Metropole - does not end up proceeding with purchase still have to pay sucess fee?

Hi guys

Just wondering if we can get some advise or if anyone has been in same situation whilst waiting for advise from our solicitor. Engaged metropole to assist in finding us investment property.

They found us a house and have given us a quote to reno the house. Now the valuation from the bank has come at 10k less than what the price of house + reno. The contract subject to finance is due next tuesday, 19th dec.

In the meantime, another opportunity has presented itself to buy a house as our PPOR but with big land that we might be able to use the land for subdivide etc in the future. Therefore we then made decision to cancel metropole purchase since we haven't got the finance approval anyway and gone ahead purchasing this other property as our PPOR.

When we notified Metropole of this, they are adamant that they should be reimbursed their sucess fee of 2% based on the following clause:

Clause 4 states that, should you proceed and purchase a property that we submitted to you, we will be remunerated with a success fee – which we both agreed was 2%.


Now i understand that any advise here is not a proper legal advise and that we should obtain advise from our own solicitor, which we have done, but waiting to hear back from.

Just wanting to get an opinion of where we stand and wondering if anyone has ever been in same sitiation. If you dont ask you wont know right? Thanks in advance

 

Is that the exact wording of Clause 4? Is the property you intend to purchase one which they, "submitted to you"?

A lot of these types of clauses in real estate related contracts are actually worded such that they'd be awarded a success fee for any property you purchase during a given engagement period. I've heard stories suggesting that they are quite enforceable and Metropole doesn't seem to be the type of business that would waive it.

 

From the wording of that clause if you do NOT proceed they are not entitle to a fee.

But it sounds like them paraphrasing the clause and not quoting it.

 

To me that reads as they need to have submitted the property you're buying to you, which doesn't seem to be the case?

Post the full clause up and it may become clearer.

 

The full clause reading the following

I understand that should I proceed and purchase a property submitted to me, Metropole will be remunerated by me with a "success fee" of 2%+GST of the purchase price of the property or properties purchased by me.

Now my understanding is since we havent proceeded with the purchase and since we havent even received finance approval yet, we are not liable for any 'success fee'. Am i right in thinking that?

 

On the basis of Clause 4, you're probably okay.

Problem is Clause 7. It suggests to me that if you purchase any investment property in the same state that Metropole is searching for you, you pay the full fee. So the question becomes:

1. Is this property you want to purchase in the same state?
2. Is it an 'investment' property?

Keep in mind that there doesn't appear to be any definition of what is or isn't an "investment property". Presumably it's any one that you don't move into as your PPOR, but that could be argued.

 

Yes i had a read of that clause too. The property that we are buying is in the same state but we are buying it as our PPOR, as we will be moving and living in it as we have just sold our current PPOR.

 

The question would then be is such a clause enforceable?

 

If we are buying a PPOR not investment property, am i correct in thinking that clause not applicable?

When Metropole mentioned to me about that clause i told them that we are buying PPOR not investment property, and since then they have been trying to argue with the basis of clause 4 not clause 7

 

So to clarify the property that they are presenting to us lets say property A, is investment property. But we have decided not to go ahead with that property A and instead selling our current PPOR to purchase property B that we will make our PPOR.

The date of subject to finance of property A is next tuesday. And we have not got the confirmation that finance approved for property A yet although the broker said should be no problem.

 

My layman's opinion is that you're probably okay, but be prepared to defend it (time, stress and possibly some money).

 

Thanks. I have a feeling that might be the case. Once my solicitor advises on where we stand, might try negotiate something. I am aware they have to be reimbursed for their time and effort, just not 2% of the property price...

 

Are you able to get out of the current purchase though? If they're doing the finance for you, and you can qualify for the loan, you may find it hard to get out of the purchase.

 

Yes we can...the finance is not in house, they referred us to a broker which i assume metrople is getting some referral fee from.

 

I'm not going to comment on the 2% but be very careful with the finance clause on the other property. Just because it valued $10k less doesn't mean that you won't qualify for a loan and you might not be able to get out of that purchase as easily as you think you can.

You may in fact have 2 accepted contracts at the moment.

 

Is thr purchase subject to anything else as well, other than finance?

Or I suppose you could tell lender 1 that you have plans to commit to buying a PPOR, therefore your financial situation has changed, which may make actually qualifying for the IP loan turn into a fail.

 

That agreement is pretty basic and getting out of paying more than the engagement fee should be pretty straightforward by relying on clauses 5 and 7.

However as westminster alludes to, your more pressing matter is getting out of the purchase contract if your cooling off rights have expired. You may be bound to the purchase contract if you qualify for finance, and therefore will also be liable for the BA fee.

 

But there is an out... don't quality for finance, easy to do