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  1. #1

    Unhappy Not settling on settlement day

    Hi Guys,
    I was suppose to be settling my 3rd property this Tuesday and asked for a vacant position.

    I was buying this property from a property finder and he was dealing with the original vendor.

    However on Monday when i went to inspect the property one final time before settlement there was no signs of the tenants moving. So i decided that i will sign up a new tenancy starting from Wednesday but i never said that i will take on the existing tenancy.It was suppose to be as if the tenants have moved out and it is brand new tenancy. However it turned out to be different story.

    So i was left to sort out the rent in advance and bond money to be transferred to me from the property manager whom i found did not want to share any information with me at all regarding the property or the tenants as i wasnt the buyer (the actual buyer was the property finder) i was the 3rd party. Now the original verndor/property manager said she will transfer the bond once the outstanding water bill and rent is paid but the fact is i asked for a vacant postion. The tenancy ends on settlement not 2 weeks after.

    After alot of running around on the settlement day i found out that the tenants were not so good and that they were given eviction notice so upon a good phone call to my lawyers i decided i just wasnt ready to settle on that day and that i want vacant postion as requested and decided to stick to that.

    Luckily i managed to get hold of the tenant and get the tenancy form and tore it infront of her telling her we are not settling today and i'm not the owner yet so this tenancy form cant start yet. She agreed happily and i got out of it. Oh yah also when i went to cancel the tenancy she showed me the letter from tenancy tribunal for a court hearing for not paying rent and she tried to convince me it could be due to her complaining about cockroaches.

    A very good lesson learnt there.

    So we never settled on Tuesday but the mortgage has been drawn and now for the short term i have to pay the whole mortgage myself.

    This is my first experience with something like this and it has really scared me i'm not too sure when we will be settling now and am worried as to what if the vendor turns it back on me saying i signed the form but my lawyer says from what she sees i asked for a vacant position and regardless of me signing the tenancy the original tenancy was suppose to end on settlement which the vendors didnt want to do.

    Has anyone being through this before or any advise for me?

    Cheers,


    Zeeal

  2. #2
    Join Date
    Jun 2005
    Location
    auckland New Zealand
    Posts
    5,236

    Default

    Has anyone being through this before or any advise for me?
    Zeeal if you had a vaguely competent lawyer this would never happen to you.
    You settle and draw the mortgage when the vendor gives vacant possession. You have taken on somebody else's problem.
    On settlement day when the vendor isn't able to give vacant possession you simply don't settle until the property is vacant.
    YOUR lawyer should have done all that.

  3. #3
    Join Date
    Nov 2005
    Posts
    3,286

    Default

    Quote Originally Posted by zeeal View Post
    Hi Guys,
    I was suppose to be settling my 3rd property this Tuesday and asked for a vacant position.

    I was buying this property from a property finder and he was dealing with the original vendor.

    However on Monday when i went to inspect the property one final time before settlement there was no signs of the tenants moving. So i decided that i will sign up a new tenancy starting from Wednesday but i never said that i will take on the existing tenancy.It was suppose to be as if the tenants have moved out and it is brand new tenancy. However it turned out to be different story.

    So i was left to sort out the rent in advance and bond money to be transferred to me from the property manager whom i found did not want to share any information with me at all regarding the property or the tenants as i wasnt the buyer (the actual buyer was the property finder) i was the 3rd party. Now the original verndor/property manager said she will transfer the bond once the outstanding water bill and rent is paid but the fact is i asked for a vacant postion. The tenancy ends on settlement not 2 weeks after.

    After alot of running around on the settlement day i found out that the tenants were not so good and that they were given eviction notice so upon a good phone call to my lawyers i decided i just wasnt ready to settle on that day and that i want vacant postion as requested and decided to stick to that.

    Luckily i managed to get hold of the tenant and get the tenancy form and tore it infront of her telling her we are not settling today and i'm not the owner yet so this tenancy form cant start yet. She agreed happily and i got out of it. Oh yah also when i went to cancel the tenancy she showed me the letter from tenancy tribunal for a court hearing for not paying rent and she tried to convince me it could be due to her complaining about cockroaches.

    A very good lesson learnt there.

    So we never settled on Tuesday but the mortgage has been drawn and now for the short term i have to pay the whole mortgage myself.

    This is my first experience with something like this and it has really scared me i'm not too sure when we will be settling now and am worried as to what if the vendor turns it back on me saying i signed the form but my lawyer says from what she sees i asked for a vacant position and regardless of me signing the tenancy the original tenancy was suppose to end on settlement which the vendors didnt want to do.

    Has anyone being through this before or any advise for me?

    Cheers,


    Zeeal
    Hello zeeal,

    Some interesting issues here that I haven't got time to debate at the moment, so sorry.

    In brief though,

    Vacant possession has been discussed in detail before, so please run a search.

    Too late now I know, but this could have been so, so much easier for you. When you went round on Monday and found the tenant still there all you had to do was ring your lawyer and say 'don't settle'. Also perhaps, ring your bank and postpone drawing down of funds (although if this was not possible you still would probably have received financial compensation for this).

    It was not your problem, but like so many buyers you made it your problem and just complicated everything. (sorry to be blunt).

    Other points of interest...

    Further confusion over who sold you the property. Without going over the 'finder as agent' issue again, a lot may depend on what actually happened. If the finder settled and sold contemporaneously then you bought from the finder, that is clear, and vacant possession should have been given by the finder. If the contract6 was assigned by the finder the matter is less clear about who is the vendor, but probably it is the original vendor. In either case you were entitled to vacant possession.

    By signing up a second TA you have muddied the waters. Have you given up your right to vacant possession? and many other questions arise too. I suggest you read the RTA, especially about ending and starting tenancies and about who constitutes a landlord.

    I agree with pooombah, your lawyer should have protected from this.

    Anyway, an interesting situation.

    xris
    Last edited by xris; 13-04-2007 at 10:21 AM. Reason: typos

  4. #4
    Join Date
    Aug 2006
    Location
    Hamilton
    Posts
    24

    Default

    And Zeeal, don't let it put you off, put it down to learning and move on, I've had heaps of curly situations happen on deals, but they all have ended well and you can look back and think, wow that was easy money really, or a great deal.
    And Poomba's absolutly right, you shouldn't (your lawyer shouldn't) draw down funds until settlement, and thats normally when the purchaser has satified all conditions.
    As it stands now, don't settle until the tenants are gone, and I would instruct your lawyer that when you do settle it's less the interested you've incurred, due to the fact that the vendor has not satisfied there part on the conditions of the contract eg Vacant Possesion.

  5. #5
    Join Date
    Feb 2004
    Location
    North Waikato
    Posts
    651

    Default

    In fact, if the delay on settlement is due to the vendor, then I think the penalty interest listed on the agreement would apply ie 12% (or whatever the figure is).

    The main reason a loan wouldn't be drawn down until actual settlement is if the property is the security to the loan. If your loan was drawn down without settling, then I assume you have offered other security to the bank, or else the lawyer/bank have made a big mistake and given you unsecured money!!!!

    John

  6. #6
    Join Date
    Dec 2006
    Location
    Manawatu
    Posts
    218

    Default

    The S&P contract is quite clear on what happens in these circumstances. I am amazed that nobody reads them and just sign away merrily hoping that all will be well on settlement day. It appears that your lawyer has also not done the neccessary checking and just assumed all would be well until allerted by you. Perhaps the biggest lesson here is that a good lawyer is worth paying for.

  7. #7
    Join Date
    Nov 2005
    Posts
    3,286

    Default

    Quote Originally Posted by Realtorman View Post
    Perhaps the biggest lesson here is that a good lawyer is worth paying for.
    ...and a bad lawyer is not worth paying for, but there isn't much choice in the matter if they invoice you for their time, however badly they misused that time.

    But, I digress.

    xris

  8. #8

    Default

    Thanks guys,
    I would definatley be changing my lawyer for my next property.
    However i have one more question my lawyer has advised me that i'm entitled to interest on the purchase price @ 12% per annum for the period of default less the interest earned on the purchase monies held in lawyers trust account on interest bearing deposit(less witholding tax, Bank admin fees & interest that you will pay on your loan for the default period)

    Can anyone tell me what she means by less withholding tax?

    Will i be ending up paying a huge amount to the vendor and not getting any money at the end of this mess?

  9. #9
    Join Date
    Sep 2006
    Location
    Christchurch
    Posts
    892

    Default

    Quote Originally Posted by pooomba View Post
    Zeeal if you had a vaguely competent lawyer this would never happen to you.
    You settle and draw the mortgage when the vendor gives vacant possession. You have taken on somebody else's problem.
    On settlement day when the vendor isn't able to give vacant possession you simply don't settle until the property is vacant.
    YOUR lawyer should have done all that.
    Actually, Zeeal's solicitors would have sent the mortgage documents through to the bank at least a day in advance (as the bank requires them to). The bank would than have forwarded the money to the solicitors on the morning of settlement. There does not need to be any contact between the solicitors and the bank on settlement for the money to be advanced.

    Therefore, unless Zeeal's solicitors knew of these issues before the money was drawn, I wouldn't be so quick to blame them. From the sounds of it, Zeeal opted to try and fix things up personally rather than tell the solicitors not to settle until vacant possession could be given. So I wouldn't blame them at all.

    I would highly recommend instructing your solicitor not to settle whenever there is a serious problem, rather than trying to fix it yourself. If you don't instruct them not to settle, you can hardly blame them if they proceed on the basis they are going to (ie. drawing down the mortgage).

    Quote Originally Posted by zeeal View Post
    Thanks guys,
    Will i be ending up paying a huge amount to the vendor and not getting any money at the end of this mess?
    No. It works like this:

    The mortgage money your solicitors drew down is sitting in their trust account. It will earn interest until you pay it out.

    You deduct from this interest any associated costs, which here will be RWT, commission (taken by solicitors) and the interest YOU are paying on the mortgage.

    Once the vendor is in a position to settle, s/he pays you 12% pa penalty on the purchase price, LESS the above (interest earned on the purchase money with the things listed above deducted).

    How will work in practice is that the amount you are paying in interest on your mortgage will be greater than the interest you are earning on the money in your solicitors trust account. Therefore, the vendor will pay you 12% pa without any deductions.

    I hope that makes sense.

    Incidentally, as you can see from the above, the contract itself clearly anticipates the purchaser's solicitors drawing down the mortgage and then not being able to settle.

  10. #10

    Default

    I jsut got contacted by the vendor who is overseas and he reckons that i should settle the proprty now as he is having a lot of difficulties getting rid of the tenants. His friend who was organising for the tenants to move out said everything will be fine by today but the tenants have changed their mind and has said we are not moving. Now the person i'm buying from is a property finder and since he said to the original vendor that we will be taking on the tenants, thats why the tenants aren't willing to move and the tenants has been advised by the property manager not to move and listen to the property finder.

    The reason the property finder wants me to settle is so that he can settle with the original vendor and avoid paying him 12% as well as me.

    He has told me to hold on to 8k till he gets back from overseas and after i have settled the property he will get rid of the tenants thats when i can give him the remainder 8k.

    Can anyone please tell me how this will work to my advantage? From what i see once i will settle, the tenants are my problem and not the sellers? Will i have to sign a new tenancy form? I just dont want these tenants at all and dont want anything to do with them but the vendor and his friend keeps on calling me and not my lawyer.

    Also i contacted my personal banker today and she said that since we have drawn the mortgage the title has been transferred to our name.
    I have no idea as to why the mortgage was drawn when we werent ready to settle. I think the bank has taken my otehr 2 properties as security.

    So does that mean we are the owners of the property? If the title has been drawn does that mean i should get the insurance out even though we still havent settled?


    Confused


 

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