Pulling out of new apartment or stick with it?

Paulw

Clone wrote: »

Is there a quick way to end this now?

Probably not. It's a nice complex situation, and I'm sure the solicitor knows all the facts and is the best person to give advice.

The developers currently want to squeeze as much out of the market as they can, and are not going to just let people out of signed contracts.

gurramok

This case just shows the lack of research by your friends into the biggest purchase of their life, after all its only a few hundred thousand euros.

Get them to find a buyer if they can as the builder has them locked in via contract and cut their losses.

latenia

There is always a way out but they're going to have to find a smart adversarial solicitor. (IE one who will actually make an effort to win rather than decide between himself and his mate from the Law Society on the other side who's going to win and what their fees are going to be.)
Go through the documentation again and there will be something on the builders side that breaks the contract. It might be some deadline missed, a change from the original plans, different materials used etc. Go back to the original planning permission application and start there. In fact, go back to the original rezoning decision and get some dirt if you can. If a single parking space is different then kick up a stink.
If you can't find a solicitor willing to get his hands dirty then do it yourselves. These guys lorded it over the general public when things were going well and now they want to force two young people to wreck their future to add to their bottom line-don't let them get away with it.

chump

latenia wrote: »

There is always a way out but they're going to have to find a smart adversarial solicitor. (IE one who will actually make an effort to win rather than decide between himself and his mate from the Law Society on the other side who's going to win and what their fees are going to be.)
Go through the documentation again and there will be something on the builders side that breaks the contract. It might be some deadline missed, a change from the original plans, different materials used etc. Go back to the original planning permission application and start there. In fact, go back to the original rezoning decision and get some dirt if you can. If a single parking space is different then kick up a stink.
If you can't find a solicitor willing to get his hands dirty then do it yourselves. These guys lorded it over the general public when things were going well and now they want to force two young people to wreck their future to add to their bottom line-don't let them get away with it.

Great post.
Good advice to the OP.
Sorry to hear about the troubles, that kind of grief is a real pain. It is a good lesson to everybody.

johnnyskeleton

chump wrote: »

Great post.
Good advice to the OP.
Sorry to hear about the troubles, that kind of grief is a real pain. It is a good lesson to everybody.

Not really. Most contracts don't have loopholes built in (and if they do they usually favour the vendor not the purchasor).

So while getting a solicitor who will fight the case regardless might seem like a good idea, it could ultimately end up where a few years down the line they are forced to complete at an even greater loss and have to foot the legal costs bill x2.

If a solicitor advises their client and that advice is bad then they can sue their solicitor. However, if the client goes against the solicitor's advice and continues to fight the case, on their own head be it.

What you want to get is a good solicitor, preferably one who you know and trust. If you want a second opinion you can ask for a barrister's advice or go to a second solicitor. Maybe the barrister or other solicitor will find a loophole, but advising to go with a solicitor who will fight it irrespective of the outcome is very bad advice.

pajos55

Clone wrote: »

According to the solicitor they would have to allow the builder to sell the apartment at whatever price they see fit while the buyers would have to make up the difference and loose their deposit, in the current market this could be allot of money :eek:

A clause in the contract like this seems a bit strange as it would negate the need for a deposit as the buyer would be tied to the outcome regardless.

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

Is there a quick way to end this now?

This is a standard condition in the Law Society contract. Once contracts have been signed the vendor can try to sell within a year after the original purchaser pulling out, and if the price they obtain represents a shortfall then the original purchaser can be forced to make up the difference.

latenia

johnnyskeleton wrote: »

Not really. Most contracts don't have loopholes built in (and if they do they usually favour the vendor not the purchasor).

So while getting a solicitor who will fight the case regardless might seem like a good idea, it could ultimately end up where a few years down the line they are forced to complete at an even greater loss and have to foot the legal costs bill x2.

If a solicitor advises their client and that advice is bad then they can sue their solicitor. However, if the client goes against the solicitor's advice and continues to fight the case, on their own head be it.

What you want to get is a good solicitor, preferably one who you know and trust. If you want a second opinion you can ask for a barrister's advice or go to a second solicitor. Maybe the barrister or other solicitor will find a loophole, but advising to go with a solicitor who will fight it irrespective of the outcome is very bad advice.

Johnny, I'm not talking about loopholes per se, I'm talking about something in the contract on the builder's side which hasn't been fulfilled which might make a case for the contract to be voided and the whole deal to be cancelled. After all, these things work both ways.

If, for example, the property has (or will) drop in value by 200k from what they agreed to pay, between interest on that amount over the term of the mortgage and the loss of FTB status they are looking at over half a million euros of a black hole in their finances as they're just starting out in life. That's probably 10 years of disposable income each gone down the drain.

Tell me that's not worth fighting over.

I don't know what the policy on giving 'morally dubious' advice here is but if they can't get out of this then maybe they should consider bailing to the UK or Europe for a few years.

miju

Clone wrote: »

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

Is there a quick way to end this now?

most contracts (if your solicitor is even half decent) will have the clause "Subject to mortgage approval" in them.

If someones been made redundant that mortgage approval is as good as gone (if they cant get employment )

antoinolachtnai

Sometimes people have stuff about mortgage approval at the early stages of placing a deposit. I'd be surprised if this particular contract had that.

Generally speaking though, your friends are liable to the builder for loss you cause him by failing to fulfill the contract.

Did your friends get legal advice as I suggested before? It is certainly worth talking to the solicitor in a fair bit of detail. There might be a way out. Maybe it is worth going to a barrister, and even a second solicitor and getting an opinion on paper. But it is all going to cost your friends more money.

It might be worth fighting over, but only if you are going to win.

Your friends could put the property on the market and see what price they can get for it themselves.

SimpleSam06

antoinolachtnai wrote: »

Rents will go up a lot faster than mortgage payments.

Hmm.

Clone wrote: »

Could the contract be "frustrated"? due to the fact that one of the buyers has now been made redundant and therefore would not physically be able to pay the mortgage or will probably not be able to get final approval.

This is a very ugly situation. If there is no option to negate the contract, and its quite likely that another buyer will not be found any time soon, from the builder's point of view he has completed works in good faith for an agreed price, and is fully entitled to seek payment or judgements in case of default. Basically they agreed to pay and now don't have the money.

One option would be to try to sell the apartment at well below market price and bite the bullet on the difference. They might end up paying 40-50k for absoloutely nothing, in fact less than nothing since they are losing FTB status, but thats a lot better than paying ten or twenty times as much OR declaring bankruptcy.

Could some sort of fancy footwork be brought to bear here, such as opening a limited company and selling that contract to the limited company, then declaring it bankrupt? Or possibly protecting some assets by moving them into the limited company?

Normally some sort of a deal could be negotiated with the person you owe money to, very few people like to hound others into bankruptcy, but builders aren't businessmen.

Clone

Thanks for all the replies.

As someone trying to offer advice and put pressure on them to get it sorted sooner rather than later; It has been very helpful to have some informed opinions.

The solicitor has been involved at every stage of dealing with the developer.

I think at this stage I'm going to have a look at their contract myself and try and get a second opinion.

Hopefully there will be something somwhere in the contract as latenia suggested.

I'll keep you posted.

Climate Expert

Rents will go up a lot faster than mortgage payments.

Really? My rent has fallen by about 10% in the last 4 years. Mortage repayments have gone up quite a bit in that same time.

seandoc

johnnyskeleton wrote: »

Not really. Most contracts don't have loopholes built in (and if they do they usually favour the vendor not the purchasor).

So while getting a solicitor who will fight the case regardless might seem like a good idea, it could ultimately end up where a few years down the line they are forced to complete at an even greater loss and have to foot the legal costs bill x2.

If a solicitor advises their client and that advice is bad then they can sue their solicitor. However, if the client goes against the solicitor's advice and continues to fight the case, on their own head be it.

What you want to get is a good solicitor, preferably one who you know and trust. If you want a second opinion you can ask for a barrister's advice or go to a second solicitor. Maybe the barrister or other solicitor will find a loophole, but advising to go with a solicitor who will fight it irrespective of the outcome is very bad advice.

Must say that i a agree with the above post regarding this situation. I would be very surprised if the current solicitor hasnt checked the contracts to find a loophole. However what i would do is get a serious professional - preferably someone recommended to you - either architect, engineer or the like who is experienced with inspecting properties and get them to check the planning compliance, the construction quality and finish from top to bottom. Its should be possible to get someone to do this for a few hundred euros. I have seen inspection reports come in for 'completed' properties running to 20 or 30 pages long. I have seen reports with serious non-building regulation compliance issues that would have cost a fortune for the builder to rectify if pushed by the buyer. What has tended to happen though is that the 'take it or leave it' attitude from builders has prevailed and buyers have closed because they were afraid of losing the property. That situation has now completely changed. The least the above will do is buy some time. The key here is to make it as difficult and costly for the builder to close but at the same time not breaching your contract.

johnnyskeleton

latenia wrote: »

Johnny, I'm not talking about loopholes per se, I'm talking about something in the contract on the builder's side which hasn't been fulfilled which might make a case for the contract to be voided and the whole deal to be cancelled. After all, these things work both ways.

If, for example, the property has (or will) drop in value by 200k from what they agreed to pay, between interest on that amount over the term of the mortgage and the loss of FTB status they are looking at over half a million euros of a black hole in their finances as they're just starting out in life. That's probably 10 years of disposable income each gone down the drain.

I don't quite see how it goes from 200k to half a million. The advice they were given is that they could have to pay the builder the difference between the contract price and the price the builder sells it at. So we are talking about maybe 20-40k if there was a firesale now. If there was lengthy litigation with no chance of success, you could add another €10,000 in legal fees, and the price might drop another 10-20% during that time. I'm not saying they should fight it or not fight it, and you are right in that they do all they can to see if there is a way out of the contract, but I don't think that fighting it all the way is a good way to go. Unless there is a point to argue, there would be little benefit to fighting it.

latenia wrote: »

I don't know what the policy on giving 'morally dubious' advice here is but if they can't get out of this then maybe they should consider bailing to the UK or Europe for a few years.

The only problem is that you might find yourself lying on a beach in Spain and the builder sitting right beside you, both of you with distinctly hunted looks on your faces.

Jo King

DublinDilbert wrote: »

Yea have seen this a bit.... when things were booming the developers would give people back their deposits if they changed their mind, cause they knew another person would come along in a month, who they could potentially sell the place to for more money!


Now developers will not hand back a deposit as they know they might be waiting months for another buyer, if they can even find one...

!

Developers have no right to withhold a deposit if contracts have not been signed. See the Case of Howlin V Power High Court Unreported 5th May 1978 McWilliam J. The booking deposit is paid "subject to contract" and unless there is a signed contract the deposit can either be given back by the developer of his own volition and the property sold to someone else or taken back by the purchaser. If developers are not giving back deposits it is because they are willing to risk litigatation rather than damage their cash flow.

antoinolachtnai

Presumably this vendor and purchaser in this case have signed contracts though. It is not a case of a 'booking deposit'.

Clone

gurramok Thanks for your input, allot of research did go into it, I find it insulting that you suggest that people would throw away money frivolously, hindsight is a great thing, I don't think any amount of research could've anticipated the chain of events that led to this.

Are you a homeowner? Were you a savy purchaser when you bought your first place and made sure that the market wasn't going to change in the period after signing to the move in date, or that you would be made redundant from a company that you have worked your way up in?

It is an unfortunate situation that the market has changed dramatically not only in property but elsewhere, had they been kept on in their job, they would've gone ahead with the purchase anyway absorbing the loss in the knowledge that they would have a roof over their head they could happily call their own for the next decade at least.

Maybe had their solicitor made them more aware of the possible pitfalls this situation could've been averted, but the fact is they are here now and have to deal with it.

They are still looking for a new job, which is getting harder everyday as more and more people enter this market.
Even if they were to get a job tommorow, no bank is going to give you a mortgage until you've been working in a company for at least 6 months and even then they would frown on the gap in employment.

The buyers have initiated proceedings to get out of the contract.
They have to wait until the place is completed before anything will become of it.

With things going the way they are I'm not sure if they are still building.
The physical shell is there, The buyers were sent a letter informing them they will be called to snag in a month. Two months later there is no news.
This could be an opening as there is a final completion date in the contract (off course the builder covered themselves here and added a possible year to the actual date).

What would be the scenario if they went ahead with the purchase on the strength of a pre-approved mortgage, but when the valuer for the bank values the property at today's rates, Would they have to come up with the shortfall?

If they couldn't come up with the difference (as would be the case for most people) would they still be expected to purchase?
Even if they sold it now they'd still have to come up with the money.

Only time will tell now.

miju

Clone wrote: »

gurramok Thanks for your input, allot of research did go into it, I find it insulting that you suggest that people would throw away money frivolously, hindsight is a great thing, I don't think any amount of research could've anticipated the chain of events that led to this.

I and alot of others would beg to differ here for example there is thread I started here and another on boards.ie by mentalson which is here

Unfortunately, many people chose to put their heads in the sand.

Clone

miju thanks for you reply.

A dip and major drop in the property market was anticipated when the decision to buy this property was made.

This wasn't a major issue as the buyers never intended to buy the property for investment purposes, They were more interested in moving into their own property in an effort to take the next steps in life without wasting anymore time out of life.

They could've gone along with "lets wait and see what happens" school of thought like most people did. And loose a couple of years before they finnally decide that it's safe enough to purchase.

The main reason for this post was to determine a best course of action due to one of the parties wanting to drop out. This was since resolved as the builder wouldn't release them from the contract. So both parties still wanted to go ahead with the purchase.

The main problem came when one of them was made redundant.
Not a pleasant scenario when your expected to close on the deal 4 months later. When i refer to the chain of events in the market I'm not only talking about the crash in the property market which was always inevitable, I'm reffering to the sub-prime crash and then the general panic that spread as multinational companies started to move their operations out of Ireland and thousands lost their jobs.

We even bought just as things were beginining to drop, we were lucky to sell and move when we did. Like the people who are the subject of this topic we bought our house as a home and were well aware that we would loose out almost immediately and I'm sure we have but I look forward to many happy years on OUR house.

If we were smart we could've sold our previous house moved in with some relatives for a year or two while we speculate on the property market but I'm a firm believer in the fact that life is too short to get caught up in market speculation that is totally out of our control and dictated by the powerful financial institutions and unscrupulous governments that force an unfettered form of captialism on people around the world and when it all goes wrong it is the people who have to pay for it.

Sorry for the anti capitalist rant but it sickens me, A whole other thread is needed for this.

Jo King

Clone wrote: »

The buyers have initiated proceedings to get out of the contract.
They have to wait until the place is completed before anything will become of it.

With things going the way they are I'm not sure if they are still building.
The physical shell is there, The buyers were sent a letter informing them they will be called to snag in a month. Two months later there is no news.
This could be an opening as there is a final completion date in the contract (off course the builder covered themselves here and added a possible year to the actual date).

What would be the scenario if they went ahead with the purchase on the strength of a pre-approved mortgage, but when the valuer for the bank values the property at today's rates, Would they have to come up with the shortfall?

If they couldn't come up with the difference (as would be the case for most people) would they still be expected to purchase?
Even if they sold it now they'd still have to come up with the money.

Only time will tell now.

If, as they appear to have done, signed an unconditional contract and they cannot complete for any reason they can be sued for specific performance and or damages in lieu and there will be a judgment entered against them for the loss to the builder.
If there is no building going on the situation is hopeful. The builder may not be able to secure funding to complete the development. If the building is not complete on time it is the builder who will be in breach of contract. He can then be served with a 28 day notice to complete and then sued for the return of the deposit when he cannot do so.

astrofool

If you were really smart, you could have bought in 2001 (or before), sold now, and still made a killing, how many on this board have done that?

Also, would the price of gold at the moment count as a bubble?

http://www.goldprice.org/gold-price-history.html#10_year_gold_price

Lots of people are using gold as a "safe" haven at the moment, and being lauded as genii (I know one guy who had money in gold a good 20 years ago, making a killing at the moment).

gurramok

Clone wrote: »

gurramok Thanks for your input, allot of research did go into it, I find it insulting that you suggest that people would throw away money frivolously, hindsight is a great thing, I don't think any amount of research could've anticipated the chain of events that led to this.

Are you a homeowner? Were you a savy purchaser when you bought your first place and made sure that the market wasn't going to change in the period after signing to the move in date, or that you would be made redundant from a company that you have worked your way up in?

Hold on, i stated that research has to be done before borrowing hundreds of thousands for an apt, that's common sense especially for 2 friends who are not a couple.

People have thrown money away frivolously on property in this country without an ounce of research without any rainyday scenario counted in.

You never stated why two friends bought an apt other than 'it wasn't an investment'. It seems to me they naively wanted to get on this ladder before its too late and did not know the whole thing was about to crash.

Loss of job etc is unfortunate, i've been there myself. Jo King has outlined the scenario they are in.

You've still not given the reason why two friends in 2007 bought off the plans for an apt to be completed sometime in 2008/2009?

DJDC

If we were smart we could've sold our previous house moved in with some relatives for a year or two while we speculate on the property market but I'm a firm believer in the fact that life is too short to get caught up in market speculation that is totally out of our control and dictated by the powerful financial institutions and unscrupulous governments that force an unfettered form of captialism on people around the world and when it all goes wrong it is the people who have to pay for it.

Sorry for the anti capitalist rant but it sickens me, A whole other thread is needed for this.

Idiotic rant. Banks just give money to people who want it, the general public were the drivers of the process, constantly trying to live a lifestyle they couldnt afford. The current media/public onslaught on bankers isnt fair as it ignored the primary reason behind every asset bubble that has existed; human greed.Like it or lump it, you bought into an asset bubble when you could have rented. It was perfectly obvious to anyone with a brain that things were going to crash sooner rather than later. I have no sympathy for your heartfelt panderings.

tbh

astrofool wrote: »

If you were really smart, you could have bought in 2001 (or before), sold now, and still made a killing, how many on this board have done that?

*smug*




sorry. but I did.

PhoenixRising

DJDC wrote: »

Idiotic rant. Banks just give money to people who want it, the general public were the drivers of the process, constantly trying to live a lifestyle they couldnt afford. The current media/public onslaught on bankers isnt fair as it ignored the primary reason behind every asset bubble that has existed; human greed.Like it or lump it, you bought into an asset bubble when you could have rented. It was perfectly obvious to anyone with a brain that things were going to crash sooner rather than later. I have no sympathy for your heartfelt panderings.

What about the human greed on the bank's side? Or are you saying the banks acted admirably over that last number of years? Granted, some buyers were extremely stupid and have to live with the consequences now, but the banks have a responsibility to lend appropriately which they did not do.

blah

tbh wrote: »

*smug*




sorry. but I did.

Out of interest, what do you do now for a roof over your head? Rent? Downsized?

tbh

married a rich woman with her own house. (granted a lot of the money I made went to paying for the wedding, i have it written off as a business expense )

SimpleSam06

DJDC wrote: »

The current media/public onslaught on bankers isnt fair as it ignored the primary reason behind every asset bubble that has existed; human greed.

Then again, remember that every single one of those loans had to be approved by the banks. If regulation like the Glass-Steagall act in the US hadn't been repealed (legislation enacted after the last great depression to prevent another great depression, and look where we are only ten years later), and Pfandbrief style securitisation welcomed with open arms here back in 2003, the financial institutions wouldn't have been able to cause this crisis.

It wasn't just greed either, it was fear. I remember very clearly the number of posters during the boom who bludgeoned people about the head and face with the fear that they might never be able to "get on the ladder" unless they bought now, now, now, don't get left behind, you'll be living with the tinkers in a caravan.

While a good case could be made for holding the general public responsible, I feel that the blame must largely fall on those doing the lending and those in charge of lending rules, like our own hapless financial regulator.

Those people trapped in unsuitable accommodation that they will probably never move out of for the next two decades, those people that bought with a partner who left them willingly or unwillingly in the lurch, those people with families they didn't bank on in the literal sense, deserve pity in my opinion, if not sympathy.