Can i Sell on an investment property imediately?

Garyr1

Hi There,

Does anyone know if i can sell an investment property imediately without completing the purchase. I put a depost of 10k down on an investment property 6 months ago (will not be ready until summer '07), but my circumstances have changed and i will probably now be unable to get another morgtage to cover the purchase. If legally i am unable to sell on, can i get my 10k back if i just back out of the deal altogether.

Thanks
G

Noelie

Ask the developer, A neighbour of mine couldn't complete, asked the developer could he cancel the contracts and get his money back, the developer agreed since he could sell it for more.

Paulw

Legally, no you can't sell the property since you don't own it yet. Also, the developer is well within their rights to hold on to the money you put down.

It really depends on what you have agreed to/signed already. But if you talk to your solicitor, and also to the developer, they may be able to come to an agreement, and refund you your money, but I certainly wouldn't be hopeful.

So, you may be very stuck and out of pocket.

antoinolachtnai

yes, in principle you can do it. It's called 'an assignment'. The benefit of it is that you and your purchaser ('assignee') don't have to both pay stamp.

Strictly speaking, you don't own the property, but you do have an 'interest' in it. Whether this interest can be sold on is another matter.

However, you do need the developer to consent to this (generally speaking).

Will the developer consent to this? Maybe. You will need to talk to your solicitor and possibly to the agent on the other side to see about this. You might have to pay the developer something for the privelige.

If he digs his heels in he could hold on to your money. (This would not be the case if you had intended to live in the property, in that case you would have been entitled to get at least some of your deposit back.)

Victor

antoinolachtnai wrote:

If he digs his heels in he could hold on to your money. (This would not be the case if you had intended to live in the property, in that case you would have been entitled to get at least some of your deposit back.)

Explain this bit.

antoinolachtnai

Contracts with consumers have to be reasonable under EU consumer legislation. They generally cannot contain punitive clauses. Penalties are supposed to be proportionate to the loss incurred by the vendor.

Obviously, you should take legal advice specific to your situation if you intend to rely on this.

dats_right

Antoin,

I was unaware that there is case law to the effect that both, the Standard Law Society Contract for Sale and the Standard Law Society/ Construction Indusry Federation Building Agreement, and in particular General Conditions 40 & 41 (which provide for the forfeiture of deposit) of the former are in breach of EU consumer legislation. It seems odd to me that this would be the case, particularly as both parties negotiate at arms length and are fully advised by their respective solicitors. But perhaps you would be so kind as to point out the citation or source of this belief as it would be of some interest to me and indeed many solicitors around the country.

It is well settled of course that 'booking deposits' are refundable and do not bind the parties in contract. However, full deposit paid over on signing of contract for sale are entirely different and heretofore would have been forfeited by the purchaser in the event of failure on their part to complete the transaction, save unless otherwise agreed with the vendor or indeed inserted in the contract for sale as a 'special condition', e.g. Completion subject to purchaser obtaining loan sanction. But as stated unless such a condition was inserted in the contract for sale or negotiated with the consent of the vendor then it is bye bye deposit. Or at least that is how the law stood until, this bolt out of the blue that Antoin talks about.

antoinolachtnai

I am referring to Directive 93/13/113.

In particular, note:

Article 3

1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights
and obligations arising under the contract, to the detriment of the consumer.
2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract.


The fact that certain aspects of a term or one specific term have been individually negotiated shall not exclude the application of this Article to the rest of a contract if an overall assessment of the contract indicates that it is nevertheless a pre-formulated standard contract. Where any seller or supplier claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on him.

It is incorrect for you to say that most consumer agreements regarding property are negotiated in length. In practice, boilerplate general conditions are used. The consumer basically has no choice about this, especially since the terms have been dictated by an agreement within the construction industry. These are exactly the types of conditions that are targeted by the directive.

As far as I know, there is only one piece of case law about this directive in Ireland. As it happened, it related to a property transaction. It is covered in:

http://www.secola.org/vortraege/prague/IV-2Horgan.pdf#search=%22Directive%2093%2F13%2FEEC%20ireland%22

There is no specific precedent on the deposit issue, probably because the market is so strong. But it does look like the builder would not be in a position to hold a punitive deposit.

The ODCA's site is also worth referencing.

http://www.odca.ie/cfmdocs/c_query/contract.cfm

and in particular section 1(e) of

http://www.odca.ie/cfmdocs/c_query/contract_documents2.cfm

dats_right

To be fair Antoin, I think that you make some interesting academic points. But that is exactly what they are and are best left to the university thesis or some such. You were also unable to point out any case law or direct opinion on whether the Standard Law Society Contract for Sale has been held in any respect to contain an unfair contract term for the purposes of the EU Directive. I am well aware of the possibility that a 'special condition' inserted in addition to the Standard Law Society Contract for Sale could bear the very real prospect of being an unfair term, but I genuinely think it somewhat disingenuous to seriously contend that any standard condition would be found by the courts to be an unfair term.

You stated: "The consumer basically has no choice about this, especially since the terms have been dictated by an agreement within the construction industry. These are exactly the types of conditions that are targeted by the directive."

I think that you slightly misunderstand the system. Firstly, the standard contract for sale has nothing to do with the building industry rather the Law Society of Ireland's Coveyancing Committee draft it and remember that they are impartial and would be trying to draft the fairest contract possible for both vendors and purchasers as solicitors act for both. Standard form contracts in the sense you refer are more to do with a contract drafted by one company with overly onerous obligations on the other party buried somewhere in the small print. This is not the case with the Standard Law Society Contract for Sale, as all conveyancing solicitors are so familiar with the terms and conditions thereof that a purchaser would be under constructive notice at the very least of the possibility of losing their deposit for failing to complete the sale (although a solicitor will also expressly make this clear to their client as well).

General Condition 41 really couldn’t be any clearer regarding the purchaser forfeiting his deposit for failing to comply with the terms of the contract. Remember also that a purchaser has received independent legal advice from his own solicitor regarding the legal implication of entering the contract for sale, which is not exactly the typical scenario associated with unfair contract terms now is it? As stated, in my earlier post all is not necessarily lost for the OP as; 1) the contact may very well have had a ‘special condition’ that completion is subject to purchaser obtaining loan sanction. If that is the case then happy days for the OP he has got his opt out. 2) If no such special condition exists then you are bound by General Condition 41 and will forfeit your deposit unless you or more appropriately your solicitor can negotiate a deal with the vendor.

Alternatively, there is a place that is willing to listen to hopeless arguments and there are those who are very willing to make them although it will cost you. If this route is for you, then issue a plenary summons to the High Court or Civil Bill in the Circuit Court depending on the amount involved, don’t be surprised to see the vendor/defendant counterclaim seeking damages and or an order of specific performance against you (and that is on top of your lost deposit), add in your legal fees and if you lose (as I would say is almost certain- given the rather weak unfair contract terms argument) your opponents legal costs, they’ll probably seek ‘mad money’ and then it’ll be off to the taxing master. You could be talking a significant five figure sum for the privilege on top of your lost deposit.

Sorry to be so bleak OP, but I don’t believe in giving people false hope with arguments which have very limited chance of success. If you're not sure who to believe, talk to your solicitor who will more or less confirm my take on the situation.

antoinolachtnai

I would be very surprised if a solicitor would advise a developer client that EU consumer law was somehow academic and did not apply to him or her. Just because a precedent hasn't happened in the past, doesn't mean it won't happen in the future. Very few developers are interested in making case law if they can avoid it. That is why I would expect the developer would back off (in the case of a consumer contract).

The standard contract fits well inside the definition of the act. The fact that a contract is a standard contract doesn't necessarily make its terms unfair, but they could be unfair in the circumstances.

The clarity of the term or the excellence of Irish legal services is not at issue. What is at issue is that the consumer had no choice but to sign it if he wants to buy an apartment in that development (or possibly in any development anywhere). The developer has all the power in the situation, the consumer has none. The fact that the consumer has been advised of this unbalanced situation in advance makes no difference.

There could be a special condition as you suggested, but there probably isn't. The reason for this is that a contract with such a special condition would be less acceptable to the developers' bankers as a basis for lending the money to carry out the development than one without that special condition. Still, it depends on the developer and it is certainly possible that it is there.

In the current marketplace, I think 10 percent of purchase price (which could be over 80 grand) is an unreasonable penalty where an acceptable assignee is available. I think there are strong grounds to think that it would be held unfair.

In the case I noted, the action was not taken by the purchaser, but by the Director of Consumer Affairs. So the very real litigation practicalities you mention are unlikely to arise.

I think you are assuming that because this is property law, that consumer legislation does not apply and that contracts can always be interpreted literally. This is not correct.

Anyway, this is all ob iter as they say. The OP told us that this property was bought as an investment, rather than as a consumer transaction. So the argument about consumer protection doesn't really apply (and I specifically pointed this out, so it is unfair to put me in the false-hope-mongering brigade).

Paulw

Paulw wrote:

Legally, no you can't sell the property since you don't own it yet. Also, the developer is well within their rights to hold on to the money you put down. QUOTE]

That's wrong anyway.

In principle, you can of course sell on. Technically, you are not selling the property, you are selling your contractual interest in the property. And like anything a contractual interest can be bought and sold. It is akin to selling on an option.

However, in 9 out of 10 cases developers now insert a clause stating that 'there can be no assignment of the within contract without the consent in writing of the Vendor' (being the initial Vendor ie. the developer). This means that they can control any such sell ons and often they will look for 'a slice of the action'...