Reneging B T L'ers Being Sued On Their Contracts

[Realistbear]

http://www.telegraph.co.uk/finance/persona...urt-action.html

Buy-to-let investors backing out of off-plan deals face court action

Many new builds are worth far less than the agreed off-plan price and buyers are trying to renege on the contract to buy the property.

Published: 6:57AM BST 08 Sep 2009

Buy-to-let investors reneging on off-plan property purchase contracts need to be aware that they risk losing more than just their deposits, warns City law firm Wedlake Bell.

It said hundreds of buy-to-let investors have already been pursued through the courts for trying to wriggle out of off-plan contracts.

During the house price boom many buyers decided to buy a new build property before construction was completed but a predetermined price. They hoped that by the time the build was completed a year or two later, the value of the property would have risen.

But prices have fallen sharply and many new builds are worth far less than the agreed price. Some investors who had bought property off-plan are trying to avoid completing if they feel they are no longer getting a good bargain.

The problem has been made worse by banks pulling 90 per cent mortgage deals and refusing to lend the buyers enough to complete on the original deals.

Wedlake Bell says that a string of recent judgments confirms that buy-to-let investors must actually purchase the property they are contracted to rather than just forego their deposit seems to have come as a surprise to many investors.

Laugh? I thought I would never stop.

Seriously though, this is human tragedy on a grand scale. As jobs are lost and banks no longer able to extend liar loans it seems that these "investors" must now pay the piper for their foolishness during Brown's decade of irrational imprudence.

[Daft Boy]

http://www.telegraph.co.uk/finance/persona...urt-action.html

Laugh? I thought I would never stop.

Seriously though, this is human tragedy on a grand scale. As jobs are lost and banks no longer able to extend liar loans it seems that these "investors" must now pay the piper for their foolishness during Brown's decade of irrational imprudence.

No its not, its really funny

[Si1]

Wedlake Bell says that a string of recent judgments confirms that buy-to-let investors must actually purchase the property they are contracted to rather than just forego their deposit seems to have come as a surprise to many investors.

[Bloo Loo]

No its not, its really funny

I would have thought a prudent investor would have got a watertight contract on the lender too...to be exposed to a risk of falls AND a risk of no finance is just stupid. tee hee.

[IOW-here-I-come!]

Can they do that though, when they haven't actually exchanged contracts yet? What are they doing wrong as nothing is signed yet? Wasn't that the intention of the deposit, that if the sale fell through the deposit was use to re-advertise and re-sell the property?

I know that often doesnt stop a good lawyer!

[abharrisson]

http://www.telegraph.co.uk/finance/persona...urt-action.html

Buy-to-let investors backing out of off-plan deals face court action

Many new builds are worth far less than the agreed off-plan price and buyers are trying to renege on the contract to buy the property.

Published: 6:57AM BST 08 Sep 2009

Buy-to-let investors reneging on off-plan property purchase contracts need to be aware that they risk losing more than just their deposits, warns City law firm Wedlake Bell.

It said hundreds of buy-to-let investors have already been pursued through the courts for trying to wriggle out of off-plan contracts.

During the house price boom many buyers decided to buy a new build property before construction was completed but a predetermined price. They hoped that by the time the build was completed a year or two later, the value of the property would have risen.

But prices have fallen sharply and many new builds are worth far less than the agreed price. Some investors who had bought property off-plan are trying to avoid completing if they feel they are no longer getting a good bargain.

The problem has been made worse by banks pulling 90 per cent mortgage deals and refusing to lend the buyers enough to complete on the original deals.

Wedlake Bell says that a string of recent judgments confirms that buy-to-let investors must actually purchase the property they are contracted to rather than just forego their deposit seems to have come as a surprise to many investors.

Laugh? I thought I would never stop.

Seriously though, this is human tragedy on a grand scale. As jobs are lost and banks no longer able to extend liar loans it seems that these "investors" must now pay the piper for their foolishness during Brown's decade of irrational imprudence.

Trouble is I think wedlake bell are lying... I have been watching this and have yet to hear of one instance where a developer has actually sued and sued yet.. to do so they have to crystalise the loss,... take the contract away from the initial purchaser, sell to a new buyer and then they can sue for the difference... in doing so they need to prove they have acted in the best interests of the original purchaser ( the contracts have this clause or similar in them) and I just wonder if when it comes to court there isn't going to be wiggle room for the original purchaser on that point ... equally theres no point in taking many to court as they don't have the money and regardless of the legal niceeties I can't see judges throwing people out of their homes.... I don't know precisely what the reasons are but there must be reasons why developers have not pursued tenants en masse before now.... somehow I suspect we'll not see mass prosecutions on this issue before any recovery kicks in.

[interestrateripoff]

These where good deals, buy now before completion at a lower price. By the time it's finished the value will have gone up and you've already got a nice profit.

Minted.

What could possible go wrong?

Looks like a lot of BTL could be in serious financial trouble. The lawyers are going to get rich. I wonder how many of these builders have already put these sales down in the books as profit?

[Bloo Loo]

Trouble is I think wedlake bell are lying... I have been watching this and have yet to hear of one instance where a developer has actually sued and sued yet.. to do so they have to crystalise the loss,... take the contract away from the initial purchaser, sell to a new buyer and then they can sue for the difference... in doing so they need to prove they have acted in the best interests of the original purchaser ( the contracts have this clause or similar in them) and I just wonder if when it comes to court there isn't going to be wiggle room for the original purchaser on that point ... equally theres no point in taking many to court as they don't have the money and regardless of the legal niceeties I can't see judges throwing people out of their homes.... I don't know precisely what the reasons are but there must be reasons why developers have not pursued tenants en masse before now.... somehow I suspect we'll not see mass prosecutions on this issue before any recovery kicks in.

the purchaser needs to have purchased in order to have his best interests served.

I agree damages for contract failure is the claim. but if I buy a container of coffee on your say so and I get it delivered and you say you dont want it any more, the reason is not my problem. If there is no market for the coffee, the whole cost is coming back on you.

[Snugglybear]

Wedlake Bell says that a string of recent judgments confirms that buy-to-let investors must actually purchase the property they are contracted to rather than just forego their deposit seems to have come as a surprise to many investors.[/i]

Is it really awful of me to want to find and read accounts of the "recent judgements" and then laugh myself sick?

If it isn't, any idea of how to find them would be appreciated.

[abharrisson]

the purchaser needs to have purchased in order to have his best interests served.

I agree damages for contract failure is the claim. but if I buy a container of coffee on your say so and I get it delivered and you say you dont want it any more, the reason is not my problem. If there is no market for the coffee, the whole cost is coming back on you.

I think these legal cases are going to be a little more complicated than buying a pot of coffee.

[abharrisson]

Is it really awful of me to want to find and read accounts of the "recent judgements" and then laugh myself sick?

If it isn't, any idea of how to find them would be appreciated.

And therein lies the problem, I can't believe there have been any or they'd be more in the public domain by now, they'd be included in the forums relating to this kind of thing, would have been in the press etc etc... it wouldn't surprise me if there are between 50,000 and 100,000 of these types of "can't pay " cases .... many of them have been around for longer than a year... if many of them had been to court we would have heard by now.. which makes me think the quote from the lawyers about cases happening etc is wrong, not true, just another part of the threat etc etc.

If I was in this position I think I'd basically be saying "so sue me" to the lawyers, and somehow I think that'd be quite some way off, if it ever happened at all. At the same time I'd be quietly re-organising my finances to make sure as much as possible stayed out of their clutches if this did go to court and they were successfull.

[Frank Hovis]

Is it really awful of me to want to find and read accounts of the "recent judgements" and then laugh myself sick?

If it isn't, any idea of how to find them would be appreciated.

Looking forward to it!

Signed a contract to buy a BTL but now can't afford to it?

You stupid boy

[@contradevian]

The all received independent financial advise from their solicitors apparently.

"you do realise Mr BTL the property prices can fall as well as rise?"

"haha"

Maybe sue their solicitors? Probably not a good idea!

Edited September 8, 2009 by HostPaul TAFKA Rover2000

[Mr Punter]

I have yet to hear of one of these going to court and I am intrigued as to the outcome. After the 90s HPC, lenders of properties that were repossessed made some effort to get some of their money back, but would often settle for as little as 10% rather than the debtor going bankrupt and them getting nothing.

Although we think that the contracts are absolute, I think there will be some wriggle room for some of these ‘investors’. Applying pressure to complete is a sensible tactic for the seller and I suppose a few buyers will do so. Chasing someone through the courts when they do not have the money is a bit of a waste of time.

If I were the developer I would try to lever a bit more cash from the buyer and perhaps offer shared equity and / or “loan†them the extra money to complete. I think, though, that many purchasers were hoping to flip the property and will try anything to renege.

[Bloo Loo]

I think these legal cases are going to be a little more complicated than buying a pot of coffee.

i doubt it...its a claim for money...the thing is, many of these buyers are "men of straw"....threats and posturing will be the best the developers will acheive in many cases.

[Neverland]

I have yet to hear of one of these going to court and I am intrigued as to the outcome. After the 90s HPC, lenders of properties that were repossessed made some effort to get some of their money back, but would often settle for as little as 10% rather than the debtor going bankrupt and them getting nothing.

Although we think that the contracts are absolute, I think there will be some wriggle room for some of these ‘investors’. Applying pressure to complete is a sensible tactic for the seller and I suppose a few buyers will do so. Chasing someone through the courts when they do not have the money is a bit of a waste of time.

If I were the developer I would try to lever a bit more cash from the buyer and perhaps offer shared equity and / or “loan†them the extra money to complete. I think, though, that many purchasers were hoping to flip the property and will try anything to renege.

Yes, but...

if the developer thinks the punter has the money... it is worth the developer going to court

the developers will probably find eye wateringly expensive second charge finance to foist upon the buyers too

these cases will drag on for years... the only ones who get rich out of them are the lawyers

as for the idea of hiding your assets from the court thats one of the stupidest ideas I've ever heard and a very good way to end up in jail

[M21er]

I have yet to hear of one of these going to court and I am intrigued as to the outcome. After the 90s HPC, lenders of properties that were repossessed made some effort to get some of their money back, but would often settle for as little as 10% rather than the debtor going bankrupt and them getting nothing.

Although we think that the contracts are absolute, I think there will be some wriggle room for some of these ‘investors’. Applying pressure to complete is a sensible tactic for the seller and I suppose a few buyers will do so. Chasing someone through the courts when they do not have the money is a bit of a waste of time.

If I were the developer I would try to lever a bit more cash from the buyer and perhaps offer shared equity and / or “loan†them the extra money to complete. I think, though, that many purchasers were hoping to flip the property and will try anything to renege.

Hi

Why would the lenders settle for just 10% of the loan outstanding? The mortgagee's loan is secured on the property and comes ahead of all other creditors even in bankruptcy.

For lenders to receive less than 10% of their original advance, would mean that the the property had fallen more than 90.5% in value assuming an original 95% advance.

Can you explain?

Thanks

M21er

Edit: Do you mean 10% of the shortfall AFTER the repossession?

Edited September 8, 2009 by M21er

[RandomBear]

Looking forward to it!

Signed a contract to buy a BTL but now can't afford to it?

You stupid boy

Charming individuals some of you round here...

Honestly, these people are victims of lax regulation that allowed people to commit to buying a property in 2 years time, without being able to lock in financing for said timescale. The size of the bubble was the only thing that would ever convince people that committing to a purchase so far down the line was a good thing.

Yes they were naive but they don't deserve what some of you are wishing on them. I hope that a solution that forces both the property developer and the buyer to take a reasonable hit to complete the deal is settled upon.

[Si1]

Hi

Why would the lenders settle for just 10% of the loan outstanding? The mortgagee's loan is secured on the property and comes ahead of all other creditors even in bankruptcy.

there are no mortgages - yet. it is the devcelopers who are considering suing as potential buyers back out after signing the contract

[Si1]

Yes they were naive but they don't deserve what some of you are wishing on them. I hope that a solution that forces both the property developer and the buyer to take a reasonable hit to complete the deal is settled upon.

in order for that to happen money would have top be majicked out of thin air - one or both parties of the deal has taken a big bath, are you saying taxpayers should pay instead?

[Neverland]

Charming individuals some of you round here...

Honestly, these people are victims of lax regulation that allowed people to commit to buying a property in 2 years time, without being able to lock in financing for said timescale. The size of the bubble was the only thing that would ever convince people that committing to a purchase so far down the line was a good thing.

Yes they were naive but they don't deserve what some of you are wishing on them. I hope that a solution that forces both the property developer and the buyer to take a reasonable hit to complete the deal is settled upon.

While I tend to agree with you there has to be some element of caveat emptor here

No one who had the funds to put down 10% could be stupid enough not to under stand the implications of signing a legally binding contract to pay the other 90% on delivery in 2 years time

Thats the whole reason I'd never buy a flat off-plan

The property developers will be taking huge hits from these where the buyer genuinely doesnt have the funds to cover the shortfall, but I can't see why they should bail out those who don't want to complete (and neither can they)

[Badhairday]

My sister put down a 10% deposit on a 300k flat a couple of years ago. Completion was to take place a year down the line. As I understand it, my sister had problems getting a mortgage in the timeframe specified and the builder then refused to honor the original agreement. My sister was told that as she didn't complete on time, the agreement was void. She stood to lose her 30k deposit unless she agreed to pay 350k instead of the original 300k. She then purchased the property for 350k.

I doubt the builders have a right to take anyone to court.

[RandomBear]

in order for that to happen money would have top be majicked out of thin air - one or both parties of the deal has taken a big bath, are you saying taxpayers should pay instead?

Both should share equally in the bath. Taxpayers should not pay, of course. But the developers are equally guilty if not more so, and I would not be at all surprised if these cases are not being taken to court because the developers are terrified of their contracts being found unenforcable due to the terms contained therein.

[Bloo Loo]

My sister put down a 10% deposit on a 300k flat a couple of years ago. Completion was to take place a year down the line. As I understand it, my sister had problems getting a mortgage in the timeframe specified and the builder then refused to honor the original agreement. My sister was told that as she didn't complete on time, the agreement was void. She stood to lose her 30k deposit unless she agreed to pay 350k instead of the original 300k. She then purchased the property for 350k.

I doubt the builders have a right to take anyone to court.

they have a right to negotiate any contract. they got an extra 50K out of your sister....god knows where the money came from as she couldnt complete the deal at 300K.

[Bloo Loo]

Charming individuals some of you round here...

Honestly, these people are victims of lax regulation that allowed people to commit to buying a property in 2 years time, without being able to lock in financing for said timescale. The size of the bubble was the only thing that would ever convince people that committing to a purchase so far down the line was a good thing.

Yes they were naive but they don't deserve what some of you are wishing on them. I hope that a solution that forces both the property developer and the buyer to take a reasonable hit to complete the deal is settled upon.

You bought a holiday for next year yet, pal?