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Property Development

 

What happens when a purchaser caveats the property they are buying?

Property vendors are anxious to know what happens when a purchaser registers a Caveat over the property they are selling under a Contract for Sale.

They ask: Will the Caveat derail the sale and what should I do? This is a guide.

First: Why has the purchaser registered a Caveat? If it is because they have released the deposit to the vendor or if settlement is deferred beyond the standard time, then it is perfectly justifiable for a purchaser to register a Caveat, provided they have been granted a 'caveatable interest' in the Contract for Sale.

Second: How does the Caveat affect the vendor? Anyone searching the title will see the Caveat - if they are a lender, they will not lend more money to the vendor; if they are another purchaser, they will not enter into a Contract of Sale with the vendor; unless the Caveat is removed. So a Caveat restricts the vendor in refinancing or re-selling the property.

Third: Is there a dispute with the purchaser? If there is no dispute, then the purchaser is using the Caveat to legitimately protect their interests, and will come to settlement with a Withdrawal of Caveat. But if there is a dispute, the purchaser is using the Caveat as a bargaining chip against the vendor. If so, the vendor needs to take action.

Fourth: What action can a vendor take to remove the caveat? The process is called lapsing the caveat. The vendor serves a lapsing notice which gives the purchaser 21 days (in NSW) (14 days in Qld) to apply to the Supreme Court to maintain the Caveat on the title. If the purchaser does nothing, the Caveat will be removed from the title by the Lands Registry.

Fifth: What happens if the purchaser goes to Court? For a vendor, the most significant part is that the purchaser must 'proffer an undertaking as to damages' which means that they accept responsibility to compensate the vendor for all losses, if the court agrees to maintain the caveat on the title until the dispute with the vendor is determined by the court.

In a recent case before the Supreme Court of NSW, the purchaser applied to maintain their caveat. But when the moment came, they refused to accept responsibility for losses the vendor might suffer. As a result, the Court ordered the Caveat be removed and the purchaser pay the vendor's legal costs of going to court.

For my case note click Will a purchaser's caveat stand without an undertaking as to damages?


 

The news is all bad for Timbercorp investors

Timbercorp investors lost their investments when Timbercorp collapsed in April 2009.

But the investors did not lose their liability to repay their loans with Timbercorp Finance. The loans remained due and payable with interest.

For a while, KordaMentha who were appointed receivers of Timbercorp Finance took no recovery action, as they waited for an investor class action to be concluded.

Then, when the class action failed, they took recovery action, but were stayed pending a High Court Appeal which found that the investors could still defend the recovery claims.

But now, the Supreme Court of Victoria has shut the door on those defences, and the investors will have no choice but to pay up or go bankrupt.

For my case note, click Timbercorp investors have failed in their ‘no loan’ defences to loan recovery claims


 

Good news at last for Great Southern Plantations Investors - Bendigo Bank loan recovery claims can be beaten!

Not a lot has gone right for investors in the 43 Agricultural Investment Schemes promoted by the Great Southern Plantations Group between 1998 and 2008.

They invested in timber, beef cattle, wine grapes, almond and olive projects. Yes, their investment was tax driven - the money invested was tax deductible immediately. But it was also an investment - they expected to receive their money back and good profits on their investment over the 10 to 12 year term of the project.

Many investors used borrowed money to fund their investment. They took out a loan from Great Southern Finance (another group company), which then on-sold their loan to the Bendigo and Adelaide Bank. Click for more


 

Is a caveat good security for an investor in a property development?
Investors can make good profits by investing in a property development. A common situation is a land owner who owns land which is ripe for subdivision. But they are missing one vital ingredient - the money - to obtain the approvals and to carry out the site work. Click for more
 

 

How property developers can profit from using vendor finance.
Is there some way we can use Vendor Finance by which we can ensure sales and that both the Vendor and Buyer are happy?  Click for more


 

Two Property Developers hit the wall – after clutching at straws to forestall possession orders on their properties
Property developers are known to use ingenious arguments to forestall possession orders sought by their lenders, after the lender calls up the loan. Click for more



 

Joint Ventures for Real Estate Investment and Development
If two people combine their knowledge and their money in a property venture, they will often achieve more as partners than they would achieve on their own. Click for more

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