Off the plan property investment nightmare

Two years ago we purchased off the plan property investment in Melbourne through a real-estate broker. After delay after delay with the developer they finally titled the land last week.

The real-state broker is now advising that the original builder they were supposed to engage to build our house has gone broke and they cannot find a new builder that can build the house as per the original contract.
Their offer now is to change the original plans and find another builder that can build a similar but smaller house costing the same as the original plans and contract.

My question is can i cancel the contract for the house seeing that the land has titled, get the house deposit back and find my own builder or do owner builder?

 

That is a question you will need to ask a lawyer after showing them the contract.

 

What you'd think is a breach of contract, isn't always as it seems, I could see a line saying "or equivalent"

I'd assume builders going bust is common, have you seen such a clause before all mighty and wise Terry? Just curious so I know what to look out for in the future.

 

What's the difficulty with building *that* house?

 

I'm going to guess the price per square metre the first builder quoted is the issue... and the new builder either cant or wont match it .... so this leaves the developer with two likely choices I would imagine.

1. Offer what they are offering - ie a smaller house or
2. Ask buyers to pay more so that the house you originally contracted for can be built.
Here's the thing though - If they were to approach buyers with an offer to increase the price in order to build the original larger house, and even if buyers indicated they were agreeable, they would first need to rescind the current contract via deed of mutual rescission, before being able to exchange the new contract at the higher price. While they would seek to do these things simultaneously, the reality is it potentially gives all the current buyers an OUT. That is a risk for the developer and I would assume the developers lawyers would be recommending against that option.

On the other hand, if there is a clause within the current contract allowing for 5 or 10% variation to the build , they can potentially try to get away with building a smaller home, keeping buyers contracted to the deal and not giving anyone an OUT.

Seek legal advice. There isnt any other path.

 

Was there a set price for the land, with the build cost added on to make a total ?
I wouldn't be settling for a lesser house, not after being without my deposit for two years !

 

You may not have a choice if the contract allows for a variation of 5 or 10%...which is why the OP needs to seek legal advice on the matter

 

Euro73 is spot on, the price per square metre the first builder quoted is the issue... We signed the contract for a fixed price land and house package. Also the contract does not mention 5 or 10% variation.
Basically we want the same 4 bed house that we signed the contract for, im not interested in a smaller similar house and if the developer cannot find a builder then they should pay the difference with the new builder as the problem is theirs and not mine.
Very frustrating and something new investors should be aware off when purchasing off the plan.

 

Yes, there was a set price for the land with the build cost on top. Im not settling for a lesser house and will seek legal advice.

 

One of my golden, “written-in-concrete” rules of property investment is:

NEVER, NEVER buy property OTF​

We have been on this property journey for 40 years and have seen/heard countless horror stories.

Unfortunately, this looks like another I can add to the list.

I know we all want the property road to be enjoyable and profitable. For many, that is not the case.

@MarleyB, most/all property investors make mistakes. I urge you to work you way through this issue, pick yourself up, dust your off and jump back onto the property investment vehicle as soon as you are able.

The end is worth it.

 

Well definitely this is a hard learned lesson, we are lucky enough that the land price has gone up over the 2 years to compensate for the delays and hoping this will be resolved soon with a new builder appointed and same house build as per original contract.

Otherwise we are also playing with the idea of doing an owner builder if possible and canceling the building contract.

 

Unusual to have a new build house AND land contract. Duty is applied to the final contract value where two individual contracts means only the land is dutiable. And then the legal issue with inability to complete the build may also impact the land. Legal advice on what your contract actually says, is needed.

 

Land has already titled and been all paid for 2 weeks ago. Contract for house was signed and agreed on at the time of land and house purchase and deposit was paid for each land and house separately. So yes they are two separate contracts but final house and land package was agreed and signed with real-estate developer.

 

Was it a 'straw builder' ie had no intention of commencing the build but was on the documentation to help flog the site? ie was this a reputable builder who has gone to the wall?
Did the building contract have provision for rise & fall (being 2 years out there must have been some provision for cost adjustment as the builder wouldn't purchase anything 2 years out).

 

this really doesnt mean anything.

 

The builder introduced to us was a small volume builder, they have gone bust at the start of this year according to their ABN/ACN records. Not sure about provision for rise & fall, will be checked with our legal rep.

 

A solicitor would probably look at the contracts and determine if its still valid. If the contracting party has gone into liquidation it may mean you are free to do as you wish. If the the contract cant be fulfilled it may or may not be valid.

Thats why its called legal advice. They will advise you on the legalities