House developer gone into administration

pjw1592

Hi all,

I started the process of buying a new-build property in 2020, and the developer went into administration in August 2021. The remainder of the building work was then taken on by a financial investor, and the build has been making good progress since.

I spoke to someone at this company today, who said that their intention was to sell the development to another company imminently, and that it is likely that the new owners of the development will choose to make these properties into rentals, meaning I would no longer be able to purchase the property.

My question is this: will I be able to recover legal fees that I have incurred since the start of the process? And will I be able to recover the reservation fee for the property? I'm in the fortunate position that I have not exchanged on the property yet, but would like to limit the financial impact on myself! This has turned into the purchase from hell!!

Thank you for your thoughts!

Thrugelmir

Recover your costs from whom?  Anything expended so far is most likely lost. You have no relationship with the new owners of the development. 

user1977

If you haven't exchanged then no, you can't recover your legal costs no matter what's happened to the vendor. In theory you'd be owed the reservation fee, but I expect you're just an ordinary creditor in the administration of the original developer, so there's probably going to be nothing available for you.

pjw1592

Thanks for your replies. This is what I suspected. 

I guess I’m just infuriated because I’ve spent so much money on legal fees, whilst the original developer knew that this was likely to happen (the build has been delayed due to a lack of funds for materials on their part for some time!), thus they have knowingly wasted my time and money. 

Thrugelmir

Catch 22. Until contracts are exchanged and a purchase committed to. The developer will have struggled to obtain further finance. 

Crashy_Time

Bust? I thought the property market was supposed to be booming?

eddddy

Crashy_Time said:

Bust? I thought the property market was supposed to be booming?

There can be incompetent companies in every business sector.

A business sector might be booming, but a poorly managed company might still be unable to make any money.

Before offering on an 'off-plan' property, it's probably worth looking at the track record of the developer and/or the people running the company.

I recently came across a development by a new developer with no track record. They went bust because they made a complete mess of the build.

Some of the houses looked finished -  one was even dressed as a show home.  But they had breached their planning consent, and they had breached building regs. 

So they went bust and the whole development was sold to another developer. The new developer had to apply for new planning consent, underpin the brand new houses, and partially demolish each house and rebuild it, to make it compliant with building regs.

GDB2222

How did you pay the reservation fee? If by credit card, you may be protected under the CCA. If by debit card, your bank may still protect you. 

Legal fees have just gone, I’m afraid. However, surely none of those compare with the rise in house prices whilst you have been waiting?

lookstraightahead

pjw1592 said:

Thanks for your replies. This is what I suspected. 

I guess I’m just infuriated because I’ve spent so much money on legal fees, whilst the original developer knew that this was likely to happen (the build has been delayed due to a lack of funds for materials on their part for some time!), thus they have knowingly wasted my time and money. 

Loads of vendors do this, whether they are property developers or not. Until the law changes it is what it is, unfortunately.

saajan_12

Whatever your contract was (reservation / exchanged etc) the first issue is the bankruptcy. The investor would have simply bought the asset(s) and the proceeds of this would go to pay the developer's creditors, starting with the secured people (who hold collateral) first. You don't have a contract with the investor, only the bankrupt investor, so you're now a creditor of theirs.

If you had exchanged, then you'd be owed your deposit + any losses to buy elsewhere (eg extra legal fees, price difference, etc etc). As you've just reserved, the legal fees are incurred at your risk until the point of exchange, so you're only owed the return of your reservation fee. However practically, you'd claim these from whoever's dealing with the insolvency, in a queue with everyone else they owe money to eg materials suppliers, utilities providers, workers, others who have exchanged, etc etc. As an unsecured creditor, you're likely to get pennies on the £.. so prob not even worth chasing. 

Crashy_Time

eddddy said:

Crashy_Time said:

Bust? I thought the property market was supposed to be booming?

There can be incompetent companies in every business sector.

A business sector might be booming, but a poorly managed company might still be unable to make any money.

Before offering on an 'off-plan' property, it's probably worth looking at the track record of the developer and/or the people running the company.

I recently came across a development by a new developer with no track record. They went bust because they made a complete mess of the build.

Some of the houses looked finished -  one was even dressed as a show home.  But they had breached their planning consent, and they had breached building regs. 

So they went bust and the whole development was sold to another developer. The new developer had to apply for new planning consent, underpin the brand new houses, and partially demolish each house and rebuild it, to make it compliant with building regs.

Yes, I suppose if the biggest property developer in China can go bust anyone can?