Rescission of contract in off-the-plan purchase

[bellagio01]

In Nov 2010, I exchanged contract with 10% deposit on off-the-plan purchase of an apartment as IP for my super in a 23 units-development in Marrickville NSW. Last month May 2012, the vendor developer rescinded the contract by exercising their right in accordance with Special Condition 32 in the contract. The Special Condition relates to provision for rescission when the strata plan has not been registered by December 2011 ("registration date") and it has been unfairly worded which my conveyancer has missed.

The building development is now near completion and would be very close to the lodgement of the strata plan registration. I am devastated and distressed at the predicament.

By the rescission, the vendor has effectively used our money as cheap financing to finance his development. The 10% deposit plus 50% interest (split 50/50 with the vendor) were refunded. I wouldn't be surprised if this happens also to other trophy units in the development. I am almost sure the rescinded units would be put back on the market for sale with higher prices.

Again Be Warned everyone! This is one of the many risks in off-the-plan purchase.

Does anyone know of similar cases where the purchaser went for a legal challenge against the vendor and won (or lost)?

I am also considering claiming damages against my conveyancer (who is experienced in off-the-plan purchases).

Hoping for some guiding feedback ...

 

[alexlee]

The clause seems straightforward with a clear time limit. How is it unfairly worded? Are you saying the vendor deliberately delayed completion and registration? The vendor used the clause 6 months after the due date. You signed it, so presumably you read and agreed with it. You've now received your deposit back plus 25% interest for 18 months.

Definitely one of the better outcomes compared to the ones we've been hearing about recently.

If your solicitor had seen the clause, what would you have done? Not signed the contract? You'd miss out on that 25% interest.

Seriously, what's so distressing about this? Fine, you lost out on a property. But you've learned something and even made money out of it. Take the money and move on.

 

[boomtown]

1. You entered into an OTP contract.

2. You chose not to get proper legal advice.

3. You got an outcome you are not happy with.

You should consider yourself lucky you got off so lightly.

 

[Rolf Latham]

Sunset clauses

ouch.

One just needs to be very careful with this stuff.

I have to say using a conveyancer to deal with an OTP contract is like dealing with a 4 week trained box ticker tax agent for a complicated tax structure.

I reckon thats the number one lesson folks can benefit from in your predicament here and thanks for posting.

Use a decent solicitor that works with this stuff and can actually relate to real world things likecontracts

One a different topic, it does suggest that the market is stronger in the area than when you purchased, which is being reflected in some other anecdotal evidence.

 

[Tish]

Bellagio, it is a hard lesson. I assume that when you signed the contract, there was soooo much to take in. It is hard to "know" everything.
I dont think it is an issue of the conveyancer- they do all they can. AND in my experience, a conveyancer understands this stuff better than a solicitor. I am currently engaging my solicitor to do work that the conveyancer could do for ease and convenience but really - the solicitor has sent me a text book of questions to answer and is going to charge me $1000/hour to do this.
The conveyancer will do the lot for around $500 and not charge per hour.
Yes, it looks like the builder has used your cash to finance his construction. You did get- was it 25% return on your money? That is better than the bank.
And Yes, I think the property market is better than the media spins it - just lately looking at local prices - they have gone up around me not down.

 

[Terry_w]

It is an issue with the conveyancer.

With an off the plan purchase that is the first thing you should look for. Special conditions should all be gone through very carefully and explained to the client.

 

[Rolf Latham]

.
Yes, it looks like the builder has used your cash to finance his construction.

doubt that...................... solis trust acct I would have thought

ta

rolf

 

[Bigtone]

OTP goes down in value u have to settle ( or pay too much ) and u have to settle and cop the loss

it goes up in value and the developer trys to extend settlement so can use sunset clause and re-sell at a profit

i wonder how many people buy one Ip off the plan, get burnt and then say investment property is for suckers and never buy again?

 

[atsim]

OTP goes down in value u have to settle ( or pay too much ) and u have to settle and cop the loss

it goes up in value and the developer trys to extend settlement so can use sunset clause and re-sell at a profit

i wonder how many people buy one Ip off the plan, get burnt and then say investment property is for suckers and never buy again?

We bought in october 09 for $531k and settled in december 2010, a few months ahead of schedule. Prices had already jumped around $50k. Still, i was probably lucky and wont be doing otp again. Next time we will wait for brand new oversupplied stock at a discount. 2015 or so i reckon

 

[Shaneelastic]

so youve made 25% in this shizenhouzen market, your lucky

 

[rugrat]

sunset clauses are a two way street usually; which means that you could have wiggled out of the contract if prices could have dropped.

I wouldn't be impressed with the building company in that situation, but it certainly could have been a worse outcome. And it is something people should be aware about BEFORE signing.

 

[Perp]

I have to say using a conveyancer to deal with an OTP contract is like dealing with a 4 week trained box ticker tax agent for a complicated tax structure.

Wow, how many times have we seen things fall apart over the years because "what people thought they were signing was different to what they were actually signing"...

followed by "I used a conveyancer because it's cheaper than a solicitor"?

 

[ozmale42]

so youve made 25% in this shizenhouzen market, your lucky

I don't think the OP was suggesting he was paid interest at the rate of 25% p.a. Most likely the OP meant that whatever interest was paid was shared 50/50...ie he got 50% of whatever interest was earned on the deposit and the vendor got the other 50%.

I think he has a valid concern and if it were me I'd be going to the conveyencer for a please explain as the first port of call.

 

[Aaron_C]

Wow, how many times have we seen things fall apart over the years because "what people thought they were signing was different to what they were actually signing"...

followed by "I used a conveyancer because it's cheaper than a solicitor"?

Problem is that lawyers are just so risk averse. They have their uses but you would never do business if you listened to a lawyer's word like gospel.

 

[Perp]

Problem is that lawyers are just so risk averse. They have their uses but you would never do business if you listened to a lawyer's word like gospel.

There's no doubt that lawyers can be exceptionally risk-averse, but that doesn't mean that the optimal course of action is to sign a contract clueless as to the ramifications. There is surely a very large middle ground that the vast majority of people occupy, where you're made aware of the legal risks and decide which ones you want to accept.

The risk of this outcome may have been perfectly acceptable to the purchaser, but it staggers me that they weren't even aware that it was a possibility. They seem so very disappointed that I can't imagine that, if they'd had legal advice, they wouldn't have attempted to negotiate this clause, or purchased a different investment property.

 

[tobe]

sunset clauses are a two way street usually; which means that you could have wiggled out of the contract if prices could have dropped.

I wouldn't be impressed with the building company in that situation, but it certainly could have been a worse outcome. And it is something people should be aware about BEFORE signing.

I doubt there are any two way streets here..... the contracts are almost always written in the developers favour.

 

[Aaron_C]

Of course there is a middle ground - but I think it's just too easy to assume that a lawyer will solve all your problems. Mainly experience can teach you what to look out for in these things I think.

 

[Perp]

Of course there is a middle ground - but I think it's just too easy to assume that a lawyer will solve all your problems. Mainly experience can teach you what to look out for in these things I think.

I'm not suggesting that a lawyer solves all your problems; I'm suggesting legal advice is "necessary but not sufficient". In this instance, I find it hard to believe that any competent conveyancing solicitor wouldn't have explained the potential downside of such a clause.

 

[Aaron_C]

Yes I agree. Although, to be frank, the OP's complaint that the developer was just using him for finance is 100% accurate. That's what pre-sales are for! Most developers have clauses in their contracts which allow the developer to tear up the contract if they think they can re-sell it for a better price later. It's very common.

 

[Terry_w]

Its up to the lawyer or conveyancer to point out the clause and to explain it to their client. It is then up to the purchaser to decide if they want to accept the clause or ask for it to be amended.