Landmark case sees developers awarded damages from buyers who walked away as property values tumbled

Published 13th Jan 2010

Bad news for off-plan buyers trying to escape the collapse in property values who thought abandoning their deposits in new-build developments would clear the slate of a dud investment.

In a landmark ruling last month, a buy-to-let investor was forced to pay damages of more than £130,000 after reneging on an off-plan deal in Plymouth.

Prestige Homes South West was awarded damages after the unnamed investor pulled out of a deal to buy two flats at the 122-unit Zero 4 development in the city.

A further 300 cases are stacking up in the courts in London alone, according to Estates Gazette, with more predicted to follow as developers-hound down punters who thought that putting down a deposit on a property purchase was a one-way bet to riches.

It is, of course, simply the first stage in a contract to buy the property at an agreed price, but now that new-build values have collapsed by up to 40 per cent, thousands of purchasers either can't or won't complete on the deal, leaving developers sorely out of pocket. Irish developer Ballymore has filed more than 130 claims over the past 15 months, Trelford Homes is pursuing 50 defaulting buyers and Imagine Homes, the controversial buy-to-let investment vehicle formerly headed by Grant Bovey before it went into administration, has filed 40 claims.

Since winning the case, Prestige Homes has seen several investors contacting the firm to settle contracts that should have been completed last June.

Matthew Hockin, for the company, said building work would not have started without 55 exchanged contracts. The failure of many buyers to complete the deal has cost the developers dear.

'We had to keep the flats, re-let them and refinance,' he said. 'A lot of people think you can lose your deposit and walk away. But once you have exchanged contracts, you are obliged to complete.'

Source: ' PropertyWeek '

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