Bought An Apartment Off Plan That I Can't Get A Mortgage For!

neverdespairgirl · 15 October 2008 at 2:35AM

I had a look at the case, the facts of which are set out quite clearly at the start of the judgment:

Chief Ajibola Anthony Aribisala ("the Purchaser") is a Nigerian businessman.... In 2006 he tried to purchase the leasehold of two properties from St James' Homes (Grosvenor Dock) Limited ("the Vendor") at Grosvenor Waterside, on the banks of the River Thames in London. One was a penthouse which he intended to use for himself and his family when in England. The other was a studio which he planned to let or, at some stage in the future allow his son to use.
2. The claims in the action arise from two contracts, each dated 14 July 2006, by which the two leasehold properties were agreed to be sold by the Vendor to the Purchaser for an aggregate purchase price of £2.16 million. The aggregate 10% deposit, which was payable in two instalments of 50 per cent each under the terms of the two contracts, was therefore £216,000. The contracts were in each case in identical terms.

The case therefore involves transactions in a rising, not falling, market. It was a 10% deposit, but because the flats were so expensive, the deposit was massive.

The buyer didn't complete on time, or when a notice was served on him, because he couldn't raise the finance.

The case sets out the default rule for contract property cases, as stated in the Court of Appeal in the case of Omar v El Wakil [2001] EWCA Civ 1090

Arden LJ went on to say at [36] that she would "start from the position that the deposit should not normally be ordered to be repaid." She asked whether there were mitigating circumstances and concluded that there were none. In so doing she concluded that

"It is also irrelevant that Mr El-Wakil has not sought to establish that he has suffered any loss as a result of the abortive Corringham contract: the parties agreed that the £110,000 was a deposit."

The judge considered the point you raised about penalty clauses, which should answer your question:

I was referred to some authority on the nature of deposits. It is clear that they are different in kind from liquidated damages clauses, and are not subject to the rule that they are void if they operate as a penalty. In Linggi Plantations v Jagatheesan [1972] 1 MLJ 80, Lord Hailsham, giving the opinion of the Privy Council said

"It needs to be pointed out that the law relating to the forfeiture of deposits has always been treated as entirely distinct and separate from the learning introduced into English law by the distinction between liquidated damages based on a genuine pre-estimate of the loss likely to be suffered in event of a breach and a penalty where equity came to the rescue of the obligee on a bond or other contractual provision imposing a penalty under a contract where the penalty exceeded the actual damage."

And this case is one where the seller made a big profit re-selling AND got to keep the deposit:

Ninthly he relies on the fact that the Vendor made a profit from the Purchaser's breach of some £366,000 on the resale of the properties. This, for the reasons I have given, is a factor I can weigh in the balance: on its own it is in my view inadequate to make the case a special one.

So it's really completely different from the OP's case.

red · 15 October 2008 at 8:52AM

i would do a couple of things - firstly arm yourself with a good property lawyer. it is worth finding someone you can talk to so that when/if you need to get advice you know where to go rather than starting the search at that point. most solicitors will talk through your problem, give you a few alternatives and let you go away and either come back when the situation develops or when you think you want to move things forward yourself.

also, try to get in touch with the developers...a lot of people are in the same position as you, and whilst you could lost the deposit, in this climate, it is unlikely that they want to penalise you or find a way of suing you for the loss they would incur by your personal circumstances forcing you to rethink...they'll be much more interested in trying to help you find a solution.

finally, go see a fsa - it may not be as bleak as you think. in any situation, i would urge not to overstretch yourself, and if this purchase is too much, then you need to find a good exit strategy.

guppy · 15 October 2008 at 9:41AM

neverdespairgirl wrote: »

It's not a penalty clause, as the rules for property deposits are a bit different under the 1925 Acts.

Thanks, just googled it

silvercar · 15 October 2008 at 10:20AM

One of the points made by the judge in the case was that there wouldn't be hardship suffered by either party. In the case of someone being financially stuffed by the loss of a deposit, there is the chance that a judge could rule that the deposit should be returned.

The other thing to consider is the position of the developer. For a property worth say 200k, the developer will have the right to keep the 20k deposit. If a deal falls down because the buyer coan't raise the mortgage but could raise a lower amount, a developer may be prepared to sell for less. If the buyer could reach say 160k it means the builder gets most of his money, can shut the sales office and move on. In this market it is probably easier than remarketing the property in the hope of getting a higher price.

stuffedbywimpey · 3 December 2008 at 1:28PM

I went to see george wimpey that I was a teacher and wanted to buy a flat but had no deposit.

The sales assistant at the time told me the flats were being sold for 300k each to which I responded there was no way I could afford to buy one.

She then explained to me that she could give me 15 percent off making the price just 250k avoiding the expensive stamp duty, I then carried on and insisted that I had no deposit how could I buy this flat?

She then told me that the bank would value the flat at 300k on its completion and lend me up to 90 percent of this so that I would get 280k which I could give 250k to george wimpey and keep the rest.

I said I would think about it after which she continued to call me every single day harassing me asking me why I wouldn't want to have 20k in my pocket for free. In the end I agreed and gave her my credit card details which she took 2500 on.

Within a week she phoned me and said that if I didn't give her a further 10 percent that I would lose my 2500. At this point I told her that I never had that money and had only agreed to buy based on the fact I had no money. She said I needed to put 10 percent more down and legally exchange contracts. After she realised I didn't have the ten percent she offered me exchange bond and said don't worry this is an insurance policy so we can carry on.

I filled out all of the forms, and duly exchanged not realising what I was committing to. The solicitors I used, silvers, now silvers arch did not tell me of the liabilities that could arise from this exchange bond.

6 months later Rene had left the site and I was receiving more calls from george wimpey asking me if I had a mortgage. I told them that I never had one and then they asked me about the deposit. To which I responded that I had no deposit and told them what rene had told me. To this they responded that I could not borrow that much and that they had never even sold and of the flats there for 300k in the history of the site (even though this was my contract price). They told me I had better find a deposit and fast, and that if I didn't then they would draw down on their bond and bankrupt me for their loss of income.

At first I didn't understand what they were talking about and then later I felt very cheated, george wimpey had lured me by inflating their sales price 15 percent, made me formally exchange by threatening to make me lose my deposit if I didn't. Failed to explain the complexities of ebond and and if I didn't buy they would come after me for 25k and then bankrupt me.

As a teacher working for very little pay, this will ruin me, george wimpey have been completely ruthless since they got the bond in their hands.

Having spoken to experts on this matter they have stated that:

1) George wimpey misrepresented the sale by inflating their sales price and the rental values then discounting them to still unrealistic levels in order to lure me in as a buyer, apparently this is a tactic they regularly use. I thought I was getting 15 percent off when in reality I wasn't getting anything off, it was on this basis that I got involved. I was unable to do any due diligence because you cannot have a survey or valuation done or even get a mortgage for a flat that is almost a year away from being built so was very vulnerable.
2) George wimpey explained to me how I could buy the flat with no money because it was worth 15 percent more then I was buying it for. They now deny they said this and that it is mortgage fraud.
3) George wimpey knew full well that I could NOT complete especially as I had been very open that I had no deposit, yet still made me sign the ebond, this was so that they could conspire against the bond company and receive 10 percent of the value of their sale even if I didn't buy.

George wimpey at altius has acted fraudelently in many ways:

1) By misrepresenting the sale
2) By making me take out the exchange bond, knowing full well I could not buy the flat, their intention was to defraud the exchange bond company all along by using me as a pawn.

I have also contacted the fsa, as;
1) Exchange bond never advised me I could be liable for 25k in the event I didn't buy the property
2) Exchange bond never told me that the value of the property may go up or down or might now be worth what george wimpey said it was
3) Exchange bond never advised me of the fact I might not be able to finance the property or of any of the pitfalls

I am now forming a lobby of innocent people who have fallen victims to this type of scam and have found george wimpey to be perpetrating this on a very large scale. Can anyone else who has been done by this scam please contact me via this thread?

Can anyone out there help me?

neas · 3 December 2008 at 1:41PM

Its so easy in this world of ours to trust unequivically everything someone says... to be lazy and not research, to get conned into believing that 30k of mortgage debt is 'something for free'.

I Will cry at night that you are part of the population instilled with the responsibility of teaching my future children...

Ohh I will weep.

silvercar · 3 December 2008 at 2:01PM

stuffedbywimpey, you should consider action against your solicitor.

Wimpey were sales people; there job is to make a sale.

Your solicitor is acting for you - or should have been. Why did silvers allow you to exchange with no deposit and no chance of getting such a large mortgage?

pinkshoes · 3 December 2008 at 2:57PM

StuffedbyWimpey: As a teacher, one would presume that you would have basic common sense to tell you that with a teacher's salary and no money in your bank account, you can NOT buy a £300k flat...

Your solicitor is perhaps the one at fault, for not explaining the meaning of exchanging contracts. (Although again, surely there is some common sense involved here... otherwise what would be the benefit of exchanging contracts???) When did you involve the solicitor, and what questions did you ask them? Did you discuss all your finances with them, and explain the deposit situation, and tell them how much you earn?

Even with a 10% deposit, you'd still require a salary of around £60k to £75k to buy a £250k house!

GDB2222 · 3 December 2008 at 3:01PM

Stuffed, leaving aside the sermonising, the obvious thing to do right now is to file for bankruptcy.

silvercar · 3 December 2008 at 3:37PM

1. Contact your solicitor, he got you into this mess he should now help you out of it.

2. Contact Winpey, tell them you have no deposit and they should resell the property.

3. Wait and see what Wimpey do. They may let you walk away, they may reduce the price of the property. They could threaten to take you to court. Whether they want the publicity of telling a court that they sold the property at such an inflated price I doubt. Chances are they will start to re-negotiate with you. When they find out you have zero chance of a mortgage they will try and resell and get something from you in compensation.

Whether it is enough to make you consider bankruptcy or not I don't know.

Bought An Apartment Off Plan That I Can't Get A Mortgage For!

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