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Soaring delays hit off-the-plan buyers

Date

Chris Vedelago

The 210-apartment high-rise was supposed to be finished by the middle of next year at the latest, but site remains virtually untouched.

The 210-apartment high-rise was supposed to be finished by the middle of next year at the latest, but site remains virtually untouched. Photo: Chris Vedelago

Archie Adams has been a patient man, but he's not prepared to wait the better part of decade for his new apartment to finally be built.

Nearly three years have passed since Archie put down a $39,200 deposit for a one-bedroom unit in the Southbank development, Verge.

The 210-apartment high-rise was supposed to be finished by the middle of next year at the latest, but the City Road site remains virtually untouched.

"There's no way they can finish it in six months, so now the developer wants me to sign a new contract giving them another 42 months [3.5 years] to finish," Mr Adams said.

"They told me if I signed, I get all these whitegood goodies, and if I didn't I'd lose out and still be stuck in my contract. I just want my money back now."

It's a dilemma about 150 other people who bought off-the-plan in Verge will face as sales contracts signed in 2010 and early-to-mid 2011 hit so-called "sunset clause" deadlines, which are expected to run out before the project is finished.

"Sunset clauses" set a deadline for when a property must be completed; if the deadline is breached, an owner may be entitled to their deposit back and can walk away from their contract.

The scramble for developer 608 Property Group to get original purchasers on board is only the latest in a series of problems for the estimated $100 million development since it was "fast-tracked" by Labor planning minister Justin Madden in 2009.

Lacklustre off-the-plan sales and financing problems reportedly delayed its original developer, DEC Australia, from breaking ground on schedule. The Indian-owned company eventually sold the site, next to Crown Casino car park and the Kingsway overpass, to 608 Property Group for $7.61 million in October.

Soon after, Mr Adams got a letter from estate agents Knight Frank, informing him that construction was about to start and he needed to "re-sign ... a new contract".

In return, he'd receive about $10,000 worth of whitegoods, including a washing machine and dryer, dishwasher, fridge, blinds and an air-conditioner.

But buried about halfway into the new 150-page contract was a clause giving the developer another 42 months from the date of signing to register the plan of subdivision for the development, the first major step in completing and effecting settlement on his apartment.

The Knight Frank missive also assured buyers that 608 Property Group would "honour" the purchase prices on the contracts. "This is of benefit to yourself as ... construction costs have increased and property prices from when you purchased have moved significantly," it said.

The claim was made despite a letter from DEC Australia's solicitors to buyers noting that 608 Property Group was "bound to observe the covenants and obligations" of the contracts after the sale.

In other words, the new developer is obliged to uphold the agreements in the original contracts, including the sunset clause.

Mr Adams was also left wondering just what his yet-to-be-built $392,000 apartment would be worth today, let alone when it's finally completed.

Online real estate advertisements show one-bedroom units in Verge are currently being offered from $309,000 to $433,000, depending on their position in the building.

"I'd had enough, so I went to my solicitor. I told (the agents) I wouldn't sign and I wanted my deposit back, but they're going to make me wait until July when my contract runs out," Mr Adams said.

"I just wonder how many other people who've bought there understand how long they might have to wait and that they don't have to do this."

Jason Van Der Slot, director of 608 Property Group, said the new contracts were only a formality and that Verge would be completed before the deadline set in many of the existing contracts.

"We're a new developer and we would prefer to enter into a contract directly rather than have them assigned to us, and we'd like to extend the sunset dates. If not, we'll rely on the old contract which is great – still enforceable," he said.

"So for the inconvenience of people having to do that, and all the hoo-ha they've had to put up [with] from the previous developer, we'll supply a white-good package as a sign of good faith."

Mr Andrew said seeking a lengthy term on a sunset clause, which starts on the date a contract is signed, was "normal practice" in the property market.

He said a "substantial" number of the purchasers had already signed the new contracts.

Construction on Verge, which is 70 per cent sold, is reportedly due to begin early next year and be completed within 24 months.

Do you know more? Have you faced similar delays?

cvedelago@theage.com.au

Twitter: @chrisvedelago

29 comments so far

  • I'd be bailing out quick smart.

    $10,000 "worth" of whitegoods means $10,000 at max retail price, so street price would be $7000 or less and the real cost to the developer would be a few thousand less again.

    A drop in the ocean compared to the delays, developer margin and devaluation of the property from the initial contracted purchase price.

    Commenter
    JohnB
    Location
    Melbourne
    Date and time
    November 30, 2012, 3:25PM
    • I aggree. The $10K package is "recommended retail price" which in reality would be worth $5-6K. I mean if you went do a white good dealer yourself and offered to take a string of white goods with a face value of $10K you would easily get them for a far, far better priice. And if you are a developer, you would be collecting them even cheaper. Its basically a stich up. The units will probably get built...along with the hundreds of others available.

      Commenter
      andrew
      Location
      werribee
      Date and time
      November 30, 2012, 3:40PM
    • You have to laugh at this absolute debacle of a housing market.

      Buy a house, get a free set of steak knives!!!

      You just know its over don't ya?

      Luv it. :)

      Commenter
      FONZ
      Date and time
      November 30, 2012, 4:04PM
  • I'd be putting the developers on notice that if the apartments were not built and ready for hand over by the date of the sunset clause then I'd be seeking my deposit back + loss of interest and any other loss I'd incurred due to their stuffing around. Developers are up there with investment bankers as the scum of the earth.

    Commenter
    Guy
    Location
    Melbourne
    Date and time
    November 30, 2012, 3:32PM
    • The only thing wrong with that is the developers will rush the job and you will end up with a poorly constructed building. The Australian construction industry struggles to do more than an average job at the best of times without the added pressure of a (now) unrealistic deadline.

      Commenter
      SG
      Location
      Melbourne
      Date and time
      November 30, 2012, 3:51PM
    • Without Investment Bankers and Developers where would you live, work, play, shop?????
      You may not like Bankers or Developers but they were and are instrumental to the economy as a whole.
      Additionally if the purchaser took the time read the contract before signing it they would understand what they were signing up to and if they did their research into the Developer they would appreciate that not all Developers are the same.

      Commenter
      Me
      Date and time
      November 30, 2012, 3:52PM
    • Yeah you tell them Guy!! You tell them to give you interest too, and legal costs etc. Son't let a little thing called a contract get in the way!

      Commenter
      ProChoice
      Date and time
      November 30, 2012, 3:54PM
    • Presumably there were penalty clauses written into the construction contract that require the builders to pay compensation pro rata for not completing and handing over on time (most building contracts have these). Might be worth checking the value of this with respect to the realistic completion date. You could save a lot , if you have the luxury of time, by sticking to the original contract and collecting the penalty payments.

      Commenter
      MarkH
      Location
      Melb
      Date and time
      November 30, 2012, 3:58PM
  • Why would anyone pay $400,000 for a 1 bedroom apartment? what a rip-off

    Commenter
    Mr Z
    Location
    Melbourne
    Date and time
    November 30, 2012, 3:43PM
    • Position, position, position~ Why you're only a stones throw from Crown Casino and Polly Woodside. They need to rename that whole precinct "Heaven" Buy Now cry later.

      Commenter
      Old Fitzroy
      Location
      Hellbourne
      Date and time
      November 30, 2012, 4:14PM

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