The recent case of Cole v Raykir Holdings Pty Ltd [2019NSWSC 1017 involved Mr and Mrs Cole (the Vendors) who entered into a contract for the sale of their home to Raykir Holdings, a property developer (the Purchaser).  The Purchaser paid a 5% deposit of the $2.83 million purchase price, amounting to $141,500. Completion of the contract was to take place 6 months following the payment of the deposit. However, the purchaser was unable to obtain sufficient finance to complete as the property valuation fell short by $510,000. Consequently, the Vendors terminated the Contract. The Vendors subsequently commenced proceedings and claimed damages for loss on resale as they sold the property at a price $600,000 less than the price that the purchaser had previously agreed to pay. The Court found that the Vendors were entitled to terminate based on the failure of the purchaser to comply with the Notice to Complete. The Court further ruled that the Purchaser and personal guarantor were liable to pay $458,500 in damages, being the amount the Vendors lost, less the amount already paid by the Purchaser by way of deposit. This case illustrates that the inability to obtain sufficient finance is a risk in delayed completion contracts. Even if finance is available based on a value equal to the purchase price, that amount may be insufficient due to a falling value of the development as at the date of completion.

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