KevinK Posted November 26, 2009 Share Posted November 26, 2009 Hi. I posted my first thread yesterday and found the feedback very helpful. I am writing this on behalf of a business partner who booked an off plan property about 18 months ago that is due for completion now. The problem is that he cannot get a mortgage due to the stark changes in the mortgage market in the UK. Also when he booked the property (for some strange reason) he informed the notaire that he would not need a french mortgage which apparently waived his right to cancel the contract on that basis. He was meant to be paying stage payments throughout 2009 which he has not been doing (no money). Hence the builder has been adding on interest charges and now want the full money as property is finished. They even asked him to pick tiles for apartment..! My question is what can he do given that he cannot complete and how far can they push him legally given that he lives in UK..? He payed a 15% deposit at booking stage which was approx 40,000 euro. Purchase price of property is 274,000 euro. Link to comment Share on other sites More sharing options...
Pickles Posted November 26, 2009 Share Posted November 26, 2009 [quote user="KevinK"]Hi. I posted my first thread yesterday and found the feedback very helpful. I am writing this on behalf of a business partner who booked an off plan property about 18 months ago that is due for completion now. The problem is that he cannot get a mortgage due to the stark changes in the mortgage market in the UK. Also when he booked the property (for some strange reason) he informed the notaire that he would not need a french mortgage which apparently waived his right to cancel the contract on that basis. He was meant to be paying stage payments throughout 2009 which he has not been doing (no money). Hence the builder has been adding on interest charges and now want the full money as property is finished. They even asked him to pick tiles for apartment..! My question is what can he do given that he cannot complete and how far can they push him legally given that he lives in UK..? He payed a 15% deposit at booking stage which was approx 40,000 euro. Purchase price of property is 274,000 euro.[/quote]Leaving aside the "that wasn't a good idea" aspects, your business partner needs to check the detail of the agreement that was signed. Nominally, he is liable for the full amount plus interest and possibly damages. His best bet would have been (and may still be) to try to sell on the property pronto, even at a loss. The fact that he is in the UK does not invalidate the contract nor does it absolve him from liability. Has he communicated with the builder?RegardsPickles Link to comment Share on other sites More sharing options...
KevinK Posted November 26, 2009 Author Share Posted November 26, 2009 He has communicated with the builder and notaire put him in touch with an agent who is attemping to sell on at a reduced price of 250,000 euro. I think the builder has given to the 31 Dec or else he takes action. Not sure if that is in french courts or UK courts. That is where he is concerned in that if a judgement goes against him in the french courts do they then pursue this through the UK courts. Also how quickly is this likely to happen. I think the chances of selling at such short notice is not good. Link to comment Share on other sites More sharing options...
BJSLIV Posted November 26, 2009 Share Posted November 26, 2009 His best bet would be to negotiate with the developer a settlement that would allow him to walk away. The cumulative legal costs and consequences of being pursued through the english courts could be far more expensive. Link to comment Share on other sites More sharing options...
Pickles Posted November 26, 2009 Share Posted November 26, 2009 [quote user="KevinK"]He has communicated with the builder and notaire put him in touch with an agent who is attemping to sell on at a reduced price of 250,000 euro. I think the builder has given to the 31 Dec or else he takes action. Not sure if that is in french courts or UK courts. That is where he is concerned in that if a judgement goes against him in the french courts do they then pursue this through the UK courts. Also how quickly is this likely to happen. I think the chances of selling at such short notice is not good.[/quote]The builder would chase him through the French courts but the debt would also be enforceable in the UK. I agree with BJSLIV: negotiate with the builder - court action could take some time but will be hanging over your business partner.regardsPickles Link to comment Share on other sites More sharing options...
KevinK Posted November 26, 2009 Author Share Posted November 26, 2009 Thanks for the info. I will let him know as he does not appear too concerned. He thinks that the problem will rest in France and that they will not pursue in the UK. Although he made a very silly mistake in waiving his right to cancel in the event of not securing mortgage finance. I think legally he now owns the property even though he has only paid 15% of the price. Link to comment Share on other sites More sharing options...
AnOther Posted November 26, 2009 Share Posted November 26, 2009 I don't see how he can be said to own the property if he hasn't paid for it !I agree that selling it for whatever he can get is probably his only option but let's hope the property wasn't grossly overvalued initially and he now finds that, distress sale or not, the actual market value is substantially below what was originally agreed. If it's part of a development then it's possible there could be other defaults potentially further depressing values.As for it resting in France I think he can be very assured that a debt of this magnitude WILL come knocking on his door and burying his head in the sand can only exacerbate his losses. He MUST talk to the developer immediately either directly or through a bilingual solicitor. It depends on the wording of the contract of course but even if the developer found a buyer I'd be surprised if he would be legally able to sell the property without some sort of legal waiver which could well include a commitment to cover his losses so doing nothing has to be regarded as the worst possible course of inaction. Link to comment Share on other sites More sharing options...
KevinK Posted November 26, 2009 Author Share Posted November 26, 2009 Agree. He has been in contact with developer Kaufman and Broad. He signed a contract to buy at 274,000 euro and has been told a reasonable sales price now is 250,000 euro. If it does sell at that then his initial deposit of 40,000 euro will hopefully cover the shortfall and costs / penalties etc. Even at that a 40,000 euro loss is hard to swallow. If he had not waived his right to cancel in the event of not securing a french mortgage he could cancel and claim his deposit back. He actually would have made money on the exchange rate fluctuation..! Link to comment Share on other sites More sharing options...
dragonrouge Posted November 27, 2009 Share Posted November 27, 2009 Here as a lawyer and I agree with what has been posted. Forget the 'not a good idea' and the virtues and otherwise of this deal.The simple fact is that your friend has lots of problems on his hands (lots) Yes the French system is long winded but for this sum of money and when (not if) they get judgment they will come knocking on his door in the UK.It will not rest here in France for there are agreements now in place (and have been for some considerable time) whereby judgments are very simply 'sent' between the two countries.I agree that for smaller sums and in differing economic times they may well not chase your friend. But for 274000+ they will and this development does seem to be a developer of some worth.If this goes very wrong and here I am presuming your friend has a home in the UK in that you say that he has not been able to organise a mortgage but of course he may have been trying to arrange a mortgage on the apartment?Whatever they will push hard and if he has assets they may not be there for too long.If I may say so he does appear to have a gung ho approach to this.Sand and head is not good and just in case he thinks they will not come knocking there is a well known legal case where a writ was served on a English guy living in France and who only popped over for Ascot! Link to comment Share on other sites More sharing options...
KevinK Posted November 27, 2009 Author Share Posted November 27, 2009 Thanks for your input dragonrouge. He has been speaking to developer and they are aware that he is trying to resell it. I think they are only giving him to the end of Dec though to sell on. Hopefully if he does sell combined with the 40,000 euro already paid it will cover any shortfall, interest etc.I will keep you posted how this develops as it will serve as a warning to other prospective purchasers to make sure you have finance in place or have the right to cancel in the contract before you sign. Similar problems have arisen in the UK where unconditional contracts were signed 2 yrs ago for apartments booked at the peak of the bubble. They are now ready to complete but valuations have fallen by at least 30% and there are only 75% loan to value mortgages available. This leaves a great big hole for those originally looking to buy with a 90% mortgage of the contract price. Lots of money to try and find and lots of writs to be issued if you do not find it.!! Link to comment Share on other sites More sharing options...
AnOther Posted November 27, 2009 Share Posted November 27, 2009 I find it surprising that this has got to the end game if he has not been making the staged payments. Link to comment Share on other sites More sharing options...
PaulT Posted December 16, 2009 Share Posted December 16, 2009 Think the 250,000 euros that the estate agent is quoting might be a little optimistic.....From my reading properties are taking longer to shift as Brits etc are not buying, except for one or two. Plus, who pays the asking price? Also if a prospective buyer gets wind that a quick sale is required then the offer price will be a lot lower.Being harsh, it does sound as though the person deserves all that they get - also makes me wonder what sort of business person they are if they cannot manage a relatively simple transaction of buying a property and not ensuring that they can complete the transaction.Paul Link to comment Share on other sites More sharing options...
mint Posted December 16, 2009 Share Posted December 16, 2009 You're not being harsh, just telling it as it is.When one goes in for this sort of transaction, the first principle must be to leave plenty of margins? Link to comment Share on other sites More sharing options...
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