Im at the end of a carrying out a small subdivision, registration should be reached by Christmas (all going well). My quandary is this, I pre-sold 2 of the blocks prior to starting civil works and the timeframe has blown out by many months. In this time the blocks have increased in value to the tune of $100k each. The Contract is written such that either party can pull out without penalty. $200k is a lot of money but morally I don't know if I could do it. Am I being foolish for passing this profit to the Buyer or am I right to stick to the deal? What would you do?
What sort of contract allows either party to recind without penalty? If you're a true developer, recind & resist but your reputation will be tarnished.
I Im a first time developer, developing my PPOR. The contract was subject to registration by a certain date which has now passed and the extension agreed will pass in the next couple of weeks. I was firm on not pulling out but after talking to people they all think I’m being too kind and not thinking like a “professional”. I keep wrestling with it in my head. Mainly because the costs blew out, I’m up for $70k in extras but then I also think I’m so close to it all being over which will be a relief and allow me to relax over Christmas without all of this hanging over my head
If the other party agreed that you could pull out without penalty then they were willing to take the risk. What if the market went down, don't you think they would have pulled out to save a loss?
That's exactly right. The clause was added for the protection of the Buyer to pull out if we couldn't get to registration by a certain date but obviously with the market going crazy they were more than happy for us to extend that time period.
The clause was put in to protect the buyer in case you couldn't get registration by a certain date.....and you now can't get registration by that date? Top that off with it costing an additional $70k to what you originally planned? If it was the buyer who wanted that clause, then I'd be pulling out as it's a risk that they take.....on the other hand, if it was me that wanted that clause put in, then I'd just suck it up.
I'd be doing what's in the best interest of the project. Your costs blew out too. If you can pull out and get 200k more then that's what I'd be doing. When the tables are turned, no one will be looking out for your needs above their own. If the market had turned for the worse, you can bet your bottom dollar they'd have pulled out leaving you to lick your wounds.
Or go to the buyers and discuss. You estimate that it is costing you an additional $70k, so go to each and say it's now cost you considerably more, so offer the option of them paying an additional $50-70k each or you may enact your right to withdraw. That would be a fair and reasonable way to go about it
Get good legal advice. You can’t simply drag out the process to avoid fulfilling the contract because prices have risen.
I'm not dragging the process out. It has taken far longer than initially estimated by the Civil Contractor. Our contract was 12 weeks, we are at week 33.... and still going. An additional 3618m3 of fill (level 1 compaction), incorrect council sewer as cons which meant a redesign by the hydraulic engineer and amendment to council application etc etc. stop works for that was 6 weeks. Unexpected rock - trenches of 130lm took 4 times as long due to rock breaking. What was mean tot be a simple job has been anything but.
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