I have a friend who recently put in an offer on a property in Perth for approximately $850,000. This offer was accepted subject to finance and a $20,000 deposit was paid to the estate agent. Unfortunatley my friend was unable to get finance for this property and so issued a letter to the agent from the bank stating that finance had been rejected. This letter was sent to the client at 4.45pm on the day of the deadline for getting financial approval. In accordance with the contract that my friend signed when putting the offer in this letter should have been issed to the agent by no later than 4.00pm that day. As a result of this 45 minute delay the vendor has now instructed the agent to not release the deposit.
It appears that contracturally the vendor is within their rights to withold the deposit however ethically it does not seem right. Has anyone out there had a similar experience? Does any one know if my friend would have a leg to stand on legally if they took this matter further?Oh, that hurts! I would think that because "time is of the essence" that your friend is out of luck… Did your friend have a conveyancing solicitor involved? If so, it is the solicitor's duty to ensure all timeframes are adhered to, and I'd be putting pressure on the solicitor.
If I were selling, I'd be banking the deposit. After all, it has potentially lost me the sale to someone else who has now gone on to another property as this one was 'under contract'.
That is why you get your finance conditionally approved before hand, have a good idea as to how much you can spend, what repayments you can afford etc BEFORE you put in an offer.
Yeah, I really feel bad for her, not a great situation to be in. My friend did not have a conveyancing solicitor involved, everything was done through the estate agent. The agent did call my friend at 4.15pm on the day of the deadline to let her know that she had to provide them with a letter stating that she had been refused finance otherwise she would not get her deposit back, however at this point in time the deadline had already passed.
And I thought the QLD REIQ was tough! Are you saying if Finance is not approved the seller can keep the deposit.? (if not notified) What does the contract say?
Looks like they are locked into a binding contract. They may lose more than their deposit!
(all because they did not notify the other party within the agreed timeframe)
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yeah that is exaclty I am saying, however the seller was notified before the 4.00pm deadline, in fact a couple of days before.
I don't know the exact wording but basically it says that if finance is not obtained a letter from the bank must be provided before 4.00pm on the day of the agreed deadline.The seller can only keep the deposit once the contract becomes unconditional and the seller then defaults. In this case I presume that the only special condition was that the contract was subject to finance being approved by date … at time … When that time passed the contract became unconditional and the seller then defaulted. If the seller advised earlier that finance was not approved then the seller would have been entitled to receive her deposit back.
BVG, exactly what time did the fax arrive at the RE Agent's office? There should be a record of that somewhere. Given that there is $20,000 involved I would be chasing every last detail. Why did the bank wait for so long to send the letter? Were there any other conditions, eg building, pest, electrical? If so, what date were they due? If there were and they were due later, then if the inspection clause is wide enough, eg (subject to satisfactory ….. inspection) then I would be paying a lot of money for a very thorough inspection were I would inevitably find something not to my satisfaction and then rescind on that basis.
Other than that, I think your friend is out of luck. I'm sure she is not ready to hear this yet BUT, that is just another very good reason to always use a conveyancer. I am a lawyer by trade but in the numerous property transactions I have done I have never and will never do my own conveyance. I would rather rely on someone else's indemnity insurance.
Cheers
K
Thanks for the detailed response Linar. So just to clarify, even though the vendor was notified before the deadline that finance was not approved, because the official letter from the bank was not recieved before the 4pm deadline the contract has been breached the deposit does not have to be returned.
I'm not Linar but I'm pretty sure that "notice not in the form specified in the contract" (ie in writing by 4pm to the agent or whatever it was) is legally the same as "no notice", and therefore the condition is taken as being fulfilled, and the contract becomes binding. Sorry!
It all depends on the wording of the contract. Let me know the EXACT wording and I'll let you know my thoughts. I say that with the usual disclaimer that it is not intended to be taken as legal advice and that independent legal advice should be sought.
Also, when was the RE Agent advised orally that finance was not approved? Why was the bank so late with getting the letter out?
Cheers
K
I for one would be getting your friends Solicitors to challenge this one and fax the Selling Agent to advise him that the Deposit is not to be released from the Trust Account.
Certainly in Qld close of Business would mean 5pm but i am not au fait with WA Contracts.
Really to be on the safe side he should have terminated at 3.59pm and then applied for a 48 hour finance extension at the same time.
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Maybe your friend could try to get the finance from somewhere else if the contract in fact has gone unconditional? That's if they still are keen on the property. Was it through a bank or Mortgage Broker?
Regards, Ian
Surely common sense should prevail in this.
The guy was 45 minutes late. Big deal. Plus the vendor already accepted the offer ‘subject to finance’ so he had already taken on the risk that it may not happen.
They we’re notified early. This is the reason subject to finance clauses are used.
Yeah I agree. Since I last posted a response on this topic the vendor has contacted my friends mortgage broker to try and obtain information on her financial background, so I am really not sure what he is up to.
gees what a horror story. Mind you that is an enormous deposit! Ive never heard of such an amount. The most i have paid is $1000.
AND how unethical of those people to want to keep such a sum.If everything fails, I would be writing to the local paper telling the story, naming the names and putting my face on today tonite or current affair. It may not get her money back those current affairs shows are great at making anyone look as evil as a hired killer. Let the agent know that you will be talking to your cousin Anna Curran or wotever her name is.
anyyway keep us updated. Hopefully there will be a positive outcome.
I think you have to draw the line somewhere.
If you miss the deadline, you pay the consequences according to the terms of the contract that you agreed to and signed for!
BGV wrote:Yeah that is exaclty I am saying, however the seller was notified before the 4.00pm deadline, in fact a couple of days before.
I don't know the exact wording but basically it says that if finance is not obtained a letter from the bank must be provided before 4.00pm on the day of the agreed deadline.Sounds like your friend did not do as he/she agreed to when signing the contract. They agreed to provide a letter before 4pm which they didn't do, so the contract went unconditional.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Just to keep you all updated, my friend has just returned from seeing a lawyer and as it turns out the issue is not over missing the 4pm deadline but rather that the vendor feels that my friend did not act in good faith when seeking financial approval for the purchase of the property. Basically the vendor believes that my my friend did not try hard enough to get finance, despite trying her bank and a mortgage broker.
According to the contract the offer does not go unconditional after the 4pm deadline but continues until either party terminates it, which is what my friend did by submitting a letter from the bank stating that her finance had been rejected. So now legal proceedings have to begin with the worst case senario being that my friend could be up for a minimum of $10,000 of legal fees for herself, another $10,000 of legal fees for the vendor as well as any pecieved financial losses the vendor might have realised as a result of my friends finance being rejected (i.e value of house dropping whilst waiting for finance to be approved and missing out on other possible buyers).
All pretty scary stuff and certainly a valuable lesson to anyone putting an offer in on a property without being certain they can get financial approval.Sounds like the finance clause may have been left a bit vague. It is a good idea to say something like subject to a loan of $xxx with ABC Bank – specify the exact amount and the name of the bank.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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