Property Development

What happens to an off the plan purchase if the building is not completed before the sunset date?

Let's start by making it clear that a sunset date is not a romantic meeting. A sunset date is a date that a property developer inserts into off the plan sale contract by which they expect the building to be completed and the strata plan to be registered.

Until 2 November 2015, there were no restrictions on vendors or purchasers terminating the sale contract if the building was not completed by the sunset date. But in a rising property market, some property developers were delaying completion and were using the sunset clause to terminate then re-sell at a profit.

In response, the NSW Government introduced a Sunset Clause Law which requires the vendor in the contract to obtain permission from the NSW Supreme Court to rescind the contract. Permission is granted if the court is satisfied that it is just and equitable in all the circumstances to be able to rescind.

In only the second case which has been decided under the Sunset Clause Law, the Court has decided to refuse permission to the property developer to rescind nine off the sale contracts in an apartment development in Surry Hills, Sydney.

The court refused because the purchasers would lose the benefit of an average increase in value of $200,000 above the Contract Price and lose the 'lifestyle' choice of moving in. This was so, even though the property developer was not wholly to blame for the delay in completing the building because its builder went into administration.

For more details, click on my case note Sunset Clause Law bites property developer.

What happens when a purchaser caveats the property they are buying?

Property vendors are anxious to know what happens when a purchaser registers a Caveat over the property they are selling under a Contract for Sale.

They ask: Will the Caveat derail the sale and what should I do? This is a guide.

First: Why has the purchaser registered a Caveat? If it is because they have released the deposit to the vendor or if settlement is deferred beyond the standard time, then it is perfectly justifiable for a purchaser to register a Caveat, provided they have been granted a 'caveatable interest' in the Contract for Sale.

Second: How does the Caveat affect the vendor? Anyone searching the title will see the Caveat - if they are a lender, they will not lend more money to the vendor; if they are another purchaser, they will not enter into a Contract of Sale with the vendor; unless the Caveat is removed. So a Caveat restricts the vendor in refinancing or re-selling the property.

Third: Is there a dispute with the purchaser? If there is no dispute, then the purchaser is using the Caveat to legitimately protect their interests, and will come to settlement with a Withdrawal of Caveat. But if there is a dispute, the purchaser is using the Caveat as a bargaining chip against the vendor. If so, the vendor needs to take action.

Fourth: What action can a vendor take to remove the caveat? The process is called lapsing the caveat. The vendor serves a lapsing notice which gives the purchaser 21 days (in NSW) (14 days in Qld) to apply to the Supreme Court to maintain the Caveat on the title. If the purchaser does nothing, the Caveat will be removed from the title by the Lands Registry.

Fifth: What happens if the purchaser goes to Court? For a vendor, the most significant part is that the purchaser must 'proffer an undertaking as to damages' which means that they accept responsibility to compensate the vendor for all losses, if the court agrees to maintain the caveat on the title until the dispute with the vendor is determined by the court.

In a recent case before the Supreme Court of NSW, the purchaser applied to maintain their caveat. But when the moment came, they refused to accept responsibility for losses the vendor might suffer. As a result, the Court ordered the Caveat be removed and the purchaser pay the vendor's legal costs of going to court.

For my case note click Will a purchaser's caveat stand without an undertaking as to damages?

The news is all bad for Timbercorp investors

Timbercorp investors lost their investments when Timbercorp collapsed in April 2009.

But the investors did not lose their liability to repay their loans with Timbercorp Finance. The loans remained due and payable with interest.

For a while, KordaMentha who were appointed receivers of Timbercorp Finance took no recovery action, as they waited for an investor class action to be concluded.

Then, when the class action failed, they took recovery action, but were stayed pending a High Court Appeal which found that the investors could still defend the recovery claims.

But now, the Supreme Court of Victoria has shut the door on those defences, and the investors will have no choice but to pay up or go bankrupt.

For my case note, click Timbercorp investors have failed in their ‘no loan’ defences to loan recovery claims

Good news at last for Great Southern Plantations Investors - Bendigo Bank loan recovery claims can be beaten!

Not a lot has gone right for investors in the 43 Agricultural Investment Schemes promoted by the Great Southern Plantations Group between 1998 and 2008.

They invested in timber, beef cattle, wine grapes, almond and olive projects. Yes, their investment was tax driven - the money invested was tax deductible immediately. But it was also an investment - they expected to receive their money back and good profits on their investment over the 10 to 12 year term of the project.

Many investors used borrowed money to fund their investment. They took out a loan from Great Southern Finance (another group company), which then on-sold their loan to the Bendigo and Adelaide Bank. Click for more

How property developers can profit from using vendor finance.
Is there some way we can use Vendor Finance by which we can ensure sales and that both the Vendor and Buyer are happy?  Click for more

Two Property Developers hit the wall – after clutching at straws to forestall possession orders on their properties
Property developers are known to use ingenious arguments to forestall possession orders sought by their lenders, after the lender calls up the loan. Click for more

Joint Ventures for Real Estate Investment and Development
If two people combine their knowledge and their money in a property venture, they will often achieve more as partners than they would achieve on their own. Click for more

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