Hello - my wife and I have landed in a fairly costly and stressful situation involving a person who has purchased our residential property through their Company and have signed the contract as the Managing Director. We have researched our position and thought we would post here to get thoughts from others.
In summary our scenario is as follows –
- We sold our residential property (in the NT) to a buyer who purchased our property under their Company Name, and signed an unconditional contract as the Managing Director of this Company. We as the sellers agreed to a six month settlement period with a weekly rent to be paid. We agreed to this as the sale price would clear the investment loan which is secured against our primary residence and in turn would then allow us to sell our main residence to then build our new family home. The agent arranged the contract and we hired a licensed conveyancer who then took over and executed the contract.
- After the cooling off period, the buyer requested a change to the contract being subject to the sale of one of two properties (the buyer runs a Airbnb style company in Australia with properties located in multiple states on various ACN’s and websites). We declined this and the contract remained in place as unconditional.
- Within 3 weeks of signing this contract, the buyer started to fall behind in the agreed rent payments. We sent numerous communications to our conveyancer who in turn contacted the buyers’ conveyancer. It was acknowledged multiple times the buyer would try to rectify. We were also informed by the agent the buyer was trying to sell properties to fund the settlement of our property, albeit the contract was not subject to such activities. Given we were approaching settlement, we gave the benefit of the doubt to the buyer and took the mindset that at settlement the buyer would also pay the rent in arrears.
- Come within 1 day of the agreed settlement date (so 6 months later), the buyer owed us over $6,000 in rent, had failed to pay any levies and also failed to pay any rates - and we suddenly received a request from their conveyancer requesting an extension to settlement for a further 3 months “at no penalty”. We declined this as we had already afforded 6 months to the buyer as agreed, and in good faith allowed the buyer to fall behind in rent with the thought this would be paid upon settlement. As a family we also did not budget the upkeep of this property beyond this 6 month mark given we had a newborn, two other kids and are on a single income.
- It was at this point we engaged lawyers on advice that maybe a well written letter from a lawyer would expedite settlement.Thousands of dollars later, and approaching the 4 month mark of hiring a law firm, we have had zero outcome with the buyer just ignoring all requests. Demands have been sent, appropriate timeframes afforded yet still nothing. The reason why we allowed this to go on is due to 1. The buyer still was paying random rent into our account which indicted to us they were still committed. 2. We received a call from a valuation company who was acting on behalf of the buyer for their finance, as such this indicated settlement was still on the cards. 3. The market had further plummeted as such we could not afford to relist the property at a further reduction of $40k.
- We finally reached the date where the buyer had requested a further 3 month extension with no penalty, and again, we heard nothing. The buyer’s conveyancer terminated their agreement I think in frustration of not getting any responses and also in anticipation of where this was going to head. Our lawyers have recently tried engaging the buyer directly but again, they don’t respond.
- We recently were informed by our agent (who knows the buyer on a professional level) that the buyer is facing cashflow problems in their business and cannot source finance to complete settlement. We have been informed the buyer has an option to fund settlement from their super however does not wish to pay the associated fees!
- The buyer has now gone completely underground, is failing to respond to any attempted contacts from our lawyers and is effectively ignoring the whole matter. It essentially feels as though they are trying to starve us out. Our agent has informed us the buyer has stated as he is an “asset poor” company he is not liable to pay us anything as such is just ignoring until we effectively move on. This is in contradiction to the agent advising us a few months earlier that the buyer “is not short of cash” indicating they are quite wealthy and owns (which we have verified) multiple properties around Australia.
- To further rub salt into the wound, we became aware that the buyer has had our property advertised on their website since the contract was signed as a short to medium term stay property, as such has possibly been making a very good income off our property yet has failed to pay us rent or any of the agreed outgoings (levies, rates). So effectively we pay the mortgage and all outgoings for 10 months, and this person knowingly advertises and makes money from our apartment with no approval whilst knowing they owe us rent. This is a Managing Director we are talking about!
- We also identified that the buyer sold “both” properties as they initially wanted to place the contract as subject to the sale of – yet still no settlement or any communications.
- Our lawyers initially were in contact almost daily, and advising they cannot see a defence on behalf of the buyer, to which this has suddenly changed to there is risk involved, it’s going to be costly and we cannot guarantee we will secure what is owed, given it seems the buyer has no assets listed under the Company he has purchased our property under. We also noted that the buyer has made changes to the Company on the ASIC website just prior to when settlement was due (removing entities).
- Finally, the actions of this person has significantly damaged our family unit. Effectively what we worked and planned for the past 9 years has been destroyed by this person. I think many marriages would not have survived this so we are quite lucky - but it has been very hard and continues to be due to this person.
We have had to pull our kids out of all of their hobbies they love, we have ceased any weekly entertainment with the kids, we are effectively now in survival mode and to make things worse, the bank has just informed us we cannot just go and sell this property for a lower price and wear the hit (keeping in mind at the agreed sale price we were already copping a $160k hit to what we owe due to the market) as they will not allow settlement unless we have the cash difference in an account to pay out the investment loan that is secured against our main property.
We have been informed the market, now 10 months on, has further declined and we can expect a further $40k - $60k reduction on the sale price which takes our hit to $200k plus.
- This now leaves us with a property we cannot maintain, whilst we cannot sell our main property until the investment property is cleared, we don’t have the funds now to pay out the difference of a lower sale price to what is owed, and this has all been caused due to the actions of this buyer who now refuses to settle, refuses to pay any owed monies, and is claiming they have poor cash flow from their multiple properties they own around the country! I view this person as a criminal and should not be allowed to run a business.
- How can an individual get away with this? The damage this person has done will take us years to recover – it’s just so upsetting and not right especially that it is now impacting our kids – how can the Australian legal system support these sorts of people through what seems to be a well known loophole being hiding behind an ACN and therefore not being liable as an individual regardless of behaviour and factual evidence we have? We are not legal experts and trusted that a licensed agent and conveyancer would present a contract or at least advise on any potential loop holes? Absolutely nothing was discussed apart from this is a good deal in the current market.
- So question for any one who is knowledgeable in property law - how can this person be held accountable. How do we recover our rent and out of pockets? Is this a case of misfeasance or nonfeasance (sorry – not a lawyer obviously) – given this person has signed the agreement as MD of the Company and has wilfully damaged us as a creditor given the owed rents and purchase of our property?, and failure to settle – is there an avenue here?
I think most people in our situation would prob by now have tried taking matters into their own hands - we have provided so much to this buyer in good faith and have just been absolutely walked over. We are good people and just want to move on, however I cannot move past the fact that so much damage has been done by this person – all of our hard work has been erased - the years of FIFO work and my wife being a single parent whilst I was away - it was all working towards a goal that we did achieve yet has now been taken away by a person who seems to have had ill intentions from very early on.
We are aware of contract breach terms such as default interest, paying us the difference between the new sale price versus previous agreed price which will be at least $40k, and legal fees - we are now pushing over $80,000 alone in damages, however our lawyers keep warning on the risk and costs.
Sorry for the long post – all advice we seem to be receiving at present is the legal system supports what this person has done so lick your wounds and move on – it just doesn’t seem right that this person can intentionally damage us and then walk away, hiding behind a company name with no attached assets.