We received instructions from a property developer that had sold a development for approximately $13m plus on an extended settlement, at the height of Sydney’s property boom. The purchaser was unable to raise the funds to complete the purchase and our client terminated the contract. When the property was re-listed on the market, its value was well under $10m.
We commenced proceedings in the Supreme Court, seeking damages and, in the interim, to freeze the assets of the purchaser. Purchaser’s might incorrectly assume that their exposure for not settling is the deposit that they have paid. In reality, the vendor can seek to recover the actual loss incurred – which in this case would be closer to 30% of the purchase price.
When purchasing a contract on extended settlement terms – it is important to carefully consider your financing arrangements, as a bank’s lending standards can change without notice – and you could be up for serious exposure, particularly in a falling real estate market. It is important for charities to have sufficient governance procedures in place to ensure that any decisions made relating to investments are appropriately scrutinised, with the decision-making process clearly articulated in the charity’s records. We assisted the charity in responding to the ACNC, which included drafting an investment policy which would set out a process to be followed for all future investments.
