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

Premier_2

I think there has been some mis-interpretation here.

The usual position is that a 10% deposit is paid upon exchange of contracts. Sometimes this is negotiated downwards e.g. when a purchaser is applying for a mortgage in excess of 90%. However, a clause is usually included to ensure that the seller obtains at least that 10% either on completion (together with the balance of the purchase price) or immediately the buyer decides they no longer will abide by the terms of the contract they originally agreed to.

The usual position is that the buyer will always lose their deposit when they unilaterally decide to pull out of the contract.

In the above times article, it appears the deposit paid by the Nigerian was for some reason greater than the usual 10%. I believe all that the article is stating is that usually the deposit is lost by the buyer if they pull out (even if the deposit paid was greater than 10%).

The gain of the deposit by the seller does not prejudice his right to claim for any losses incurred by the buyers breach of that contract.

Such losses can include interest due on the amount owed at the completion date. Naturally the seller has an obligation to mitigate his losses. Claiming interest on the amount owed forerver and a day would not be doing that. The seller usually re-sells the property and, if likely to recover, claims the difference in actual selling price (assuming it can be proved to have been sold at best achieveable price) and the original contract price plus costs incurred doing so (e.g. marketing costs, legal costs, interest, etc) but less any amounts already received (i.e. the deposit)

In the above Times article, it sounds as though the Nigerian buyer paid a higher deposit than the costs incurred by the seller because of the Nigerian buyer's breach. What the High Court decided was that Nigerian wasn't automatically entitled to the deposit (or part of it) back even though it was more than the loss incurred by the seller.

Similarly, in a rapidly rising market, a buyer will usually lose his deposit even if the seller then re-sells the property at a substantially higher price, although obviously as the seller will probably not have incurred any losses due to the breach of that original contract would not be in a position to make any further claim against the defauted buyer.

silvercar

Such losses can include interest due on the amount owed at the completion date. Naturally the seller has an obligation to mitigate his losses. Claiming interest on the amount owed forerver and a day would not be doing that. The seller usually re-sells the property and, if likely to recover, claims the difference in actual selling price (assuming it can be proved to have been sold at best achieveable price) and the original contract price plus costs incurred doing so (e.g. marketing costs, legal costs, interest, etc) but less any amounts already received (i.e. the deposit)

Do you know of cases where this has actually happened? I'm particularly thinking of new builds, where the builders may be reluctant to go to court and admit to one, more or all of the following:
a) inflated unrealistic prices;
b) encouraging their buyers to use their own (less than impartial) mortgage advisors, solicitors etc;
c) pressurised selling;
d) quoting unachievable rental yields.

Also where buyers clearly haven't got money, is it worth the sellers taking the 10% and reselling for what they can get or if they go to court the bad publicity may do them more harm than good.

GDB2222

Worth reading the whole judgment here:
http://www.bailii.org/ew/cases/EWHC/Ch/2008/456.html

I will be doing that as soon as I have time, but I MUST do some work instead of posting here!

Premier_2

Thanks for the full details GDB222

Reading through quickly it appears the Nigerian only agreed to a 10% deposit. The reference in the Times article to it being very large was because the property itself was £2.16m.

The basic issue appears to be that the vendor made a substantive profit because of the purchasers failure to complete based around the background of a rising market at the time.

The vendor was entitled to retain the deposit.
The vendor was not entitled to additional costs in this particular case simply because the vendor didn't make any loss overall.

TTMCMschine

I wouldn't worry. If they aren't due to build them until next year they'll probably have gone bust by then.

Most building firms around here are goosed - up to their eyeballs in debt, can't sell what they've already built, & can't borrow any money to finish the rest.

I think they'll be happy to just take your deposit.

Why don't you do some investigating & see whether they're still actually building, if they aren't maybe you could negotiate a way out & get at least some of your money back by getting your solicitor to express concerns about their current lack of funding or some other such line.

GDB2222

Premier wrote: »

The vendor was not entitled to additional costs in this particular case simply because the vendor didn't make any loss overall.

As soon as I saw the date (2006), I wondered whether there was actually any loss.

clady

Thanks so much to all of you who commented! You lot really know your stuff! I feel a lot less worried now but still alittle annoyed at the huge deposit i lost. Buy hey such is life. Would lose much more if i managed to get a mortgage and go ahead and buy the apartment.

silvercar

I wouldn't write off your deposit just yet. Wait and see what happens.

guppy

Premier wrote: »

Similarly, in a rapidly rising market, a buyer will usually lose his deposit even if the seller then re-sells the property at a substantially higher price, although obviously as the seller will probably not have incurred any losses due to the breach of that original contract would not be in a position to make any further claim against the defauted buyer.

Surely if the seller hasn't incurred any loss, but still keeps the deposit, this would be a penalty clause and not legal under the 1973 Unfair Terms Act?

Or is this negated because of the risk the seller has already incurred, given there was no guarantee of the prices rising at the time the deposit was handed over?

neverdespairgirl

guppy wrote: »

Surely if the seller hasn't incurred any loss, but still keeps the deposit, this would be a penalty clause and not legal under the 1973 Unfair Terms Act?

Or is this negated because of the risk the seller has already incurred, given there was no guarantee of the prices rising at the time the deposit was handed over?

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