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#265821 13-Feb-2020 07:15
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A bit of nasty, but legal business in Wellington. Developer claims they had to cancel and relist, or get liquidated.

On the ladder: First time buyer's dream home contract cancelled within weeks of move in date

Stuff by Mikaela Wilkes

A would-be first time buyer who was preparing to move into her dream home within weeks has been left devastated after the developer cancelled the sale and relisted the property for $90,000 more.

Bailey Ross paid the deposit for a two-bedroom, one-bathroom new-build in Tawa, in May 2019.

The $515,000 price was bang on budget and the developers, Tawa LLP, told the 25-year-old sales account manager she would be able to move in by the end of the year, early 2020 at the latest.

Ross had watched her home, one of 22 units in the outer Wellington suburb, be completed. "I could see them, they were practically ready," she said.

The end of 2019 came and went, and the BEO (buyer enquiry over) on the real estate listing for the houses rose to $535,000, then $565,000.

...But then Ross' realtor phoned her with the bad news. Tawa LLP had cancelled the purchase and would be returning her deposit, plus interest.

...A sunset clause in Ross' agreement permitted the cancellation.

Property law expert Joanna Pidgeon said a sunset clause under the Resource Management Act allows both parties to get out of an agreement if the build is not completed by a certain date.

"Sunset clauses are usually there for purchasers' benefit rather than vendors'," she said.

Ross and the developer had signed a sunset clause for September 2019, so either party could back out of the sale if the build was not completed by then.

When Ross' lawyer approached Tawa LLP for an explanation none was given, which isn't uncommon.

...Pidgeon's advice to other first time buyers is to beware of sunset clauses shorter than one-and-a-half, to two years.

"In genuine use, vendors have sunset clauses to get out when they can't finish a build in time," she said. "But it can also be an opportunity to get finance off the back of having you signed up, then terminate and sell for a higher price if the market is moving upwards."


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  #2417042 13-Feb-2020 07:30
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I wonder if the purchases lawyer advised her of the clause and it’s implications ?

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  #2417043 13-Feb-2020 07:37
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Ross should have a crack at her lawyer, who has apparently failed to provide appropriate advice regarding the sunset clause. If the lawyer did provide the appropriate advice, then Ross has little to complain about.





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  #2417047 13-Feb-2020 07:51
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Most sunset clauses I've seen only allow the buyer to get out. I would really question one that gives the vendor a way out.

 

 

 

 

 

 

 

 

 

 

 

 


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  #2417059 13-Feb-2020 08:11
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Personally I would not have signed it.

 

 

 

It appears to be used as a method to have your cake and eat it. I did a subdivision scheme myself and pre-sold both the plots that resulted because it made my life easier when asking the bank for the $150,000 it cost me to do the works required to get title. There was a sunset clause in both sale agreements but it could only be exercised by the purchasers in the event that I did not get title within the specified period. There was no way for me to exercise that right at all.

 

To be honest, it never occurred to me that it could even be done so that I could. In the unlikely event I do it again, I might try it on though...! 

 

It reminds me a bit of gazumping, a perennial problem in a rising house market in the UK.






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  #2417077 13-Feb-2020 08:45
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logo:

 

Most sunset clauses I've seen only allow the buyer to get out. I would really question one that gives the vendor a way out.

 

 

This.

 

I have purchased property off the plans, and the contract has a 'due diligence' clause which allows the vendor to pull out within the first few months if they fail to gain the necessary project capital, resource consent, etc. Beyond that the vendor cannot cancel the agreement, as the sunset clause can only be triggered by the purchaser.

 

I would expect any decent lawyer to raise red flags over any sunset clause that can be triggered by the vendor.


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  #2417083 13-Feb-2020 08:57
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I wonder if all the unit sales were cancelled as it wouldn't make sense if only some unit buyers have to suffer.


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  #2417090 13-Feb-2020 09:05
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Although this is a dick move by the developer, the issue here is that the purchaser’s lawyer has not done their job.

 

Also, there is no company registered called ‘Tawa LLP’, which sounds like a legal entity rather than a trading name. It would be good to understand exactly who Tawa LLP actually is. Doing a bit of looking into it it looks like the underlying company is in trouble, but I haven’t done enough to be definitive about this. It sounds like Tawa LLP is in desperate need for money. 

 

Mikaela Wilkes should do some more work on this.





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  #2417093 13-Feb-2020 09:11
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The project did get derailed early. It seems that completing a factory built house on site means more than one council has an opinion on what is required by Building Act.

"The houses were supplied by Matrix Homes, which was liquidated in December 2018, and Hannah said the subsequent development had been "beset with problems".

"We shipped the units out of the Matrix factory and we've had to complete them on site, which caused problems between two consenting councils."

Edit: in the comments under the Stuff article it transpires that Matrix Homes and Tawa were both owned by Hannah. While it explains why he wouldn't miss any chance to reduce his losses it means that he isn't another "victim" of the circumstances.

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  #2417138 13-Feb-2020 09:24
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BlinkyBill:

Although this is a dick move by the developer, the issue here is that the purchaser’s lawyer has not done their job.


Also, there is no company registered called ‘Tawa LLP’, which sounds like a legal entity rather than a trading name. It would be good to understand exactly who Tawa LLP actually is. Doing a bit of looking into it it looks like the underlying company is in trouble, but I haven’t done enough to be definitive about this. It sounds like Tawa LLP is in desperate need for money. 


Mikaela Wilkes should do some more work on this.



A LLP is a limited liability partnership. It's not a company although some of the partners may be companies


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  #2417145 13-Feb-2020 09:31
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the devil is in the details of the legally binding contract.





Involuntary autocorrect in operation on mobile device. Apologies in advance.


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  #2417394 13-Feb-2020 14:17
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A sunset clause that allows the builder to cancel the contract sounds really dodgy to me. They could decide early on they want to pull out so they can sell for more, and then deliberately delay the build until they can make use of the clause.

 

EDIT: I bet a lot of people don't even get a lawyer to look over the contract.


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  #2417458 13-Feb-2020 15:58
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Paul1977:

 

EDIT: I bet a lot of people don't even get a lawyer to look over the contract.

 

 

I certainly hope not. These types of contracts can be extremely onerous and, aside from the sunset clause, there were a whole lot of things that I wanted my lawyer to advise me on such as:

 

  • Is the developer obligated to insure the property during construction?
  • Is the separate title for the car park correctly reflected in the contract?
  • Can I refuse settlement until titles & code of compliance have been appropriately issued?
  • How much can the developer vary the specifications or size of the dwelling?
  • Are there any easements on the land for access to the neighbouring units?
  • What am I potentially liable for as a member of the body corporate?

You are taking on a huge risk if you don't do due diligence on these sorts of details. Interestingly my solicitor noticed that the contract specified a 9 month warranty period, while the building act requires 12 months - that's the sort of thing you need a good lawyer to pick up on.


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  #2417506 13-Feb-2020 17:06
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Paul1977:

 

A sunset clause that allows the builder to cancel the contract sounds really dodgy to me. They could decide early on they want to pull out so they can sell for more, and then deliberately delay the build until they can make use of the clause.

 

EDIT: I bet a lot of people don't even get a lawyer to look over the contract.

 

 

I doubt you'd get a mortgage without a lawyer. 





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  #2417511 13-Feb-2020 17:11
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Reading between the lines, I think Bailey Ross may have dodged a bullet. It's my guess these apartments will have been finished with cheap fittings/materials in order to complete the project without liquidation. I think they have a potential to cost the owners further down the track.





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  #2417547 13-Feb-2020 18:09
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logo:

 

Most sunset clauses I've seen only allow the buyer to get out. I would really question one that gives the vendor a way out.

 



Clauses that allow the vendor to cancel late in the contract are sadly not rare.

At the height of the Auckland property boom there were a few developments were contract cancelation was triggered by non completion by the sunset date. Developers completed 99% of the build, and waited for the clause to trigger before installing the last fixture...


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