Forced to Buy a Burnt-down Property

L[Deactivated] on 21/03/2022 - 09:52
Last edited 23/03/2022 - 15:24

Hi all,

I am new and joined because I am in a bit of trouble.

I bought a house, and I thought I was lucky enough to win the auction.

However, two weeks after the auction, before the settlement date, the owner had an accident in the kitchen and burnt down almost the entire kitchen. All the cabinets, some walls, and some part of the roof. There is basically a hole on the roof and signs of smokes everywhere. Walls between the kitchen and living room is half gone, the window is broken, and water damage from the fire engine is on every part of floorings and walls. The damage so extensive they moved out straight away.

Now, here is my problem starts.
I then called the real estate agent to cancel the deal. They said they will try their best, calling the owner and see what they can do.
The agent said the owner didn't answer their phone and told me to call my solicitor.

I called my solicitor to cancel the deal obviously.
Here is what he said:
Have you got building insurance? I said no of course, because I haven't settled on it.
My lawyer said the once I won an auction, it is my property, and I have to settle on it, no matter what.
I said, what the F, BS is this??? It is obvious to me that the house is not at all in the same condition it was when it is sold to me. My lawyer said he need to discuss with his colleagues for whatever other legal avenue available. Worse come to worse, he said I lost my 10% deposit. However he also said that if the house then sold at lower price (which is 100% definitely), I may have to pay for the difference. I said again all the swear words known to me. This could costs me hundreds of thousands, plus I can't live there, what am I gonna do with this?

I don't know yet if the owner has building insurance, or if their insurance companies can pay me out.

Sorry for all the rambling, but I just can't.

Edit: 11:41am
Seller's solicitor told mine that the owner have insurance. However it is unclear what will. happen after. I'm a little relieved now.

Edit 11:53 AM:
It seems that the seller meant was content insurance, not building insurance, however it still isn't very clear, and they seek clarification.

Edit 12:05 AM:
Apparently police is investigating this because it involves significant material damage.
Idk what this mean to me tbh.

Edit 2:57 PM:
They definitely have building insurance. However I think perhaps it is still best to back out of the sale, let them deal with the payout and sell it to someone else who can rebuild it. Otherwise, it can be messy for me waiting for them to sort their insurance and transfer the payout to me.

Edit 23/03 3:19 PM:
Vendor's solicitor seems to hold on to the 'unconditional' rule. My instruction to the lawyer is clear, do not settle no matter what. I have told the bank's lender too, and they don't seem to know what to do? I don't know what the vendor want, my solicitor thinks it could be that they want to hold on to insurance payout and full payment too. My solicitor thinks it may gone down to court, but i am more likely to win. I hope this doesn't go on too long, I need a place to live…

Home & Garden

Comments

        • donny donny on 25/03/2022 - 22:29

          it is recommended but its not compulsory. who's your lenders?

          CBA only require me to obtain insurance after settlement only (a year ago in vic)

  • yjun355 on 25/03/2022 - 14:57

    Very strange. You would expect the conveyancer when reviewing contract would pick up things like that and make sure get that removed.

    Good luck. Hopefully it all works out for you

    • dtc on 26/03/2022 - 12:20

      I’m not sure why the solicitor/conveyancer is at fault here, the land sales contract is a standard contract and there is no suggestion that there were additional clauses added. Also the OP bought at auction, bet he didn’t even speak to a lawyer until after he signed the contract. Auctions don’t allow you to negotiate contract changes anyway, they are ‘as is’ transactions.

      So all in all, nothing to do with the conveyancer

      • yjun355 on 26/03/2022 - 15:47

        Actually this would be pre-contact when you get contact of sale and ask your conveyancer to read it. I would expect coveyencer would highlight the risk at least. I know when you buy outside auction, one thing conveyancer do is to make sure seller doesn't use your deposit to buy another property until settlement. This scenario seems something similar. To be honest, you wouldn't think about this if you never heard it before as you assume it voids the contract.
        The professionals involved should really cover this. I'm sure ozbargain community will look out for it in future as they are now aware. I feel for OP and hope it works out

      • john_conner on 27/03/2022 - 14:27

        You should request the contract (eg. Section 32) pre auction to review it. Conveyancer would charge for this though. Usually reviewing the special conditions yourself is enough if you know the standard contract. You can agree with vendor changes to the contract pre auction (e.g. deposit amounts and settlement terms very common) to apply should you win.

  • StonedWizard on 25/03/2022 - 19:56
    +1

    OP you need to find a senior Conveyancers or Solicitor. You need someone who knows this like the back of your hand.

    How much did your lawyer charge you? As I’ve found you get what you pay for with conveyancing.

    Pretend to be a prospective client to some local mortgage brokers and see if they recommended a conveyancer or look at big law firms. They will charge more, but you’d have access to more specialised advice. Spending the few $ now can stop you losing a big deposit.

  • dust on 30/03/2022 - 15:35
    +13

    Hey OP got an update for us?

    • [Deactivated] on 03/04/2022 - 16:45
      +24

      Hey mate,

      So I hired a new lawyer to work alongside the current one. He reviewed the whole thing, and yesterday they came to agreement with the vendor to terminate the contract unconditionally.

      My financial loss, is $2000 for the two lawyers. ~500 for the pest n building inspections prior to auction. I wanted the vendor to pay me for that, but I had enough. He said my deposit should come back in a few days.

      • dust on 03/04/2022 - 16:59
        +3

        Nice. Reasonable outcome. Thanks for the update OP!

      • BigBirdy on 04/04/2022 - 10:44
        +1

        Assuming the seller was using an estate agent, they may still have to pay the agent’s commission, as well as their own legal/conveyancing fees. An insurance repair would probably have been the better outcome for both parties.

        • [Deactivated] on 04/04/2022 - 12:35
          +5

          Yeah thats right, they try to hassle me and keep 10% deposit. I said f off, u get more from insurance anyway. Insurance pays the value as if it is new. And he probably lose 20k. Basically they have no legal grounds. The re agent said to try to keep their commission of 1-2% too, i said to my solicitor to them that's their problem

          • geoffs87 on 05/04/2022 - 11:19

            @[Deactivated]: Thanks for the update OP - what a wild ride, but seems like you got the outcome you were (kinda) looking for.

      • GourmetFoodie on 06/04/2022 - 22:03

        Good news. What a f-ing nightmare!

  • EVL on 11/04/2022 - 17:10

    Just a fyi.
    We just purchased in the ACT by private treaty and were advised to purchase building insurance immediately, so we did same day as we exchanged contracts and made the deposit.

  • sydney_kings on 15/07/2022 - 16:05

    The vendor got off very lightly here.

    The onus is on the vendor to make good the condition of the property to when the contract was exchanged based on the inspections.

    The scenarios is outlined here for NSW: https://rankinellison.com.au/publications/damage-to-property…

    Your lawyers should be making a submission for costs to terminate the contract. Otherwise, the vendor would have needed to make good the damage or settlement can be postponed. This is the reason you have pre-settlement inspection.

    The most suprising thing for me is that the OP is new and came here for advice. There are many other forums - PropertyChat etc that this would've been more appropriate for feedback.

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