Property Developer Wins Test Case Against Investors

A property developer has won a High Court case against property investors forcing one to pay £133,000 after they backed out of an agreement to purchase flats “off plan”.

The High Court, in Bristol, has ordered the person to pay a whopping £133,282 in damages, costs and interest to Plymouth’s Prestige Homes South West Ltd, after pulling out of a deal to buy two Zero 4 flats in Plymouth.

This is one of a number of cases that this property developer is pursuing against people who paid deposits on a number of flats but then walked away from the deals once property prices started to fall.

It would appear that in addition to deposits being paid, contracts were exchanged on an “off plan” basis.  This was common practice during the height of the property boom where investors were agreeing to purchase a property (often at a discount) before the development had started.  The property developer would then secure ongoing finance against the security of knowing that the sales would complete.

The challenge for the hapless investors was that the property values were declining, loan to values were following and many of them were faced with no option other than to pull out of the deal.  Sadly for them, once you have exchanged contracts you are committed to the sale and liable for consequential loss if you fail to complete.

This is not the only case of its kind, among the developers reported to have filed claims are Ballymore, which has lodged more than 130 claims, Trelford Homes, which has filed 50, and Imagine Homes which issued 40 before it went into administration.

There appears to be two types of purchaser affected by this situation; the would be homeowner and the property investor.

However some would be purchasers are putting up a fight. One group has formed the Berkeley Homes Collective. They say they are private purchasers only and that they were ‘mugged by slick sales staff’. They claim Berkeley Homes used “high-pressure sales techniques”.

This could well turn out to be a tough lesson for property investors, one that could end up with many resorting to bankruptcy.

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