Resale Guarantee for original purchase

The fact that the market value has dropped is not the realisation of the loss but only a paper loss. That is not justification nor a trigger for a buyback.

 

Generally in property a guarantee is used to disguise a sale price relative to its likely value. Of dubious value really. If a tower of apartments was being marketed on this basis and prices crashed EVERY buyer would likely want to opt out. The value of the apartments would plummet as replacement buyers would not be evident. ie its a fire sale. And financially it is unlikely any lenders would allow the developer to fund such a commitment and their own capacity would be rapidly exhausted. The nature of the guarantee needs legal review.

1. Was it a binding contractual offer in writing with specific terms and events ?
2. Is it an option in which case you merely must exercise it (I bet its not)
3. Was its mere puffery by sales staff to induce you to buy ?

I saw this a few years back. A tower was being developed. The sales & marketing was being done by Sample Marketing Pty Ltd (an example) for several batches of units. Then it changed and Sample Marketing 2 Pty Ltd did more and so on. Each company was wound up and sold its rights to fees etc to another company etc. Each marketing company went into liquidation blaming - The guarantee made the company insolvent. At the end any guarantees were worthless as the entity which made it was no longer in existence. A chain of pheonix entities really. The legal costs to pursue assetless entities make it an impossible task.

 

Yep that's what I was saying, cheers!

 

What happens from a CGT perspective when the person wants to sell his property? The overinflated purchase price is accepted by the ATO or they will say "you paid too much or you got a rental guarantee or free car which in fact meant the purchase price was in fact $50k less than you paid"?

 

Market value is generally what a willing buyer will pay
If not market value the market Value substitution rule may apply