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samtheman

New Builds And Completion

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I do not know the entire process involved in purchasing a new build flat off-plan but have noticed in my area a number of foreign investors who purchased a couple of years ago who are looking to sell before completing i.e. they have paid the 10% or so and the building is now complete but they are yet to complete on the actual sale.

As such a "sale" is not conventional and most mortgage lenders will not approve such a purchase and with a shortage of investors willing to pick up these flats, I am suspecting that for a lot of these flats, investors may choose not to complete.

Does anyone know what happens to a flat on which an investor does not complete? Does the ownership return to the developer?

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I imagine the developer just keeps the deposit - I thought a lot of this happened up north in Leeds when the market crashed - a lot of southern BTLers put down deposits on off plan flats but failed to complete as when they were built they were worth less than they thought.

Could be wrong tho

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Depends on the contract. But usually the full contracted price is expected on completion and if it's not forthcoming then things get nasty.

I wouldn't buy a ham sandwich off plan, let alone a house.

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I imagine the developer just keeps the deposit - I thought a lot of this happened up north in Leeds when the market crashed - a lot of southern BTLers put down deposits on off plan flats but failed to complete as when they were built they were worth less than they thought.

Could be wrong tho

The answer is "it depends". However, in general, if you fail to complete, the contract makes you liable for any loss to the developer.

Exactly what happens depends on your financial state, and the current market for the flats:

If the market for the flats is good, e.g. they are worth more than you agreed to pay, then the developer may agree to cancel the contract, and resell the flat at a higher price.

If the market for the flats is bad, the developer can either go to court and ask that the court force you to complete (assuming that you have sufficient cash at bank, or assets which can be forcibly sold), or they can sell the flat to another buyer, and then sue you for the difference. (e.g. you agreed £200k, pull out and the flat later sells for £125k, the developer can come after you for £75k + legal fees - deposit paid)

There were a few "flippers" who lost their shirts in 2007, they'd bought off plan in 2006, credit crunch came in 2007 and buyers were unable to raise mortgage finance and the prices of the flats they had bought had crashed - many were forced to sell their main homes to buy the flats at the agreed price, or were forced into bankruptcy if they didn't have enough equity.

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Here's one such example.

http://www.birminghammail.co.uk/news/local-news/birmingham-cube-apartment-investors-claim-224502

Birmingham Cube apartment investors claim they 'face financial ruin'

ANGRY investors in Birmingham’s controversial Cube development claim they face financial ruin after being sued by state-owned Lloyds TSB.

Around 30 people signed contracts and paid deposits to buy off-plan luxury apartments in the luxury city centre complex in 2006.

But property prices plummeted after the credit crunch and the development went into administration. It was only finally finished last year at a staggering cost of £100 million.

Now investors are being sued by co-Cube developers Lloyds TSB to force them to complete purchases at their original price, or face paying compensation.

That is despite the fact that many can no longer secure mortgages because they will be in massive negative equity.

Walsall delivery driver Ranjit Singh, 41, says he is among those facing the legal threat.

“I never thought in a million years I’d be taken to court for trying to make a sound investment in my future, especially by a bank bailed out by taxpayers like myself,’’ he said.

“I just thought I saw a good investment opportunity and could not have foreseen what would happen to the world economy.

Bankrupt

“I was told the value of my flat was £150,000 and now I’m told it’s worth more like £100,000 – yet I still have to cough up the money.

“I just cannot afford to do it, and will go bankrupt if I do.

‘‘Myself and the rest of the investors will fight this with all our might. We have nothing left to lose.”

Retired civil servant Noreen Shah, from Birmingham, says she will be £200,000 out of pocket if forced to complete at her original buying price.

She explained: “We were led to believe the development would be completed in 2008. We paid £212,000 each for two one bedroom flats.

“After the developers went into administration the building was not finished until 2010 and the flats were priced at between £112,000 to £115,000, nowhere near the original price.

“Then I started having letters from solicitors saying if you don’t complete on time then you have to pay the costs. They didn’t finish on time and because of that I can’t get a mortgage, so what do they want me to do?

“Instead of saying ‘you will lose the deposit’ they are saying they are going to sue us for compensation.

‘‘I don’t understand how they can do this.

“It is not our fault that the scheme finished two years behind schedule; we are the ones who are out of pocket.”

The investors are now planning to countersue the Cube developers and plan a protest outside the bank’s regional headquarters this week.

But a spokesman for Lloyds TSB, said: “Although the development was finished in August last year, there are a small number of buyers who have not yet completed and we are assessing these cases in detail.

‘‘In situations where customers simply cannot complete, it is not in anyone’s interests to force them into bankruptcy and this not an approach we intend to pursue.

“We are working closely with the administrator PricewaterhouseCoopers, to ensure that all outstanding purchasers’ cases are handled fairly and that each purchaser’s ability to complete is fully considered.”

However, I seem to recall reading a later article which implied they'd manage to wriggle out of their contracts.

I see they are still looking for er, "investors":

http://housing.justlanded.com/en/United-Kingdom_West-Midlands_Birmingham/For-Sale_Apartments/investment-apartments-for-sale-birmingham-cube-uk

iv got last 5 apartments for investment for sale in birmingham cube commercial street b1 1la uk next to mail box,new street station,selfridge

investors wanted The cube Apartments Birmingham are located on the fashionable canal bank in the heart of the city, next to the Mailbox. This brand new development is just a few minutes walk from the city centre, National Indoor Arena and International Convention Centre.

(The rest of that page is just as illiterate as the start of it)

ALARM: the guy's asking for £300k in 2014 - now look back at the amounts being discussed in the "financial ruin" article... utter madness...

Edited by mrtickle

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