Hi. I reserved a property at the peak of the 'property boom' in July 07. The property is due to be competed in April 2009.

It was agreed at £160k and a 10% deposit paid. In the current climate it is probably worth around £120k. and this could get worse!

From memory, the contracts detailed that the sale was not subject to receipt of mortgage etc.. However, it is inevitable that when the time comes the mortgage companies will not value the property at the higher levels, and we will have to hand over additional thousands of pounds to the developer as well as additional deposit to the lender!

I realise that if I pull out of the sale I will lose my deposit. But could I be 'sued' or otherwise legally FORCED to purchase the property?

Thanks for your assistance.

Hi --- Property contracts are not binding until the final exchange of contracts takes place, therefore you cannot be sued for breach of contract for not proceeding, and they cannot force you (how could they ?) to purchase the property.

You will as you expect lose your deposit though, which in itself is a high enough financial penalty if you withdraw, or at least some of it, but how much should be worded in the pre-contract you signed when you paid your deposit.

Proper Tea,

following on from CMK's excellent legal advice, just consider this; the developer will be fully aware of the situation with regard to falling property values, and it will not be in his/her best interests to pull out of your deal, even if he gets your original deposit, as he may still have a flat he can't shift in the current climate. So you need to be proactive here, and approach the developer and see how the land lies. Just a thought.

Many thanks for the replies.

Exchange of contracts HAS taken place. As I recall we paid an initial booking fee then had 4 weeks to sign contracts and pay the full 10% deposit. This all happened a year ago.

Where does this leave us legally?

And with regard to the other reply, is there room to try to 'renegotiate'?

Thanks again

PT --- Final exchange of contracts does not take place until all the funds are in place to proceed with the completion, which would not take place without all the finance organised and in place after the builders have finished the flat, then the Solicitors would exchange contracts. For this position to be reached your mortgage has to be agreed first, in order to satisfy the Solicitor that you are in a position to proceed, once this process has taken place you then become the legal owner.

You need to see your Solicitor as I think you are possibly misleading yourself, at the moment all you have signed is the pre-contract agreement to buy, "subject to contract" and placed a holding deposit of 10% in place (which is at risk), your Solicitor would not expose you to legal action otherwise, by completing the full deal until all the funds were in place from your lender.

Ok - many thanks for all the advice. I'll chase it up with my solicitor but you have offered some hope!

And with regard to the other reply, is there room to try to 'renegotiate'?

Absolutely, Skywalker makes perfect sense, the developers understand full well that realistically they stand little or no chance whatsoever, of selling any property for much more than it's open market value when the time comes to any other prospective purchaser.

Therefore they can make a decision whether to take a reduction or risk losing a sale.....take into account though when negotiating they have you over a barrel somewhat, in that they already know you stand to lose your deposit and they will use this as a lever to some extent....to try call your bluff....mind games I'm afraid. !

I would advise that you have a valuation done nearer the time, so that you can fairly negotiate a suitable reduction in price to reflect the market value at the time, if not then decide if it's more advantageous for you to withdraw and cut your loss by loosing the deposit.

Again, many thanks - this has been most useful. No more sleepless nights!

hi,

I have a property abroad that is incomplete too. I assume you have held back a small amount (2%?) untill completion? this is standard form. So long as there is any outstanding payments then the contract is not valid. You have no obligation to purchase in full. although the market is changing rapidly, when you come to mortgage you are not trying to sell the property i assume? If not then you are simply obtaining a valuation. In this case you can value the property higher than the current market. i buy properties and I have just recently bought a flat in which I valued it at what I thiought it was worth. This was about £10000 over current market trends. This valuation was accepted. The problem of value in the current climate is that it usually takes presidence when selling. You are not I assume? So if you say it is worth £160,000 then stay with that. They can only bring the price down!! but only by so much. Over valuation by yourself is a simple tactic and can bring a positive result.

regards

ged

Hi,

Having read this, the advice from CMK and Skywalker is completely wrong.

I am a property lawyer and would advise as follows:

1. If you pull out you will lose your 10% deposit

2.You are also liable for damages to the developer, the main one being if they subsequently sell the property at a lower price. You must make up the difference.

I would contact your solicitor immediately rather than seeking legal advice here.

Please read the posts thoroughly before jumping to wrongful conclusions, this is where a lot of lawyers go wrong.... because they simply do not pay attention to the obvious fine detail.

1) I have already explained he will forfeit his deposit by withdrawing.

2) He will only be liable for damages that the developer suffers, but as the drop in property prices due to uncontrollable market conditions will cause a reduction in their expected profits, that loss will be hard.... to impossible, to illustrate and prove.

We also have told him to contact his Solicitor. ! .......But there's one thing for sure, he should not really be taking legal advice from a property lawyer who, has neglected to read this thread thoroughly. !

Hello,

I was wondering if you could help me as i am in a similar situation to the one you have quoted.

Have you made any progress in finding out any further information if so could you please help me as it is a straing situation to be in.

I have been today by a good FSA that the builders cannot do anything yes it looks likely the 10% deposit will be lost but they cannot it seems force us to buy the flat or take us to court well at least that is what the fsa thinks.

Please let me know your findings or maybe someone that can guide us through this please see the extra information below. Thanks.

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I have read your previous thread on this subject and it was somewhat assuring to know that we cannot be forced to complete even though we have signed a contract and paid a 10% deposit.

In my case i was contacted by the builders agents who sold the product in that we pay a 10% deposit now on a plot and before the plot is complete they would sell it for us before completiion making a further 10%on the appreaciated vale in a year or two for us.

Now near to the time the agent has gone bust and no one is picking up the phones.The builder now has contacted us and from what i understand from the solicitors that were recomended by the builders at the time they say that we are bound by the agreement and that we will either have to pay a further 10-15% and loose our deposit to get out of this or the builders will take us to court.

Although the solicitors are supposed to be on my side it seems to me since they were originally recomended by the building firm to draw the contract they are more towards the builders favour??.

What i would like to know is that i can understand loosing the 10% deposit expected, but a further 10-15% and if we dont they will sue or take us to court ? or are they playing mind games to scare me. (Any advice please)

And if they did lets say take this to court would i be affected in my main resident or credit rating or money in my bank account etc?? Although i have proof of letters sent by the selling agents which was why i invested in the first place.

What the builders are trying to do now is ,they have contacted some financial mortgage company which they say have special deals they should be able to get us a mortgage even if we are unhappy about it , it seems.Looks like they really want us to buy .

If you or anyone can help me with this or even put me in contact with anyone that can guide me in this matter it will be greatly appreciated.

Regards.

Hi -- You're correct in your assumption that the 10% deposit will be lost if the agents who hold your deposit do go bankrupt, but as your contract was with the builders agents and NOT the builders....then how can the builders take you to court.? your contract was not with the builders..it was with the agents, if the agents go bust there is no agreement to bind you to anything.

In my view their Solicitors who probably get a lot of work from these builders are biased and trying to bluff the buyers into going ahead, in the interests of their relationship with the builders and to limit the loss they will suffer.

You really need independent legal clarification from your own Solicitors once they have read the contracts to explain all the options that are now open to you, including registering as a creditor against this agent who has gone bust and holds your 10% deposit.

Thanks for your advise sorry i must not have made it clear but the agents that have gone bust very cleverley acted only for the builders so the 10%deposit was paid to the builders and i believe the agent got a big commission.

Quite right i do think that the solicitors representing me seem to be more in with the builders possibly to get the business.

I think i will have to get an independent solicitor and leave the one the builders recommended.

What i was concerned with was that the solicitors that are supposed to act for me are saying that if we do not complete either we will have to pay a further 10-15% to get out of the contract-lease papers signed .But the builders really want me to buy the flat and get a mortgage and for this they have now got there own mortgage people to try and help me get a mortgage although i have told them i cannot afford it.IF not they will take me to court-sue me?

Can anyone put me in contact that can help me clearify this once for all please.

Thankyou.

Hi, I know this is an old thread but I'm sure this topic will come up very frequently. I am an amateur buy-to-letter that also bought off plan at the peak in 2007. There have been quite a few disturbing articles in the national press today which state that:

1. If you have exchanged contracts this is legally binding. You will lose your 10% deposit if you don't complete. This was an assumption that I resigned myself to accept, like investing in a stock that had gone under. My off plan flat has probably lost 10% at least.

2. The developer can then sell the flat in a fire-sale auction, say for another 100K discount based on market conditions.

3. The developer can then sue you for the difference agreed at exchange, leading to no home and bankruptcy. I don't have funds to take a 100K+ hit.

I will seek professional advice but seeing as I have only just seen these articles, I wanted to know if anyone on this thread has contacted their solicitors for information. Can the developer really sue you in the way mentioned?

In my case, there are additional factors that would deter completion, for example promised regeneration that will not take place due to the credit crunch, potentially not being able to secure a mortgage (the market was very different a year ago in terms of LTV). Can I get away with just losing the 10% deposit? I was thinking about the renegotiation of the price but I know that would be a long shot, is there any precedence for this once contracts have been exchanged?

Thanks