Property Vandalised before settlement

[FatBelly]

I had to post this to see if there has been anyone else out that has found themselves in the unfortunate situation I am now in.

Are due to settle tomorrow (Monday) on 2 flats that I got under contract a month ago. During the last month we have spent over $15k getting them back up to standard and had a great valuation performed, giving us a healthy profit (some of you may have read my other post about this deal moving us towards our Xmas goal).

Well anyway, today I found out that they have been completely vandalised over the weekend, all windows broken, the house spray painted over all the walls, inside and out, all brand new curtains ripped out, new carpet and underlay ripped up and removed, locks broken, doors kicked in. You can imagine how I feel.

So with the deposit on these paid and the reno just being performed, I am $25k out of pocket and due to settle on a property that is now in a worse state than when I contracted it. Yes it is insured, it has been since the day we started the renovations, and chattels were in the cover.

But as far as the immediate problem is concerned re: the settlement, Im unsure as to what the next step will be. Has any other unfortunate person had this issue before? Have you settled in this state, or enforced the vendor (who legally still owns the dwelling) to remedy this? Dont forget also that from the vendors POV, the property was already run down when we contracted it with him, so I guess the fact that we have spent thousands and it now looks brand new is not going to be taken into account when he repairs the damage. If he even agrees to do this.

Man, what a nightmare. Are still in the UK too, so cant talk to lawyer and insurance company till tomorrow, but hopefully we can sort this out. On top of that, the police havent event made it to the property to inspect it yet, saying there was a spate of burglaries over the weekend and we are 17th in line, so they wont see it till tomorrow.....

[Monid]

Oh lord Fatbelly that really sucks. At least you were smart enough to have insurance in place, so hopefully that will take care of it.

I think as you are aware you are caught between a rock and a hard place, while you can hold the vendor accountable for ensuring it is up to the condition that it was in when you signed the contract, you can't make them restore it to how it was once you had renovated it. However, I would check with the insurance company before you let the vendor off the hook, since they may only be willing to pay out what he is isn't liable for. And what do you mean if he is willing... if he isn't he is in default of contract and you can start to charge penalties.

I seem to remember someone mentioning on here awhile ago about a situation like this which became a great cashflow for them for awhile since it was the vendors problem to sort out and they were in default of contract...

Personally I'd try any make it a bit more friendly than that and only move to that level if neccesary, but your first stop should be clarify the situation with your insurance company.

Hope it turns out well, and let us know how you get on, it would be useful to know what to do in that horrid situation.

David

[FatBelly]

Hey David,
Yep will definitely want to sort this out as aimicably (spelling?) as possible, but I can see straight away this is going to take some time as there is a LOT of damage. Spray paint over pretty much EVERY internal wall and door etc.

Im hoping that between the vendor restoring the property to its original condition (ie. removing all grafitti and repairing windows and doors and walls) and my insurance company covering a few things (replacing the curtains and the carpet that were taken) we can get it back to where it was.

In the meantime we wont be settling with the vendor until he has done his part, which will result in some penalty interest paid to us.

[Monid]

What stuns me is the mindset of someone who would do something like this.

Hope it ends up back in the condition you got it to, without costing you an arm and a leg.

David

Btw if you use the new version of Firefox as your browser it has spell checking built in so you can just click a button.

[Gatekeeper]

I had this happen before settlement on a two flat property. The back porch was smashed up and the brand new carpets ripped up and stolen. But I hadn't done any renovations, I just had access to get my planning started. The vendor fixed the porch before settlement and took a few thousand off the settlement amount to cover the carpets (which were not my taste anyway).

Settlement went ahead on the due date.

[xris]

Helo Fatbelly,

Although it will probably depend a lot on what you had agreed with the vendor, and with any insurance policies in place, on the surface it looks like the worst case scenario (bar burning to the ground) that a vendor will have to confront.

The vendor still has to settle based on the warranties in the agreement and he clearly cannot do that now. Even if the place was run down when you made the contracted I’d be surprised if it was this bad. So, a nightmare situation for the vendor.

Also a nightmare for you and all your work, whether you have insurance cover or not.

My thoughts are that the vendor will need to scrub up the place just enough to fulfil his warranties and then he will be in a position to settle, losing a few days in penalty interest. This may mean just fixing the locks, repairing the worst of the damage and replacing broken windows etc. You then have to settle of you are in default. Your $25,000 do-up? Not relevant. It is an issue between you and your insurance policy if there is one.

The moral of the story is mainly for the vendor - between confirmation and settlement make sure you are properly insured and do not let people into the house (you know what I mean), because these things can happen. (I realise this would have happened anyway and it wasn’t you, fatbelly, that caused this damage, but it could have been, with one of you subbies leaving a match by some oil in the kitchen…)

It would be interesting if you can keep us up to date on what happens.

One final point. This is a matter of the contract and there may be many variables. Make sure it is all dealt with by your lawyer despite what other people say and advise.

xris

[FatBelly]

Yep - will def leave it in the lawyers hands. I think that is exactly how it will pan out Xris, the vendor will be required to clean the place up and get it back to the standard it was in when we contracted it, and the replacement of the chattels that are missing (that we installed in our reno) looks like our own matter with our insurance company.

There are definitely going to be a few negotiation points however, eg. who will put the carpet down? There was carpet down in the place when I contracted it so should the vendor replace this? But I tore that up and replaced it with new stuff, so does that become my cost?

Will keep you all posted.

[Gatekeeper]

JMHO, but I'd say the carpet is on you. They may not have damaged the old carpet (anyway, book value?? very little probably). You pulled up his old carpet, so this action had already been accepted between you and the vendor prior to the break-in.

[FatBelly]

Yep - tend to agree with you there Gatekeeper. Latest on this one at the moment is that our solicitor has instructed them we wont be settling until the property is in the same sort of state it was when we contracted it ie. cleaning it all up, repairing windows etc etc.

Interesting POV from the insurance company initially has been that the claim should be from the vendor as he owns it and we dont own it yet so we shouldnt be claiming....I find this pretty interesting as they were made aware that we didnt own it when we opened the policy but that we would be performing work on the place. They havent had any issue taking money out of our account for the premium so there better not be any issue with a claim if I have to submit one.....Will see what comes out of the solicitors before we go down this path anyway.

[xris]

Hello fatbelly,

Re the carpet… I simply don’t know – a real minefield. It reminds me of a recent carpet discussion on tenanted properties and the way the TT views matters. Book value of zero, yes, but there was a carpet there nevertheless? Oh, what a mess – leave it to the lawyers.

The insurance issue is more important. Your comments about what the insurance company said were my first thoughts too. That is why I indicated it depends on the type of policy you have - note YOU - not the vendor.

I would think the vendor’s policy would cover this (the repair to the house up to the point where the reno's began) because it was vandalism from intruders. But, if it had been your contract workers who caused the damage the vendor would be in a real dilemma because he had allowed/invited those people in.

My advice to people, once again on this subject, is…

Do not let people into your property prior to settlement unless you have an insurance policy which very clearly covers you for all scenarios. A normal house insurance policy is unlikely to do this. A vendor should be advised of this by an agent and/or lawyer. I suspect in many cases this does not happen.

xris

PS... FB, if the policy you are refering to is indeed the vendor's house and chattels policy, and you are thinking that your $25,000 loss is covered by that, then sorry, but I think you may be in for an unpleasant surprise.

[FreezingandHot]

Interesting points made here, I had early access for 2 properties that I had done reno's on and usually the responsability lay with the vendor as they still own the property therefore would be liable for any damage, Im no lawyer but this theory makes perfect sense. In saying
that I think you would always have to cover yourself as this story illustrates.

I have asked insurance companies before what to do in this instance and was told it is the responability of the vendor to insure , but I think you can also cover yourself with putting in place a contract with your insurance company. Is this correct??

So sorry to hear this fatbelly, Im sure it will all work out in the end, keep the faith!!

Let us know how you get on.

FH.

[cube]

It could all get very messy if the vendor claims that the vandals only got access because a door was left unlocked by a tradesman carrying out renovations on behalf of the purchaser!

[roseneath_rat]

From an insurance perspective I feel there should be two claims-
1. Claim on vendors domestic insurance policy for the house for material damage caused to existing chattels & dwelling
2. Claim on purchaser's contractors-all-risk policy for the improvements (assuming it was set up like this).

The difficulty with insurance is beneficial interest. Some insurers are rightfully cagey about insuring assets where you have control but not ownership eg- early access.

The issue of negligence & reasonable care may also be an issue for insurance, as if the insurer can see that the premises were left unsecure then they may also decline the claim. Insurers also often have a clause that voids cover if a property is vacant for 60 days or more unless notified.

Good luck & let us know how you get on.

[FatBelly]

Hi guys,
Thanks for all yoru comments. One point I have forgotten to mention that might become relevant later on also, is that the vendors tradesmen picked up a set of keys from us on the Friday as they were going into the property to re-wire the stoves (one of the conditions of the agreement) and we didnt go around there after that until we found them vandalised.

SO - we most probably werent the last people in the properties. Im not sure if it is going to come down to that, but I feel a bit better about it all knowing we have that as back-up should this issue of 'our tradesmen possibly not securing the place' arise.

Latest is that the vendor has come back with a quote of roughly $5k for the damages (which has excluded replacing any curtains or carpet) and wants to immediately settle less this cost. Has even said as we are not settling they are due penalty interest! The interesting thing is that for them to force this clause in the S&P (clause 4.2 (2)) the property has to be 'tenantable'. Well we have many witnesses
who have viewed it in its current state that say you would not be able to tenant this property with graffiti over all the internal walls, no carpets and no curtains, and a kicked in door.

Im aware there is also a clause that says if the property is deemed 'untenantable' on settlement day thru damage, then we have the right to cancel the contract. Not sure if we want to do this thou as we might not recover what we have spent.

Will keep you posted...

[keleri]

Re insurance: I built a minor dwelling on my parents property a few years ago which was explained to the insurers. Had to claim for carpet uplifting and drying as the plumber fitted a connection wrong and the pressure blew the connection apart flooding the house. Insurance refused to pay up as you cannot insure a property you do not own, even though I paid for the unit , it was on my parents land. Luckely th plumbers paid up.