THE property market is booming, and dodgy developers are having a field day. First home buyers are having their lives snatched out from under them.
As with any gold rush, opportunism and unscrupulous behaviour are rife.
Experts have warned of a growing number of developers cynically exploiting exit clauses to cancel off-the-plan contracts in a bid to resell properties at higher prices, leaving many first home buyers unable to buy back into the rising market with their original deposit.
For first home buyers in Sydney, where the median house price has increased by around 14 per cent over the past 12 months alone, this can be devastating.
One Penrith buyer who placed a $40,000 deposit for a $400,000 unit in March last year is calling for legal action after being informed that the building’s new developer was tearing up his and 12 other contracts.
The site, a council-approved 13-unit residential building, was sold by its original developer to an investment company last year, but construction was repeatedly delayed.
The buyers were only told earlier this month that the site had been rezoned, and the developer was applying for a new DA to build an extra 10 units, potentially pushing back the completion by up to 18 months.
“I don’t know how this is acceptable in Australia,” said the 35-year-old IT engineer, who did not wish to be named. “The government has to do something. The builders know all the loopholes — they’re playing with people’s lives.”
Despite being offered a discount on the new units, the buyer claims it’s not good enough. “We have lost a year. Even if they start building now it will take at least another year, and I’m paying high rent where I’m staying at the moment because we were told we would be moving out.
“Is the builder going to give me that one year’s rent?”
Christine Manolakos, principal at conveyancing specialists CM Lawyers, said the problem was getting worse as the Sydney housing market continued to rise. “This is just the tip of the iceberg,” she said. “I’m now hearing one of these cases every week or two.”
Conveyancing lawyers have called for a class-action to test the issue under the Australian Consumer Law’s unfair contract provisions. “When developers use these preconditions to get out of contracts so they can profiteer, that needs to be challenged,” she said.
“But who’s going to do it? It’s beyond the scope of a property lawyer. You need a barrister experienced in class actions, and a big enough group of affected people to make it cost-effective — this is unknown territory.”
Mark Machaalani, solicitor director at Unified Lawyers in Marrickville, said until that happened, all buyers can do is be aware of the risks, particularly with overly vague special conditions in contracts.
“I’ve had two purchasers recently that didn’t go ahead simply because of that risk,” he said. “They were a young family and the timing of when the property was built was very important to them, it wasn’t just an investment.”
Mr Machaalani said even provisions requiring the builder to exercise everything in their power to get the development completed were difficult to enforce.
“How can you actually prove whether they’ve done everything in their power? The builder can say it was raining. There are so many things that can delay a development of that size.”