The handsome returns often made by investors who buy properties ‘off plan’ have to be balanced against the risks involved and that is why such purchases should never be hazarded without first taking professional advice. In a case on point, numerous buyers ended up severely out of pocket after a developer went bust.
The developer had purchased two empty plots of land on which it intended to build student accommodation blocks. Units in the prospective developments were sold to mainly overseas buyers, almost all of whom paid reservation fees and substantial deposits. Neither block was built, however, before the developer went into administration and subsequently creditors’ voluntary liquidation.
Under judicial guidance throughout, the company’s liquidators set about realising its assets so they could be distributed to the buyers and other creditors. Their task was complicated by, amongst other things, difficulties in serving documents on foreign buyers. The plots were eventually sold for just over £900,000.
In giving directions as to how that sum should be distributed, the High Court ruled that about £150,000 of the sale proceeds should be paid to the liquidators in respect of costs and expenses that were incurred in selling the properties. The buyers had undoubtedly benefited from the liquidators’ hard work in that respect. The Court noted with regret that, even before those costs and expenses were deducted, there was not enough money in the pot to reimburse the buyers the full amount of their deposits.