Back in December I was browsing through an industry magazine, and was surprised to read that a large and well known developer in London had dropped their deposit. Meaning they had exchanged on a property and failed to complete on a deal.
They are in dispute over the deposit as the seller is claiming they had forfeited it as they had breached the pre completion conditions.
The reason this caught my eye was it was a property we were aiming for. The location is the most prestigious in London, a few years ago we had agreed the deal and even had the contract. The deal was done very discreetly. The owner was of prominent royal lineage and had passed away, the sale was both off market and confidential.
We had the contract and were about to exchange, only to be told the deal had been done by another party. At the time I had heard who had purchased the deal.
A few years later the magazine article confirmed the rumour but surprisingly the deal was not done.
So we got in touch with someone who was able to get in touch with the law firm acting for the seller and are now in touch with them. Though the deposit is under contention the property presumably is not and therefore up for grabs. Given they may be keeping the 10% exchange monies they may do a deal for less – possibly. Especially if it’s discreet.
This is the second time this has occurred. It’s not a common occurrence where another party gets the contract and exchanges on the deal yet we end up proceeding with the transaction.
The last time this occurred was on a site in London Mews, W2, where we were looking to purchase a site which had planning for four mews houses. We didn’t particularly want to deal with the receiver as we had a sneaky suspicion he was preparing to sell this site to one of his friends and family probably for a good fee.
The lawyer we were using had a good idea considering we were in touch with the person who owned the site. He had been made bankrupt and so the bank had appointed a trustee to sell the asset. The trustee apparently works on the behalf of the client but is appointed by the bank. You wouldn’t think so judging from the experience many clients have with the receivers who act on their behalf.
The fact the bank had appointed a receiver did not preclude him from remortgaging, therefore we could simply come in and remortgage the property instead of purchasing it.
This would achieve two things. It would bypass the receiver and secondly it would mean we do not pay stamp duty as we are not the purchasers merely loan givers. We would be free to dictate the terms of the loan which would be heavily weighted in our favour.
Just as we were preparing to exchange, which wasn’t as quickly as we had hoped for, the receiver had done the deal with another party; leaving us with an expensive lawyer’s bill. At the time the firm we were dealing with was one of the top law firms in London who charge heavily by the hour.
The deal after much time had been spent was gone, this is sometimes the nature of property, some you win and some you lose, as long as you win more than you lose you’re doing something right.
However like the first example it seemed the party who had exchanged on London Mews had been too hasty, they hadn’t secured the money to complete the deal and so they lost their deposit. The property was back on the market. With the 10% applied the price we could get it for now would be even cheaper.
Given the two failed transactions the bank or receiver decided it was time to sell for sure, by hook or crook. The surest way to do this is via an auction sale, at the drop of a hammer the deal is exchanged leaving the purchaser 28 days to complete the deal or lose their 10%.
It was purchased on the 10th June 2010 for a sum of £1.65m, it was my hand which went up in the auction room and closed the deal. The purchaser was continually prodding me in the kidneys to bid higher and higher. We were expecting to close this deal somewhere between £1.2m and max £1.4m but the purchaser’s partner was going to purchase it at any cost – it seemed. There was another Indian in the room who was persistent in getting this site and was responsible for pushing the price up to what seemed at the time an overpriced development site.
The site was seconds away from Paddington Station, and was a virtual freehold. It had a few complications, one being it ran over some rail tracks and the other the opening to the site was constricted affecting deliveries and getting any machinery in.
Looking back it was a good deal for the client. The property had been around, the property was previously in an auction in 2007 but then was withdrawn, everyone knew about the site. Furthermore the funding environment was less conducive compared to now for developments. Those who purchased in 2009 made the most money in property especially in London, this was an environment where most were sitting on the fence not deciding one way or another. When a property stays on the market for a while it loses its appeal and its shine. People think there must be something wrong with it as no one is buying it. No one knows what but everyone thinks there must be a problem therefore no one buys it.
The deal has been a good one, the price of each freehold house must be touching £2m a piece meaning the current value of the site must be around £8m. This from a purchase price of £1.65m and approx. £500k for the development.
I guess some properties are just supposed to fall in some peoples’ laps no matter what. Even when the deal looks like it has gone for sure, it rebounds back, like it was meant to be.
