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9 October 2017

Developers failing to complete property purchases

Chris Twaitsposted byChris Twaits Partner

Developers failing to complete property purchases

There have been recent widely publicised examples of buyers failing to complete the purchase of a property on the contractual completion date.

Often this is in cases where a developer buyer has used a company specifically formed for the purposes of buying the property (a Special Purpose Vehicle or ‘SPV’).  In these cases the seller is often left with a relatively small deposit and no real ability to take action against the SPV which is likely to have little or no assets.

Sellers should try and protect their position in a sale transaction by considering the following points during the legal process:

  1. Consider if the deposit being offered by the buyer on exchange of contracts is sufficient.
  2. In cases where the deposit offered is less than 10% of the purchase price, checking that the sale contract includes wording requiring the buyer to ‘top-up’ the deposit as soon as it fails to complete.  This wording may have limited value where the SPV has little or no assets, but it is still worth having.
  3. Considering if it is appropriate for a parent company or director’s guarantee to be provided to back up the SPV’s obligations in the sale contract. 

If you would like to discuss your legal options with our commercial property solicitors in Bournemouth please contact Chris Twaits on 01202 294 566 or email christwaits@steeleraymond.co.uk.

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