Structuring the terms of a contract

[morty]

Hi guys,

Just wanting to get an idea from anyone out there who may be able to give me advice on how best to structure a deal i'm looking at.

It's a commercial warehouse in Melb that looks like i can get a good whack of apartments on.

I know the vendor and he will not budge on price but he would give me good terms if i want them.
Price is in the high $1m mark. He will take $100k as a deposit with $900k to be paid before 30th june 2013 and the balance 6mths after that.

It is a very good site in a great location and i've had 2 separate architects and townplanners provide an assessment of the site and 20+ apartments is achievable with no basement.

I am a builder and so i am in the hunt for a site but am needing to speak to a property savvy solicitor on how best to structure the contract.

Could anyone point me in the right direction or offer any advice on how to approach this.

Thanks very much for any comments

Regards, Morty

 

[Terry_w]

Would he accept an option to purchase?

Or just exchange contracts now with a small deposit and the rest of the deposit due on xx.

 

[morty]

Hi Terry,

Thanks for the reply. He's a retired greek fella and cash is king, i floated the idea of an option but it definately needs to be a deposit of some kind. He needs a certain amount for a deposit, then x by 30th June to pay into his super and then the final amount end of next yr.

My broker suggested doing two contracts, one for the bank which would settle the deal on 30th june and the other one a private contract to settle end of next yr. Not sure if this is possible and i'm sure it would need to be a specialised solicitor to put it together.

Thanks for your suggestion.

Morty

 

[Terry_w]

Hi Terry,

Thanks for the reply. He's a retired greek fella and cash is king, i floated the idea of an option but it definately needs to be a deposit of some kind. He needs a certain amount for a deposit, then x by 30th June to pay into his super and then the final amount end of next yr.

My broker suggested doing two contracts, one for the bank which would settle the deal on 30th june and the other one a private contract to settle end of next yr. Not sure if this is possible and i'm sure it would need to be a specialised solicitor to put it together.

Thanks for your suggestion.

Morty

Don't take legal advice from a broker. This could lead to all sorts of problems - which contract is the 'real' contract for example.

You also need to consider things if he wants to get access to the deposit before settlement, especially if he is going to put those funds into a SMSF - a third party. What if it doesn't settle and you have released the deposit already. You may need to sue him to get the money back, but how do you sue the SMSF? that would be more complex and costly. You may have to bankrupt him and use the claw back provisions of the bankruptcy act to get the money back and that would be costly and time consuming.

 

[morty]

Yeah great points Terry, i def wouldn't proceed on broker's advice and am wanting to set this up properly.

If anyone out there knows a good solicitor for a deal like this please let me know.

Regards

Morty

 

[Peter_Tersteeg]

Like Terry said, putting together two contracts and deciving the bank is a really bad idea. It raises the question of which is the valid contract and therefore enforcible. If the bank contract is not valid, then they don't have to fund anything. If it's the other one, the vendor could argue you're in breech and you'd forfeit your deposit. I'm sure the vendor and banks solicitors could come up with a whole lot of other issues as well, none of them look very good for you!

The loan could be set up as a progressive drawdown, with one drawdown of $900k then the balance later. It would probably do the bank's head in, but they probably could do it on a commercial lend.

 

[Rolf Latham]

My broker suggested doing two contracts, one for the bank which would settle the deal on 30th june and the other one a private contract to settle end of next yr. Not sure if this is possible and i'm sure it would need to be a specialised solicitor to put it together.

I expect that this would be interesting on both side : )

Your lender would want to settle 30 june, and would want security im sure

ta
rolf

 

[wylie]

Yeah great points Terry, i def wouldn't proceed on broker's advice and am wanting to set this up properly.

If anyone out there knows a good solicitor for a deal like this please let me know.

Regards

Morty

Why not Terry?

 

[morty]

Yeah good point! Sorry guys I had previously thought terry was a broker.
I'll ring him now.
Morty