Property Developer pulls out of house purchase 2 days before completion. Absolute nightmare.

RoyallyFlushed

Hello everyone, new user in a desperate pickle and urgently needing advice.

TLDR Version: Property Developer exchanges contracts on house sold at normal not development price and standard contract. Has 6 months to arrange finance. Cancels 2 days before completion citing lack of funds despite advertising everywhere they're highly successful and buying / selling other properties. Old woman caring for disabled son left completely screwed with house purchase falling through, multiple expenses and extreme stress and worry.

Detailed version.

Background.

Got involved with a property developer a few years ago as we have a house with a few acres of land in the middle of a picture postcard village. Long story short it all fell through due to the start of covid / lock downs, the developer not having funds to put in an appeal (despite promising he would), massive delays on his end in applications, etc. Took ages to finally get released from the contractual agreement.

Registered with an Estate Agent once freed of contractual obligations to sell the house and land normally at a price without development potential, and stated to the agent that we didn't want to get involved with any more property developers. Got quite a few offers very quickly, and then the first offer came back with one above our original asking price, but wanted an immediate decision. We accepted.

Contracts Exchanged mid February 2022.

We found a nice new build and reserved it. In the process of exchanging contracts we discovered that the offer for our house and land was from a property development company, and that all the things told to us when they viewed were false (one of the Directors pretending to be a private buyer). Not pleased we complained to the agent, who has some business with them regarding other house sales. Agent told us that because of some legal loophole they weren't technically a developer on their records so didn't have to inform us at the time. Tuned out at the explanation as it seemed a stretch to me. Was assured by agent they were a legitimate outfit with good credit checks. Given that the Estate Agents are a nationwide outfit and have a good reputation (for an EA), we accepted their word.

Our solicitor was more suspicious as the developers were using a newly set up limited company for the exchange. Not wanted to start the whole process again and lose out on the new build, we accepted, but were dubious and not happy at all.

10% deposit received from the development company which was then used for our 10% deposit on the new build. Delays from the developer on exchange cost us an extra £10,000 on the price of our new build. Developer was fine with protracted date on completion due to having to wait for the new build to be completed. Standard contracts with no development clauses, etc.

Cancelled at end of day on the 22nd August 2022. Completion date on 25th August 2022.

Received call from solicitor that the buyer had pulled out! He's surprised the estate agent hadn't contacted us already. First reaction is complete shock, then anger! Were surrounded by boxes and half of our furniture has been skipped as we were planning on buying new after the move. Gas, electric, post, internet, council tax, you name it has been arranged to be moved to the new address. Removal costs down the drain. Massive stress.

Ok, it's strictly 3 days before, but given it was the end of the working day, and we couldn't cancel anything as everywhere was closed I call it 2!

Activity from 23rd - 24th August.

Nightmare cancelling everything. Lost removal fees, which were a lot, as we have a lot of books and other stuff to move a considerable distance. Agent, solicitor and everyone are shocked and very apologetic, saying this is incredibly rare, especially so close to the moving date. Estate agent says that the developer told them it's cancelled due to not being able to raise the funds, and their ambivalent about it with no apology. Can't / won't disclose much about them, as they're selling a house for them currently, but promise they'll not do business with them in the future. I'm sceptical.

The Property Development Company.

Played internet detective, and the development company is boasting on their website, facebook, twitter, etc of having at least £20m+ in development contracts. Their holding webinars, hosting an investor event in a month's time at a prestigious venue with some recognizable names attending, providing consultancy advice, advertising for properties to buy in the area, etc. They're incredibly active at the moment. The controlling Director claims to have a private property portfolio of 50+. Seeing the Directors post their smiling faces on their business facebook page about how successful and amazing they are while were in worry stress city makes me want to punch the monitor!

The Directors have a load of limited companies on company house, as they set a new one up every time for each property deal. All have the same Directors and share allocation, with a more established company also owned by one of the Directors having another even share, giving him controlling interest.

What really gets my goat is that the Directors boast about how much they care about disability issues, but are fine dumping on an 80-year-old woman in poor health who looks after a disabled, severely immunosuppressed (covid / flu deadly) son with a stress aggravated condition. That's me. They were fully aware of these facts both from their viewing and the estate agent. Not to mention I'm sure they knew they weren't completing well  before we were informed and had 6 months to arrange finance.... Anger rising again.....

Loads more details I could mention about them, but I hope the picture is fairly clear.

Current situation on 25th August.

Sorry for the essay, but had to get it off my chest!

In limbo land now, our solicitor is serving a notice to complete today, and were waiting to hear back from the builder regarding the new house we had set our hearts on to see if some extension agreement can be made. While he's sympathetic, I somehow doubt it stretches to the deposit, the increase in it's value over the last 6 months and the money we paid them directly on extras like an upgraded kitchen they'll now pocket. Mentioned he has to discuss it with his partners in their development company, so probably no chance. Will see if they serve notice on us today, which I assume will be a black mark on our credit rating, etc and possible legal action, through no fault of our own.

Raising the full purchase price in 14 days would be extremely difficult, and will involve friends and family which gets incredibly complicated. Both of us have low incomes and needed the extra money released by downsizing to a much more energy efficient house, especially with energy prices rocketing and winter coming.

The stress of all this is definitely having a detrimental affect on our health, and I'm very concerned for my mother. The shock and anger have worn off and the thought of now having to start over from scratch with everything boxed up, half the furniture gone and a lots of things that are now needed already given away is very depressing. Not to mention the legal and financial worries on top.

Solicitor and agent have mentioned we have cause to sue, though solicitor isn't a litigation specialist so we'd have to change. Advice on exactly the best course of action going forward would be greatly appreciated.

HampshireH

I have no advice but I am so sorry this happened. That's awful. I would definitely be pursuing costs

macman

You have given a great deal of detail, but, to be frank, a lot of it is not relevant. For whatever reason, if a buyer exchanges and then fails to complete on the agreed day, then he is in breach of contract and, should further negotiation fail, your only course of action is to sue him. Even death does not void the contract. You cannot lose, though whether you will recover your losses is another matter.
Your EA was right: it is very rare, but not unknown. You have my sympathies.

user1977

If the buyer is a shelf company, presumably with nil assets, there's going to be little point in pursuing them.

TheJP

macman said:

You have given a great deal of detail, but, to be frank, a lot of it is not relevant. For whatever reason, if a buyer exchanges and then fails to complete on the agreed day, then he is in breach of contract and, should further negotiation fail, your only course of action is to sue him. Even death does not void the contract. You cannot lose, though whether you will recover your losses is another matter.
Your EA was right: it is very rare, but not unknown. You have my sympathies.

How do you know its a he/him?

RoyallyFlushed

macman said:

You have given a great deal of detail, but, to be frank, a lot of it is not relevant. For whatever reason, if a buyer exchanges and then fails to complete on the agreed day, then he is in breach of contract and, should further negotiation fail, your only course of action is to sue him. Even death does not void the contract. You cannot lose, though whether you will recover your losses is another matter.
Your EA was right: it is very rare, but not unknown. You have my sympathies.

Yes, I apologise for the length. It was quite a cathartic experience once I started to write it all down and couldn't stop.

On the detail of being in breach of contract, what could the consequences of our breach of contract with the builder despite the fact it was not our fault. Is the fact our breach was caused by another party taken into consideration? What effect does being in breach have on credit ratings and other official bodies?

How nasty could they get with us? One would hope that the builders development company would be generous given they're likely to profit considerably from this fiasco, from the deposit, house price rises in the area and our outlay on extras. Sadly, given our experience with development companies to date they seem to have the moral principles of a politician filling in an expense claim.

RAS

I think you need to restate your entire case clearly.

Sounds like you exchanged on your existing property in February, to sell to a developer? Was the completion date set, then, or was it some sort of long-stop arrangement?

Why the long delay in the exchange on the sale?

And exchanged at the same time with a new-build company to buy a new house? 

Is there any relationship between the developer who you sold to and the developer from whom you are buying the new build?

If the developer fails to complete, you can sue for your costs, including losses on the purchase, but there's a risk the developer will wind up the development company. 

housebuyer143

RAS said:

I think you need to restate your entire case clearly.

Sounds like you exchanged on your existing property in February, to sell to a developer? Was the completion date set, then, or was it some sort of long-stop arrangement?

Why the long delay in the exchange on the sale?

And exchanged at the same time with a new-build company to buy a new house? 

Is there any relationship between the developer who you sold to and the developer from whom you are buying the new build?

If the developer fails to complete, you can sue for your costs, including losses on the purchase, but there's a risk the developer will wind up the development company. 

They don't need to explain it clearly, it's all there. As you do, they exchanged on both properties ready for the new build date. 
Developer since changed their mind and decided it's better to just drop out.

Now they want to know what liability they have to their onward which they have committed to buy but can't afford.

Doozergirl

RoyallyFlushed said:

macman said:

You have given a great deal of detail, but, to be frank, a lot of it is not relevant. For whatever reason, if a buyer exchanges and then fails to complete on the agreed day, then he is in breach of contract and, should further negotiation fail, your only course of action is to sue him. Even death does not void the contract. You cannot lose, though whether you will recover your losses is another matter.
Your EA was right: it is very rare, but not unknown. You have my sympathies.

Yes, I apologise for the length. It was quite a cathartic experience once I started to write it all down and couldn't stop.

On the detail of being in breach of contract, what could the consequences of our breach of contract with the builder despite the fact it was not our fault. Is the fact our breach was caused by another party taken into consideration? What effect does being in breach have on credit ratings and other official bodies?

How nasty could they get with us? One would hope that the builders development company would be generous given they're likely to profit considerably from this fiasco, from the deposit, house price rises in the area and our outlay on extras. Sadly, given our experience with development companies to date they seem to have the moral principles of a politician filling in an expense claim.

It has no effect on credit rating.  No one has  given you credit.  

You need to sue the developer for all your losses.  You keep their 10% but sue for your lost deposits and extras and any other reasonable costs associated with the failure to complete.

It is likely that the new build developer would sue you for any remaining costs above the deposit and paid for extras, though as developers there will be no onward purchase and if prices have risen they won't incur a loss via a reduced sale price.   

If they do, you pass it on to your failed buyer.  

Here's another question.   Do you have it in writing that you didn't want the EA to sell to a developer?  Or any of this subsequent correspondence where the EA says they didn't know (but confirms that there was instruction not to).  

I wonder if it is worth a complaint into them in the first instance, and subsequently to whichever Ombudsman that they are signed up to.  They should not be ignoring instructions.  It doesn't sound co-incidental that the developer was pretending to be an individual and the EA is working for them on other things.  

eddddy

Doozergirl said:

You need to sue the developer for all your losses.  You keep their 10% but sue for your lost deposits and extras and any other reasonable costs associated with the failure to complete.

It sounds like the problem will be that the developer set up a limited company specifically to buy the OP's property:

RoyallyFlushed said:

....the developers were using a newly set up limited company for the exchange. 

And I suspect the limited company has no assets. So trying to sue them might just be a waste of time and legal costs.

Depending on what exactly happened, there might be scope to report the company's directors for misconduct, in order to get them disqualified as directors - so they cannot do the same thing again (so easily). Perhaps the threat of that might even make them pay some compensation.

pretamang

What does your solicitor say about the limited company?

Since it was a brand new company with no assets did they secure a guarantee from the top company to cover any losses?