Investors don't have to complete purchase of flats

independent.ie/national-news … 53363.html

So they agreed the price and signed a contract. Now that the value of the investement has dropped,they don’t fancy it, and the judge says that’s ok? If the value of property had gone up what would they say?

We’re smart and ballsy.

Well they were as it turns out now. They couldn’t lose! Not bad.

In fairness the judgement appears to be based on common sense. There is no point in ordering specific performance where people will be unable to comply. Read the article in full.

They will have to pay compensation over and above the value of the deposits that they forfieted.

It is the amount of this compensation and the decision on legal costs that will determine the canniness and/or ballsiness of their actions.

Is it likely that the compensation will be related to how much the builder lost?
That option is surely more preferable to the couples, but not necessarily to the builder

(i’m ignoring the obvious ‘obtaining credit/money’ related problems here)

I.e:
Scenario A, specific performance. Builder gets the 2006 price for property, couples get apartment they don’t want, and immediately offload it, crystalising their loss, and generally complaining.

Scenario B, compensation. Builder gets 2010 price from some 3rd party, is awarded the 2006 price less the 2010 price from the original couple, who crystalise their loss without ever actually touching the property, general complaining.

IMHO B is better for the couple because they don’t have to deal with the transaction costs twice, and have the hassle of owning an apartment they don’t want briefly.

Smart and canny!

The key words here are- “investment properties”

So - the mistake made by all those who “agreed to buy investment shares” at the height of the “boom” was to pay money for their shares.

They should really have given an IOU that they were good for the money.

Then when the price collapsed - toddle off to court and show the “impossibility of enforcing specific performance due to lack of adequate funds on the part of a purchaser”.

That’s what investors do , no?

Judgement is common sense. The investors are still going to take a hiding. Builder will pass the debt to a debt collector who will hound them until the pips squeak. It’s a lot easier to squeeze someone for a liquidated cash amount than it is for specific performance of a contract. Nothing to see here.

So why is the Judge getting involved in deciding the level of compensation?

Pre-ruling:
Builder sues to enforce legal contract. Defendant agrees the contract was legal. Judge rules contract law applies. Everyone goes home. Builder sells legal debt to debt recovery agency. Agency seeks recovery greater than the price they paid.

Post-ruling:
Builder sues to enforce legal contract. Defendant agrees the contract was legal. Judge rules contract law doesn’t apply - due to the “impossibility of enforcing specific performance due to lack of adequate funds on the part of a purchaser”. Judge now sets level of recoverable debt. Builder sells legal-beak-specified debt to debt recovery agency. Agency seeks recovery greater than the price they paid.

This doesn’t read like a get-out-of-jail-free card.
Judge simply rules that theres no point in pursuing the investors to fulfill their contracts, as they dont have the money to close.
Common sense.

Now comes the question of how much compensation should be paid.
If the properties were €300,000 and can now only sell for €150,000, then the developer has a strong case to sue for €150,000.
Downshot for the investors may be, they forfeit their deposits, lose the property, and still have to stump up the difference between what they would have paid for it and what the developer can now get for it.

Will be interesting to see the final outcome of this case.

yes a bit too soon just yet to say that anyone “got away” with anything.

Wonder what the wording is in some contracts about “failure to obtain finance”. Obviously no serious seller would allow something too lax and very few buyers in 06 would have worried about it, but I wonder if in future this will creep in? Sellers may be so desparate they may agree to something more along these lines in future?

I agree. These investors will likely be hit for the difference between the peak price and what the builder can shift them for now, so no real escape for them The builder will not be impressed either, because to pursue his damages claim he needs to demonstrate what the real current price is. Let’s say they were asking 400k at the top, then they’re not likely worth more than 150k now. But does the builder really want everyone to know that? How many other units are he and his mates still trying to shift for 300k?

Forcing the investors to fulfil the terms of the contract would have got around this problem for the builders - they could still pretend they’re worth 300k.

It’s not about “getting away” with anything.

It’s about financing of investments/gambling.

People used debt leverage to invest/gamble.

They signed legal contracts.

Their investments/gambles turned sour.

Debt leverage is what’s busting them.

Legal contracts can now be challenged because “investors” used debt to finance their gambles?

Sorry, but “flippers” turning up in court pleading poverty should be told: “A contract is a contract, there’s the door!”

It’s not about pretending what they are worth.

It’s about the builder making units available in 2006 at a certain price and creating an “invitation to treat”.

Canny McSavvy made an “offer”.

Builder “accepted”.

A legal contract was formed.

Now in 2010 Canny McSavvy claims inability to pay “due to lack of adequate funds”.

Cry me a fucking river.

Well luckily that’s why we have a court system that examines the facts instead of just having a local guard verify the signatures are authentic before delivering a beat down.

These contracts should have had a “dependent on getting a mortgage” clause in them in the first place and the judgement reflects that basic safeguard. You can’t compel people to do something they’re quite literally unable to do.

What do you propose? Should NAMA lend them the money and then make them repay it?

The investors in this case fully accepted that the contract was valid. They claimed inability to perform owing to lack of cash.

Frank Clarke should assess damages according to each specific set of circumstances in that case as he says he will.

It is a victory for common sense but the costs for the three couples will be considerable, Commercial Court scale and all that.

These cases date back to 2008

ARANBEL LIMITED 2008 8805 P ARANBEL LIMITED -V- DARCY & ANOR
ARANBEL LIMITED 2008 8806 P ARANBEL LIMITED -V- MC GIVERN & ANOR
ARANBEL LIMITED 2008 8807 P ARANBEL LIMITED -V- DARCY & ANOR

It seems that they all had the same solicitors through the process but changed them twice. Byrne Wallace solicitors represented them all in the end. Having one set of solicitors and barristers makes sense where the defendants are all using different variants of the same excuse. One case has not been heard yet and instructively they used a different solicitor.

How many of these properties are now in NAMA :wink:

Is Irish law driven by precedent? Does it mean it is now the law? Does it mean that before it was legal to enforce impossible orders? If so then it is good ruling, now lower instances of court can rule reasonable verdicts. Who knows maybe “specific performance” was just easier to be won in court than compensation for damage, so choosing the later was not rational decision for developers. This could fix this possible deficiency.

I

Yes, what would they say and do if property price went up but developer could not provide them with houses. There is always counter party risk when contract is signed, and in most legal systems only possible orders would be enforced.

irishtimes.com/newspaper/ire … 18800.html

More from that article:

They were fucking canny “investors” Judge!!!

What about all those poor canny share investors Judge???