The failure of a class-action suit against a Sydney developer has left thirty-four property buyers out of pocket and devastated.
The buyers took property developer Kaymet Corporation to the New South Wales Supreme Court after it used a sunset clause to to cancel contracts signed between 2009-2010 for between $370,000 and $600,000. A sunset clause is supposed to protect buyers in the event that the developer does not complete the project, allowing them to be released from the contract. In this case, the buyers argued that the developer did not complete the project on time on purpose, as property prices boomed.
The Wolli Creek apartments that were once worth $500,000 in 2010 are now worth $900,000. The developer is estimated to make an additional $6 million from the project.
Justice Stevenson found in favour of Kaymet in a judgment handed down on Tuesday, saying it had not breached the terms of the contract by rescinding the contracts and refunding buyers their deposits.
“It is common ground that the apartments are now worth more than the contract price,” Stevenson said. “However, it is no longer any part of the plaintiffs’ case that the defendants deliberately delayed work on the project so as to be in a position to rescind the contracts and sell into the rising market.”
The judge considered Kaymet Corporation’s argument that they hadn’t deliberately delayed the development.
One of the members of the class action against the developer says she has lost any chance of being able to enter the Sydney property market. “It took me seven years to save that deposit and I could not believe my luck when I bought that apartment,” she said. “Now the money is not really worth anything in Sydney and I’ve lost most of it through this court case.”
Kaymet Corporation said that the class action had not been necessary. “We tried to give them $2m to settle the matter with them and they didn’t want to settle,” a spokesman for the company said. “They said, ‘No, we want everything.’ We said OK, let the court decide.”
Asked whether, had the market fallen or stayed flat rather than rising by as much as 80 per cent, Kaymet Corporation would have allowed the buyers to go through with the purchase, the spokesman said: “That’s a question I’m not going to deal with.”
In addition to almost $800,000 in legal costs, the group have been ordered to pay costs for the developer, which could bring the total bill to well over $1 million.
The NSW government is considering making reforms to the Conveyancing Act 1919 to prevent what it calls “exploitative practices”. The proposed reforms include allowing only the purchaser to rescind off-the-plan contracts, and requiring the vendor who terminates and resells under a sunset clause to pay damages equal to the difference in sale price between the two contracts.
The group of buyers have 28 days to file an appeal, and they say they will consider it. In the meantime, the proposed reforms to legislation have come too late for them.
Before you sign any contract, make sure you seek legal advice. Here at Mitchells Solicitors, we advice our clients never to buy off the plan because the of the legal pitfalls that can occur. This is just one particular example of how purchasers can lose thousands of dollars.
If you need advice on signing a contract or a property dispute, contact us today for your FREE, 10-minute phone consultation.