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  1. #1
    Join Date
    Jul 2005
    Location
    Christchurch
    Posts
    735

    Default Help Needed for a Sticky Situation

    Hi Team

    I need some advice for a friend.

    They have an unconditional contract on a house that as yet does not have title. The house was subdivided off and they were to purchase the house on the new section. Title through in 4 weeks or so.

    However since first entering into the contract their situation has changed dramatically and they can not afford to purchase it. Firstly the house is not worth the asking price, but my friends were in a situation that they needed to purchase it. Probably worth at least $50K less

    Secondly there are things that have not been done to the property that should have been done. These things were only verbally agreed upon.

    A deposit should have been paid but was not paid due to these things not been done, but it has been demanded by the RE agent. The RE agent is also the developer of the property.

    Another problem is that the same solicitor is acting for both parties.

    These people are living in the property and paying rent on the property.

    The 2 parties are also acquaintances from days gone by and know each other relatively well although the relationship is breaking down fast.

    I know this does not look like a great situation and have told them so. I have also told them to tell their lawyer immediately and not waste anymore time. I am just after some good honest, hard hitting advice to give them. And possibly a lawyer who can untie this messy situation. They also know they have created the situation.
    Last edited by Monkeyboy; 25-07-2006 at 08:45 PM.

  2. #2
    Join Date
    Nov 2005
    Posts
    3,286

    Default

    Hello MB,

    From what you have said it sounds like ‘tough on your friend’. He has confirmed unconditional and is therefore obliged to settle on the agreed terms. If he does not he will be in default. The vendor is similarly obliged to settle on the agreed terms which would presumably include giving clear title, which seems not yet to have been struck.

    Just some thoughts from me:

    a/ A little odd, if not, in my opinion, unethical perhaps, for the same lawyer to be acting for both parties.

    b/ The fact that he thinks the house is only worth $50,000 less than the agreed price is guesswork and irrelevant.

    c/ If it is currently worth $50,000 less on the open market then all I can say is: ‘That’s life”.

    d/ The fact that the vendor is a RE Agent should not be relevant if it was all done above board at all times.

    e/ The verbal agreements count for nothing, except possibly in the sense that the REA/vendor needs to be seen not to have abused or smirched his position, although this is probably unlikely. If a commission went through his office though, as it appears it may have done, then more probing questions still may need to be asked.

    f/ And finally, a quick word not to your friend but to the vendor and all other vendors reading this. The vendor, as a REA especially, should be holding his head in shame for failing to do this: GETTING A DEPOSIT ON ACCEPTANCE! How many times have I laboured this point in the past on this site? And here we have yet another example of the undeniable importance of doing just that.

    Not much help Michael I know, but thought I’d just jot a few thoughts down. Have you any more information about this situation?

    xris

  3. #3
    Join Date
    Jul 2005
    Location
    Christchurch
    Posts
    735

    Default

    Cheers Xris

    Knew I could rely on you for some honest answers.

  4. #4
    Join Date
    Apr 2005
    Posts
    2,699

    Smile

    there are some situations where a contract is not binding.

    And there are ways to break a contract as long as both parties agree upon the terms.

    Have you tried asking the REINZ of their opinion on this matter?

    Lately they seem keen to keep their nose clean.

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

    Default

    I don't see the problem actually here. If no deposit paid then just walk off. The vendor will have to sue which simply won't happen. And unless I am mistaken, (Xris can correct me here), the developer can't sell without CCC so any work that needs doing will have to be done before settlement could occur anyway. Just walk and advice your solicitor of this fact. The likelihood of retribution is minimal and if it did happen, you are buying yourself years of time to deal with it anyway.

  6. #6
    Join Date
    May 2005
    Posts
    1,070

    Default

    The Vendor only has to produce Title not Code unless it is a specific condition in the contract. But I agree with Poomba. Just tell your friends to move to a new flat and walk away from the deal. It is very rare for a vendor to sue for Specific Non Performance. Its just not worth the legal fees , especially if there is no way the purchaser can pay anyway. The Agent made a very rudimentary mistake in not getting a deposit. And, change Solicitors. It is highly inapproriate for the lawyer to act for both.

  7. #7
    Join Date
    Feb 2005
    Location
    Auckland
    Posts
    795

    Default Two people can play the same game

    I concurr with Poomba.

    Legal may be one thing but 2 people can play the same game.

    The builder cannot on-sell the property to another purchaser unless he walks away from the original deal with your friend.

    The vendor would certainly have to have his CCC in place first, and thatís a mined-field that can be argued or used in your friends favor.

    Because your friend is dealing with the Vendors lawyer, Vendors Real Estate Agent, Vendor/Developer, it all sounds like he getting bias advice on the side of the sellers.

    A good lawyer acting for your friend can help frustrate the matter and drag it out for a couple of years or so.

    There is no-way that the developer wants to get stuck with his capital on this property for such a lengthy period in a legal battle, especially with no deposit paid out. People involved in the building project want to get paid and the developer doesn't want to pay unnecessary holding cost for too long.

    (It was a little different with Jonah Lomu ex-partners case in Wellington because big $$$$ were involved, and that dragged out for years anyway.)

    If the agent really wants his commission that badly he will have to sue the vendor and not you. (Next time the R/E Agent wants the deposit refer him to your friends new lawyer and cease further direct verbal communication.)

    Whatever the event,
    1 Don't go paying any deposit.
    2 Go get your own legal advice.
    3 Go get some sleep.

    Good Luck

    Cheers Ron

    PS - the above should not be taken as correct and is my opinion only, independent legal advice should never-the-less be sort.

  8. #8
    Join Date
    Nov 2005
    Posts
    3,286

    Default

    Some great comments here. Dean’s post is exactly the point. The purchaser can just walk, leaving the vendor in an unenviable and unpleasant position. Steve G’s post (in another similar thread running at the moment about blank S&P agreements) is also excellent in that it brings everything back down to commonsense and working with people, which is what business is all about.

    Just a quick one on deposits for those who cannot see the point and are viewing the matter from a blinkered one sided position only.

    If you are the vendor it is in your best interest to get a deposit on acceptance. This is the standard/default time to receive it (not on confirmation), as stated on the S&P. To do otherwise (such as on confirmation) involves the vendor’s contracting out of the standard condition in clause 2. If anybody has an issue with that or thinks that it is an unnecessary ‘trick’ by the RE agent, then I suggest you take it up with the Auckland district law society which drafted the standard S&P, not with the agent or the REINZ.

    If you are the purchaser, you will want to have as many terms and conditions of the contract in your favour as possible, which is only commonsense. Paying a deposit on confirmation is better than on acceptance, but not as good as paying no deposit. The purchaser should try to get as many conditions in his favour as possible, even perhaps a purchase price at say 50% of market, or payment due one year after possession or vendor finance at 1.00% and so on. The more the purchaser pushes his luck the more he runs the risk of the whole thing falling to pieces around him as the vendor quickly starts to regard him as nothing more than a time waster.

    Again, commonsense in each situation needs to play its part.

    xris
    Last edited by xris; 26-07-2006 at 12:22 PM.

  9. #9
    Join Date
    Apr 2005
    Posts
    2,699

    Cool

    It is not unusual for a real estate company to be involved in many legal disputes at the same time.
    It is unwise to bet that a real estate company will not use the courts to settle a disagreement over a contract.

  10. #10
    Join Date
    May 2005
    Posts
    1,070

    Default

    "The vendor would certainly have to to have his CCC inplace" Not necessarily true Ron. Many houses are sold without (my mum just bought a bach at Snells beach like this- its code compliant now) but it is risky.And valuers dont like it. You are right in that the contract has to be cancelled before he can on sell.And actually before he can keep the deposit.


 

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