Land Sale Purchase - Can We Get out of Contract?

summithunter on 18/10/2019 - 13:20

Hi All,

Just seeking advice from anyone who is in the industry/ from anyone who had similar situation in the past.

So, Me and my brother have purchased a block of land to build an investment property and hold it long term in northern suburbs of Melbourne. This was purchased in June 2018 and projected title date is March 2020. Our intention was build and hold property for long term.

Due to extenuating circumstances(Medical) with my brother’s wife she has been off work and my brother does not want to proceed with additional debt/ loan.

Our plan was to rent the property and share the shortfall which was estimated to be $400 per month ($200 per family) to meet the loan repayments.

Whilst, I can afford a new loan and can settle, I do not want to be over committed and was wondering based on the medical situation if we can get out our contract and get our deposit back. We can provide evidence of my brother’s wife medical situation and she is unable to get back to work in near future.

Has anyone had this situation before where the developer has agreed to cancel the contract and return the deposit? Any advice/ suggestions will be appreciated.

Thanks

Financial

Comments

  • 87percent on 18/10/2019 - 13:22
    +13

    Sad story, but unlikely you’ll be able to get out of a contract based on medical.

    • HighAndDry on 18/10/2019 - 14:03
      +17

      Not even that, it's a medical condition of someone not party to the contract.

  • dcep on 18/10/2019 - 13:23
    +3

    depends on your contract & goodwill from developer (probably none)

    • summithunter on 18/10/2019 - 13:42

      What do i check in the contract? It was purchased unconditionally ! Developer is Oliver Hume.. They have several developments in Melbourne with different branding.

      • HighAndDry on 18/10/2019 - 14:04
        +4

        Oliver Hume has had massive losses in other developments. There won't be anything in the contract allowing you to get out because of spouse's medical issues. If you go to church, start praying. If you don't, maybe start going.

    • 87percent on 19/10/2019 - 13:15

      “Goodwill” and “developer” are 2 words you well NEVER see in the same sentence

  • wheretobuychocettes on 18/10/2019 - 13:30
    +2

    Fairly unlikely - unless the developer beleieves they can re-sell for a better price right now. That's probably your only hope.

    Happened to someone I know. They verbally told developer they'll take 3 lots, then dropped down to 2 few weeks later and developer was pretty happy due to rising prices in that area at the time.

  • thatonethere on 18/10/2019 - 13:32
    +2

    If the land is increasing significantly in value since you bought the developer might let you out. However mostly likely it is flat or down.

    You could get your conveyancer to advise but consider you will lose the deposit and may have additional cost claims against you.

    • summithunter on 18/10/2019 - 13:43

      Prices have not gone down but are flat.. Similar size of land is being sold for only $5K more than our purchase price in the same estate.

      • pyramid on 18/10/2019 - 15:46

        Hunter - Which estate if you don't mind asking.. Element?

  • Seraphin7 on 18/10/2019 - 13:45
    +3

    Talk to your solicitor, but it is unlikely your contract will have any "get out clauses" that cover your scenario. On that assumption you will be effectively obliged to settle or risk being sued for any loss incurred by the vendor.

    As others have mentioned, goodwill on behalf of the vendor is your likely only avenue. That goodwill will likely be tied to whether or not they can get a higher sale price quickly from an alternative purchaser.

    • summithunter on 18/10/2019 - 15:06

      Thanks I will check in with the solicitor

  • sweefu on 18/10/2019 - 14:15

    Just thinking outside the box - could you build a duplex instead of a single family dwelling?

    This could increase rental yield, decreasing your monthly shortfall. It also diversifies your rental income, so if one tenant leaves you still have the other income.

    • summithunter on 18/10/2019 - 15:05

      Unfortunately the land size is not big enough to build duplex also it means it will increase my loan for construction and i dont want to over commit.

  • [Deactivated] on 18/10/2019 - 14:20

    based on the medical situation if we can get out our contract and get our deposit back.

    You won't be able to get out of the contract nor can you get your deposit back.

  • Nutrino on 18/10/2019 - 14:27

    How much was deposit?

  • [Deactivated] on 18/10/2019 - 14:28

    Well your brother might be able to get out his obligation but you would be the suffering party, not the developer.

  • djkelly69 on 18/10/2019 - 15:06

    Have you looked at on-selling the land?

    • summithunter on 18/10/2019 - 15:06

      I cant, as i cant nominate anyone prior to settlement ..

      • iampoor on 18/10/2019 - 15:44
        +3

        You might want to ask. Mirvac has a clause about not being able to nominate anyone prior to settlement but I have seen them be flexible about it.

  • ihbh on 18/10/2019 - 15:15
    +1

    Whilst, I can afford a new loan and can settle, I do not want to be over committed and was wondering based on the medical situation if we can get out our contract and get our deposit back. We can provide evidence of my brother’s wife medical situation and she is unable to get back to work in near future.

    Flip your question around and you'll be able to answer your original question yourself. If the market value of the block had doubled over this time and the seller's wife had a medical condition, etc., could they give you your deposit back and rescind the contract?

    • summithunter on 18/10/2019 - 15:29

      Thanks for your comments but honestly that not the point and there are no if's and but's .. This is life and sometimes we are stuck in uncertain situations.. the whole point of this post to avoid being committed to total debt for 30 years as per original plan.. and looking for legal ways / instances where the developer would buy back from us !

      • ihbh on 18/10/2019 - 15:42
        +1

        What I mean is, if the price had doubled in this time, you could on-sell it for a profit - no need to get out of any contract. However, since you've bought nearly at the top of the market, resale values are likely to be down. But you can't have it both ways - heads I win, tails I don't lose. Have you considered selling it when you can - e.g. when the land titles or when you've built property?

        The best you can do is speak to the developer and offer something along the lines of - can you try to resell the land and I'll cover all the shortfall (capital loss if any, transaction costs, their time, etc.) - obviously this will need to be a watertight contract, because you or your wife might become sick and try to get out of it :). See how much this shortfall is and see if it will be less if you undertake it yourself or through some other party.

        • summithunter on 18/10/2019 - 15:47

          Great..Will consider the alternatives. I did go the estate office and met with the same sales agent ( who sold us the lot and was great at the time) now doesnt seem to care or even bother to have a decent conversation.

          • ihbh on 18/10/2019 - 15:50

            @summithunter: That's because he's already received his commission. But pitch the conversation along the lines of potentially another commission (if there's potentially something in it for him, you'll have his full attention).

            Also, bear in mind that if you take possession of the land and then try to sell, you'll incur significant stamp duty and also conveyancing fees so take this into account in your analysis of the best option for you.

            Good luck. If you need more guidance with the negotiation/option assessment I can help coach you.

            • MrHyde on 18/10/2019 - 19:11

              @ihbh: Wouldn't it be the next buyer who would incur stamp duty?

              • ihbh on 18/10/2019 - 19:15

                @MrHyde: Not if he takes title of the land and then resells (both will incur stamp duty).

  • suti on 18/10/2019 - 16:42
    +2

    Due to extenuating circumstances(Medical) with my brother’s wife she has been off work

    This is why ppl with debt need life and income insurance. It protects you and your spouse in case something goes wrong and prevents your scenario from happening.

    • iampoor on 18/10/2019 - 16:45
      +2

      Maybe the OP's brother can check if his wife's has income protection insurance under her superannuation fund?

  • Camm90 on 18/10/2019 - 18:06

    If they can get a higher price for the land, they might let you cancel the sale, though you might have to forfeit the deposit.
    Though, it's highly unlikely. It's worth getting in contact with them and see what they think but I believe the chances are very slim.

  • HeWhoKnows on 19/10/2019 - 08:37

    Unless you are DEAD then NO!

  • H E B on 20/10/2019 - 01:18

    Not on my end. We have looked at apartments off the plan and prior to settlement found another opportunity which we decided would be better. As the price had gone up significantly the developers were happy to refund the deposit.

    We were prepared and failing that we were originally considering just settling and reselling and undercutting the seller. Had we done that we'd have made minimal loss.

    Real estate agent and land seller's aren't in the business of being nice and understanding. If you cancel a 'sale' that's more work they have to do when they've already got their cut. If they let you off the hook who else is going to try the same thing genuine or not?

    Have a look at your contract see if there are any get out clauses but if you purchased that far ahead in advance there probably isn't. If you are able to settle like you say maybe do so and sell at a loss if it will be lower than the deposit (or negotiate and offer something as a sweetener in return for the deposit) if the market isn't looking good.

  • Sofie519 on 22/10/2019 - 18:17

    the only medical condition that can get you out of an unconditional purchase. would be death (of the direct parties).

    Anyway, your other alternative is to sell the land. Request the vendor to allow a name change to the original contract.
    Effect the transfer on the same day, that is, the developer ends up selling directly to the new buyer you found (your solicitor, will know how this works).

    If property value has increased you may walk away with a small profit without going being charged stamp duty. If property has dropped in value, you still potentially lose less and reclaim some of ur deposit back.

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