OTP Rescission Decision

We bought an OTP apartment (I know, right ) at Rouse Hill, NSW initially due for completion end 2018 with sunset clause mid 2019. Last week the agent rang requesting that we sign a document agreeing to extend our sunset clause to end 2021. Apparently this is for them to meet bank obligations as development has been delayed to 2020.

I asked our conveyancer why on earth I would sign/agree to this when prices have since levelled off anyhow (we bought Jan 2017), and she was shocked that I would consider NOT signing, as I may miss an opportunity.

Is their extension request grounds for us to rescind?

 

It depends on your contract - some sunset clauses are for the developer and some are for the purchaser &/or the developer. There are almost none for just you as purchaser.
Get specific legal advice, NOW.

 

How did you find your conveyancer?

 

This happened to us for the same reason and we rescinded the contract as we didn't want to wait and prices were also starting to fall in that area. Our lawyer checked the technicalities of this before we proceeded. We got the full deposit back but had to pester the real estate agent for months before they released it

 

So agent said we can't rescind because the letter sent to us is an "offer" to extend the sunset date to meet financial obligations of bank - not a chance to rescind. Conveyancer said she can send a letter asking if they'll consider allowing us to rescind. When I asked agent why on earth I'd sign the letter, he said that if the values go up (because train station will be open by then) and it's past the first sunset date, then the developer can rescind on us!!! OMG we are such dupes!

 

Who recommended the conveyancer you are using?

 

You don't have a right to rescind now but you know the project isn't going to be completed by the sunset date so you just have to hold tight and terminate once the sunset date expires if you want to get out of the deal.

It is normal to ask buyers to extend the sunset date where required by a bank, however you are under no obligation to agree to it. Banks usually require a circa 6 months buffer after the anticipated date of practical completion for sunset dates if they are going to fund the project.

Also, you could try and use it as a bargaining tool. Reduce the price by $10k and you will agree...probably a nasty thing to do though.

 

Why would it be a nasty thing? By extending the sunset clause, his deposit is tied up longer and further, and his borrowing capacity is tied up, not enable him to buy other properties if the original sunset clause date expires.

To me developer is a business, so yes make a counter offer with $$ off the price and see what they can do. Better to play hardball than let them run over you.

 

One of the hidden traps with OTP - The date will often be deferred again and again and again and some just jump in and agree. Because they havent sold 80%+ (varies but typical) which the bank will have as a finance condition. And the other is the issue of where your deposit is. Its supposed to be held on trust account. Some will even ask you to allow release of deposits. Never do that without legal advice. That aspect can be a problem and exposes contract holders to loss.

Important you get legal advice and a conveyancer may not be able to provide that. This is a difference between conveyancers and solicitors. The need for ongoing legal and conveyancing involvement does blow out those costs over time. Many swing from a fixed fee basis to suddenly an extensive list of all the extras and the charge for this is over and above.

 

We just used the same conveyancer who sold another (straight forward) property for us. Lesson learnt: get a conveyancer who specialises in OTP. I've bought OTP to live in years ago and it went well; I hadn't realised the different dodgy practices, that have come up in last 10 years because of boom.

 

6 months buffer sounds reasonable. This developer claims financier is asking for 18 months, which, by the time you add in an extra 12 months allowed in our contract "for reasonable delays" that the vendor can't have foreseen (as determined by the vendor's architect), then if we sign the extension letter, we could be waiting until 2022.. Mind you, we've got only $80K tied up in it inc stamp duty and it's unlikely it'll drop hugely in value from the $620K we paid (2 br apartment), especially once station is opened. But that's a long time for circumstances to change hugely, and to affect our borrowing capacity for another property. On other hand, if we sit tight, worst that can happen is that value goes up and builder rescinds on us at sunset, but at least we get chance to pull out ourselves if everything goes bum up and we can buy better at that time. Decisions!

 

Really? Isn't the lesson to get a lawyer instead?

 

Ha! Yeah quite right.

 

Are we talking highrise, pool, gym, etc? How many of those are under construction?

 

Yeah there's a few - I think there'll be a flood over next few years, but it's not massive in Rouse Hill itself yet (plenty in Kellyville/Norwest though of course). It's 4 buildings around a pool and playground, 4 stories high.

 

and what would happen if you told the vendor that you had some issues come up and wanted to delay by 6 months??? im sure it wouldnt be favourable,

the law sux

 

Which law is that?

 

the laws and the indsutry/culture that allows clauses like that to be put in as we ll as become mainstream which clearly favours the developer, yet it should go both ways

or those people that when they signed up they got a certain design ticked off, and 12-24 months later ,the developer decides to make it smaller or remove a garage or bathroom because it doesnt suit them, and the buyer doesnt have any option for recourse, and basically has to accept it or lose their deposit or the opportunity cost

 

Why take legal advice from an agent and one that has a conflict of interest at that.
Have you asked your coneyancer what will happen if you don't agree?