing contracts rescinded. Considering how much the prices of property in that area have shot up in the last 2 years, the developer is easily looking at $100K-200k+ more profit per unit now.
     
  12. Rolf Latham

    Rolf Latham Member

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    I have more than one client thats been squeezed by a few 100 k as a result of sunsets

    ta

    rolf
     
  13. Perp

    Perp Member

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    OK, I'll be the cold one: who the hell signs contracts worth hundreds of $K without getting legal advice first? :confused:
     
  14. Scott No Mates

    Scott No Mates ...and people wonder why?

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    Obviously there are a few
     
  15. Ausprop

    Ausprop Member

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    would legal advice really have changed their minds about entering into the agreement?
     
  16. Perp

    Perp Member

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    My lawyer would strongly discourage me from signing it, at least without pretty strong "best endeavours" clauses and other protections.

    At the very least, he would have told me of the risks in a rising market, and if I signed, I'd be knowingly taking that risk and have no grounds to complain.

    But people seem to get into these situations and act all surprised, like they had no idea what they were signing. I don't get that.
     
  17. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    I have 2 clients in this situation - both are land releases in Kellyville. The land was supposed to be registered in September 2014 - I told them both that they were getting played and although they agreed its hard to make a move.
     
  18. ej89

    ej89 Member

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    Legal advice would be to make sure it was a big developer wouldn't it?
    A sunset clause is a sunset clause no matter what your legal advice is isn't it?
     
  19. Perp

    Perp Member

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    No, sunset clauses are not all equal. If it doesn't have a tight "best endeavours" clause - requiring the developer to take all practical steps to achieve registration, for example - then a lawyer would recommend that the clause be amended.

    Either the developer would agree to tightening of such clauses, and the buyer would be better protected, or the developer would refuse, and the lawyer would explain to the prospective purchaser precisely what risks they're taking and why it would be a very bad idea.
     
  20. ej89

    ej89 Member

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    I bought land recently and sunset date is December 2017 with completion expected beginning of next year. When did these guys buy the land and how long did they have until sunset date? I know someone small developers selling land registering in 18 months with sunset clause being not long after