Condo Contract Question - Defaulting?

[Impulsive Apathy]

If I bought a pre-construction unit, what are the consequences for defaulting on the contract? I would lose my deposit for sure but I cannot find any other information on what the Alberta laws are and what the Condo builders can do. Does anybody have any idea at all?

Can I claim force majeure to get out of the liabilities because of the unforeseen circumstances with the economy from when I initially signed the contract?


Thanks in advance for the help

[BlackArcher101]

Originally Posted by Impulsive Apathy

Can I claim force majeure to get out of the liabilities because of the unforeseen circumstances with the economy from when I initially signed the contract?

Oh wow. You wouldn't happen to be a farmer as well would you?

Edit: Looked into it and found this.
http://dealbook.blogs.nytimes.com/20...-in-recession/
I can't believe Trump of all people says recession can be used as force majeure (only for him though, not anyone else like you).

[Nancy]

Originally Posted by Impulsive Apathy

If I bought a pre-construction unit, what are the consequences for defaulting on the contract? I would lose my deposit for sure but I cannot find any other information on what the Alberta laws are and what the Condo builders can do. Does anybody have any idea at all?

Can I claim force majeure to get out of the liabilities because of the unforeseen circumstances with the economy from when I initially signed the contract?


Thanks in advance for the help

As I understand it: The builder is entitled to the full amount of the contract price, regardless of you personal circumstances or your inability to obtain financing. If they turn around and dump it at a huge loss, not only do you owe them the difference, but you will also owe them interest, commissions, and legal costs as well.

EDIT: Oh yah, and you may want to talk to a lawyer.

[photon]

Originally Posted by Impulsive Apathy

Can I claim force majeure to get out of the liabilities because of the unforeseen circumstances with the economy from when I initially signed the contract?

Heh, I'd like to see a lawyer's answer to this. My gut reaction though is "unlikely".

[DuffMan]

It's weird that you heard stories a year or 2 ago, where house/condo builders went back to the buyer with a new, higher price, before the place was built. Not sure if it works both ways though, where you can tell them the price has now dropped.

[jtfrogger]

Have you read your contract? It may give you an out if you walk away from your deposit. I know someone that did this recently, and it was within his contract.

[Mike F]

Originally Posted by Impulsive Apathy

If I bought a pre-construction unit, what are the consequences for defaulting on the contract? I would lose my deposit for sure but I cannot find any other information on what the Alberta laws are and what the Condo builders can do. Does anybody have any idea at all?

Can I claim force majeure to get out of the liabilities because of the unforeseen circumstances with the economy from when I initially signed the contract?


Thanks in advance for the help

If your contract doesn't have an opt out provision and all of the "subject tos" have been removed, you're legally obliged to complete.

If you don't, it's a breach of contract and the seller has the option of either treating the contract as ended and keeping your deposit as liquidated damages or suing you for specific performance (i.e. you pay the full price) or damages.

As for force majeure, I can't see that flying in any court.

[Winsor_Pilates]

Mike F is right. They have a lot of options beyond just keeping your deposits.
They can sue you for the full amount, and also any additional costs brought on by your delaying completing etc.

Are you financially incapable of closing, or just don't want to because of value? I would be honest and call the developer about it. Sometimes if you have a really good excuse, there's a slim chance they'll work something out with you. Worth a try, but other then that you'll likely have to close.

[llama64]

Condo builder's make me sick.

They use the market as a Force Majeure to get out of their existing contracts just so they can force much higher prices on buyers in a blatent attempt to milk the local realty market. Now that the pendulem has swung the other way, people who signed those ridiculous contracts are now stuck with them despite being in very much the EXACT same position the builders were in when they pulled their crap.

[CFENT]

Originally Posted by llama64

Condo builder's make me sick.

They use the market as a Force Majeure to get out of their existing contracts just so they can force much higher prices on buyers in a blatent attempt to milk the local realty market. Now that the pendulem has swung the other way, people who signed those ridiculous contracts are now stuck with them despite being in very much the EXACT same position the builders were in when they pulled their crap.

We bought some units of the Skytower in November of 2005- right as the boom was taking off. After 180 days the Rockwell Developments sent us a letter saying that they were unable to secure a building permit from the city and sent us back our deposit and told us the contract is now void. In the contract they put an out clause that they could cancel if they could not get permits in a certain period.

These devlopers are smart enough to have clauses to get of the contract for themselves but not have any for the purchaser to get out.

[BlackArcher101]

I don't see how that could be considered the exact same position. Condo builders are in it for the profit. They are a business so of course they will have clauses protecting them. If the cost of business goes up, so does the cost of their services/product, happens all the time. The buyers who get the shaft here are the investors who are treating homes as extra investment income or a business who expect to make a profit, but in reality they are stuck by the same binding rules by those who just want a place to live. Buyers must assume there will be risk.

Don't blame the condo builders for raising the prices and the buyers being stuck with the contracts. Correct me if I'm wrong, but if prices are changed midway through a project, don't they give you the option to get out of it? I know at least some that do.

[Wookie]

Originally Posted by BlackArcher101

I don't see how that could be considered the exact same position. Condo builders are in it for the profit. They are a business so of course they will have clauses protecting them. If the cost of business goes up, so does the cost of their services/product, happens all the time. The buyers who get the shaft here are the investors who are treating homes as extra investment income or a business who expect to make a profit, but in reality they are stuck by the same binding rules by those who just want a place to live. Buyers must assume there will be risk.

Don't blame the condo builders for raising the prices and the buyers being stuck with the contracts. Correct me if I'm wrong, but if prices are changed midway through a project, don't they give you the option to get out of it? I know at least some that do.

Correct me if I'm mistaken. But it seems you're suggesting the developers deserve leeway to build condo's as an investment/business and be protected but not people buying condo's as a business/investment.

I could be totally misinterpreting this?

Now this I'm not interpreting as coming from you, but I've seen it elsewhere. There often seems to be an attitude towards people who bought properties in the past few years as an investment that this boom and subsequent drop seems to be their fault, and any misfortune that falls upon them is deserved.

[ken0042]

Well Wookie- you have to admit that the boom and the subsequent correction that we are seeing is a result of demand exceeding supply to a certain extent, and if there were people who bought property hoping to help push along the demand, and they ended up losing out, I'm not feeling very sorry for them. Any investment involves risk.

What has caught the OP here is that the condo builder had a lawyer draft a legal contract, and either the OP didn't get representation of his own, or that representation was flawed.

When I bought my house, I used a realtor and a lawyer. The realtor went over the purchase agreement as my advocate, and showed me what each part meant. When I bought my property out in Manitoba I also used a lawyer, and paid him some extra cash as this was a "sale by owner" deal, and I didn't want to get shafted.

In my mind the OP tried to save some money by not getting representation, and it has now come to bite him.

I would suggest the OP speak to a lawyer about his options. My recommendation is to look in the power ring for Troutman's post, as I have used his services and he was extremely helpful. If nothing else, better to spend a couple of billable hours with a lawyer to get the info you need, than to just try and do this on your own.

[Wookie]

Originally Posted by ken0042

Well Wookie- you have to admit that the boom and the subsequent correction that we are seeing is a result of demand exceeding supply to a certain extent, and if there were people who bought property hoping to help push along the demand, and they ended up losing out, I'm not feeling very sorry for them. Any investment involves risk.

What has caught the OP here is that the condo builder had a lawyer draft a legal contract, and either the OP didn't get representation of his own, or that representation was flawed.

When I bought my house, I used a realtor and a lawyer. The realtor went over the purchase agreement as my advocate, and showed me what each part meant. When I bought my property out in Manitoba I also used a lawyer, and paid him some extra cash as this was a "sale by owner" deal, and I didn't want to get shafted.

In my mind the OP tried to save some money by not getting representation, and it has now come to bite him.

I would suggest the OP speak to a lawyer about his options. My recommendation is to look in the power ring for Troutman's post, as I have used his services and he was extremely helpful. If nothing else, better to spend a couple of billable hours with a lawyer to get the info you need, than to just try and do this on your own.

I'm not feeling sorry for any of them either. But noticing a bit of schadenfreude and blame vs. empathy.

"it's their fault"
"if they weren't so greedy"

As if buying a property to rent out was "oh so evil"

Perfect example.

I rented my place out while I was living elsewhere. I used it as an opportunity to pay down the mortgage on a place that maybe I couldn't afford otherwise. I'm now living there with a roommate. That's how I make ends meet.

But, while renting it out, the renter had some problems, I tried to help him as much as I could. But it was becoming difficult and I was going to take a financial hit if I was any more lenient (and in the end I got screwed). His take on it, "this is an investment for you, vs. me and my life/ making ends meet"

So, because I was renting it out, I could afford to lose money because, wow, if I'm renting this place out, it must mean I'm rich. Or by buying property with different intentions then living in it, one is screwing someone else out of a home.

Feeling sorry is a totally different thing.

[photon]

I've found that pretty much any time I as a landlord try to go out of my way to help someone, I end up screwed.

[ken0042]

Originally Posted by Wookie

As if buying a property to rent out was "oh so evil"

I guess we were talking about two seperate things.

I was thinking of the people who were buying properties; knowing that they could turn around and flip the place once contruction was complete and make a profit. It is those people who I have little sympathy for; as part of any investment is the risk involved.

If somebody is buying a place with the intention of making it a rental property- that is different in my books because you aren't manipulating the market per se by having so many properties bought and sold.

The flippers were looking for short term quick and easy money and some got burned. The guys buying a place to rent out were looking at a longer term investment; and the fact is if they stay the course they could still end up ahead. Meaning that although they may be down 15% on paper- odds are the prices will go back up and 5-10 years from now they will be back into the making money situation.

[Wookie]

Originally Posted by ken0042

I guess we were talking about two seperate things.

I was thinking of the people who were buying properties; knowing that they could turn around and flip the place once contruction was complete and make a profit. It is those people who I have little sympathy for; as part of any investment is the risk involved.

My original reply to Blackarcher specifically bolded this part

The buyers who get the shaft here are the investors who are treating homes as extra investment income or a business who expect to make a profit

I took that to mean - rent/flip/grow-op what have you all people looking for income/return.

Flippers, do I feel sorry for them? No, but I don't blame them or wish them any misfortune. Which on a whole is what I was talking about.

[Wookie]

Originally Posted by photon

I've found that pretty much any time I as a landlord try to go out of my way to help someone, I end up screwed.

Yup, a wise landlord once told me over PM's that the job of a landlord is to supply a place to live without complications, not to deal with the life problems of the tenant... Wish I could remember who that wise landlord was

[Winsor_Pilates]

Originally Posted by llama64

Condo builder's make me sick.

They use the market as a Force Majeure to get out of their existing contracts just so they can force much higher prices on buyers in a blatent attempt to milk the local realty market. Now that the pendulem has swung the other way, people who signed those ridiculous contracts are now stuck with them despite being in very much the EXACT same position the builders were in when they pulled their crap.

You seem jaded, but this isn't true for most developers.
Very few developers have raised prices after contracts are in place, and it is widely regarded as an offside dirty policy within the industry, as well as not even possible in most cases. You're painting a huge industry with the same brush based on a few lousy developers.
Very few developers will attempt to get out of their existing contracts, because they need those contracts in place for their financing agreements. That's the whole point of selling pre-sale. If they didn't need those contracts in place, they would have built the whole building, and then sold finished product.

For years, investors have made a killing buying and selling pre-sales in escalating markets, and now that the market has turned, people expect to get out? How is that fair?
Investors shouldn't have expected zero risk, and sometime the market will go down. To expect a free ticket out of your contract when you're not happy with the market isn't fair.

Originally Posted by CFENT

We bought some units of the Skytower in November of 2005- right as the boom was taking off. After 180 days the Rockwell Developments sent us a letter saying that they were unable to secure a building permit from the city and sent us back our deposit and told us the contract is now void. In the contract they put an out clause that they could cancel if they could not get permits in a certain period.

These developers are smart enough to have clauses to get of the contract for themselves but not have any for the purchaser to get out.

This often has more to do with Real Estate Laws, then the developer and is generally for the protection of buyers. In BC, the Real Estate Marketing Act enforces that a developer has to secure financing and building permits within 1 year from the original disclosure statement.
If they don't, the purchasers have the option to opt out and get their deposits back, instead of waiting for a project that may never happen.
The key difference here, being you should have had the option. I've never seen an automatic cancelation clause like that in the 50+ developments I've worked with.
For what it's worth, we almost took over the sales of that project, and the developer was an A-hole. I'm glad we're not dealing with that project, and you likely should be too.

[killer_carlson]

There are provisions within the Condominium Property Act to get out of your purchase contract with a developer if you walk within 10 days of signing it (section 13 or so). I haven't dealt with it in a while but there is this relief provided on new condo developments that isn't offered for regular real estate purchases. Check them out.

The force majeure argument is not likely to hold any water. Even if it is, it will be appealed and won't stand up.

Developers will come after you for the difference in what they now sell the unit for vs what you agreed to buy it for, plus the developer will claim (and is likely entitled to) his interest.

Not great news in my opiniion, but that's my 2 cents worth.