Off-plan investors legally bound to buy-to-let
- 15th September 2009
- Buy-To-Let Property News
Frustrated buyers told to pay agreed price for off-plan buy-to-let even though values have plummeted.
Recent judgements have ruled against the buy-to-let investors reneging on off-plan contracts, forcing them to pay the full amount initially agreed for the property.
Such off-plan contracts were offered during the height of the housing boom, with investors believing the value of the property would rise by the time the build was complete.
However, the sharp fall in prices left many investors seeking to break their contracts.
The problem was made worse by the withdrawal of 90 percent mortgages, which has left buyers without the funds to complete on the original deals.
There were initial hopes that buyers would be able to just lose their deposit, but, after recent court cases, City law firm Wedlake Bell has warned buyers may be forced to stick to the deal.
Jeremy Raj, head of residential property, Wedlake Bell stated:
“There is a worryingly widespread and entrenched belief among buy-to-let investors that if they decide to withdraw from a purchase for which they have exchanged contracts that only their deposit is at risk.
“The legal position is quite clear. They are legally obliged to complete on the transaction. Damages are not even restricted to the difference between today’s market price for that property and the price they contracted to purchase at.”
Mr Raj advised it might be best for investors to reach a settlement with the developer out of court, so it would not have an effect on the individual's credit rating.
They are legally obliged to complete on the transaction.
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