Laragan customers lose their deposits

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I'm going to put this another way, which one of the 95 deposit holders would be happy today if Laragan was taken over by another builder who agreed to finish the estate at the prices contractually agreed. Do the same scenario, 1 year 2 years ago etc. So then tell me financially who is at a loss. The deposit holder today or the person who received or would receive a completed property.

Kate in relation to the insurance, what a simple solution that would have been. In relation to the Law society it's like a case of horse and bolted.

I don't understand why this could not be thought about before thousands of people signed contracts. I really do feel that a legal advisor has a duty of care to ensure their client a purchaser is protected but I keep getting told that the purchasers would have signed anything just to get on the property ladder.

We have basically purchasers purchasing from a limited company, any limited company can go bust, the simple basics of company law would tell you that, and what do Irish people do, hand over deposits in large numbers and amounts with completion dates that mean diddly squat, meanwhile there are overruns on completion and circumstances change and people who are not now eligible for a mortgage are forced to complete as they signed a contract with no mortgage clause. Somewhere in there is negligence.
 
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Bronte I agree with you but I feel that home buyers being consumers buying into something so complicated should have been protected. I do not think that the arguement as to wheather the deposit holders are or are not worse off is the only issue at hand and that needs to be resolved going forward.
 
Quote:
Originally Posted by Kate10 http://www.askaboutmoney.com/showthread.php?p=889817#post889817
Re. the release of deposits - plywood there is nothing legally incorrect in releasing a deposit as long as both side agree to do so. In the vast vast majority of housing developments in this country, purchasers agreed in their contracts that their deposits could be released to the vendor, subject to delivery of homebond/premier direct documentation on exchange of contracts.

Kate

I think its healthy to explore our respective motivations for the posts we put up.

I have no motive for the statements I have made except to alert people who could potentially be stung for their deposits that they may have a means of redress. A solicitor however could potentially be exposed to possible claims if the great unwashed became aware that solicitors make mistakes and that there is a means for people to obtain compensation.

If the contract is based on the standard terms and conditions issued by the Law Society and they aren't amended, and the developer fails to complete the house/apartment etc within a reasonable timeframe a borrower can be successful in an action to withdraw from the purchase. This has happened in a number of developments, two of which I am familiar with. It just so happens that in one of these developments the solicitor for the developer forwarded the deposits to the bank when he was confirming that X number of new contracts had been signed. In the the other the solicitor for the developer refused to forward the deposits on the basis that he was holding them in trust for the purchaser pending completion of the houses.

Some purchasers in both developments took legal action to withdraw on the basis of late completion (not non completion). The court ordered that the purchasers should have their deposits returned. Obviously the solicitor who held them in trust was correct in his actions and this has been confirmed to me by an independent solicitor, from a top firm, who specialises in property.


You can disagree if you like but this is fact, and my strong view (and I'm entitled to it) is that even if the law didn't state it, it could not be morally correct or proper for a developer to be given the deposits of purchasers, to be used as his equity input to the development, thereby exposing the purchasers to the risk involved.
  • Banks provide the debt.
  • Promoter (developer) provides the equity
  • Purchasers purchase the product
Quote:
Originally Posted by Kate10 http://www.askaboutmoney.com/showthread.php?p=889817#post889817
To compare this to off-shore accounts and fraud on the Revenue is just stupid. I don't know where your example is coming from, as you will not cite it, but the only way a solicitor could be at fault for releasing the deposits would be if he/she were not permitted to do so under the contract, but did so anyway. That is a completely different situation.

My comment was an analogy (you don't normally have to state that it is an analogy). You made the point that it was bog standard practice for deposits to be forwarded to the developer. I made the point and I stand by it, that common practice (or bog standard as you so eloquently put it) does not establish a legal basis for the practice. I compared it to the situation with non resident accounts. Banks openly promoted these to depositors who were not 'non resident'. When the revenue decided to crack down on the practice, the defence that "everyone was doing it" did not hold any weight.
 
"Some purchasers in both developments took legal action to withdraw on the basis of late completion (not non completion). The court ordered that the purchasers should have their deposits returned. Obviously the solicitor who held them in trust was correct in his actions and this has been confirmed to me by an independent solicitor, from a top firm, who specialises in property."

So, can you give a citation? If the Court so ordered, it would have made big news. It would also have had a huge impact on solicitors who would have been alerted by each other and the Law Society as to a possible exposure.

You are actually incorrect in your view of the law. If the contract provides for the forwarding of the deposit to the vendor/builder, which was the most usual scenario, then, if later the purchaser becomes entitled to withdraw from the contract and is entitled to the return of the deposit he looks to the vendor/builder , not the vendors solicitor.

It will also depend at what stage of the downturn these events happened. A year or so ago, a vendor /builder may have had the funds to return the deposits and may have done so voluntarily but its more likely now that they do not have the funds.

mf
 
Plywood,

Let's simplify things for a second, shall we?

My point is that if a contract, properly negotiated between two legally represented parties, allows for the release of deposit monies to a vendor, there is nothing legally incorrect in doing so.

Do you disagree with this? You keep referring to your example, but you have not said what the terms of the relevant contract were.

Please either give a citation, or post the specific special conditions in the contract relating to the release of the deposits.

Secondly, you seem to believe that a vendor's solicitor has some sort of moral duty to a purchaser. I believe that a solicitor has a moral and ethical duty to practice in a certain way, but it sounds to me like you think a solicitor acting for a vendor should put the purchaser first. The logic behind this escapes me, I'm afraid. I think you misunderstand the role of the solicitor.
 
The Irish Times Editorial today - Monday June 29th:

[broken link removed]

Lost deposits

"Among the ranks of the disillusioned are 95 homebuyers who paid deposits to buy apartments in Dublin over two years ago. The apartments, however, were either not built or not completed. And the buyers have found now that they have lost their deposits, after Laragan Developments, a property company, was placed in examinership"

"Nevertheless, to ensure what has happened cannot be repeated the terms of the Homebond scheme must be changed. The Construction Industry Federation should now accept the need to guarantee all deposits made by housebuyers, and without a time limit.

A failure to reassure homebuyers that their deposits are safe, and recoverable, can only further depress a depressed property market."
 
I may be wandering a little off the point here and I apologize in advance of so.
I not that all below comment is made as fair comment in the public interest.

I think there are three separate issues here:

  • the legality in principle of non-refudable deposits -vs- protection for the consumer/purchaser
  • the completion of the contracted matter in a timely manner to avail of the Homebond guarantee scheme.
  • the credibility or otherwise of the Homebond scheme having such a limited time period and from a purchase point start date.
I understand Brendan's point in relation to the avoidance of negative equity, but I think the other purchasers points about the loss of their deposits and having no dwelling are well made [I'm paraphrasing].
In my personal opinion in an ideal world the deposit should have been returned once the builder exceeded the term and effectively broke the contract - having broken the contract what basis did he have to retain a "deposit"?

The law allowing him to have use of the depositors money all this time with no recourse and no end product [even one in negative equity] needs to be looked at.
On this latter point, and I may stand corrected here, the local authority as planning authority and building control authority have five years from the date of completion within which to take action if something is built in breach of either body of law.

In relation to the contract, there appears to have been trading on market position by many developers looking for long lead in periods.
Some of these periods seem inordinately long, but laypeople can fail to take account of the long delays that planning and High Court actions can bring to the delivery of a competed development.
That having been said two and a half years seems inordinately long if no planning or legal problems had arisen.

I would be surprised if it the Home Bond Guarantee Scheme Purchase Date equates to the date the deposit is handed over, but that's the meaning I've taking from what's been posted.
A deposit is one thing in legal terms, but I understand that the actual purchase isn't made until the contracts are signed and returned with the money and keys being exchanged.

Separately but on a related point, it seems only fair and reasonable that any kind of guarantee scheme should be run from a completion date as opposed to a purchase date - after all, what is there to guarantee until the work is complete - are they guaranteeing incomplete work, and if so, how can they do that?

FWIW

ONQ.
 
A couple of points worth adding to the pot here:
  • It was always the case that these deposits were going to the developer in order to provide cash flow and allow funding of the project. Any form of escrow was never cards (the developers put the projects together on the basis that the deposits would be forthcoming) and everyone knew that. So stop blaming others for your counterpary risk.
  • The homebond scheme was what it was. If you were worried about counterparty risk you should have taken steps yourself or not bought "off plans". Again, stop blaming others.
  • What exactly are you trying to achieve here? The words blood and stone immediately spring to mind.
  • Don't forget that not all depositors' interests are aligned here. Some have a stronger case for a deposit refund (from failure to perform) than others. Those "others" might find an alternative scheme could mean they are held to their contracts in order to pay the refunds for those released.
 
Hi Timbo -

What exactly are you trying to achieve here?


Just to answer your question briefly -

1. Generally just some clarification regarding the Homebond Insurance Certificate Scheme - and how it works - to seek the opinions of other people who hopefully may be able to offer some professional opinion if they work within Law, and also from people who are home owners themselves.

To ask some questions such as:

2. Can a builder offer a Homebond Guarantee when a Contract has a Completion Period that is longer than the Homebond Guarantee?

3. If a building project for Apartments and Houses is going to be delayed is a builder obliged to inform a buyer/deposit holder that their deposits will not be protected due to the ongoing delays in completing their Apartments and Homes?

I have mentioned earlier that I was aware that my deposit was being forwarded to the builder - this was a condition in the contract.

Well yes - the Homebond Scheme does seem to be what it was/is!
But I am asking opinions from people if they think that there could be some room for improvement with regard to the Homebond Scheme - for example should the protection period for Deposits be extended until the Completion Date?

This has been a good thread here on Askaboutmoney - and I have found it informative to read - some technical information is complex legally which is difficult to understand myself but are comments from people who I think are working in the legal profession? But its interesting to also hear their views on this Homebond Scheme.

But I think's it unfair to say that the focus has been on "blaming others".
 
Very interesting / informative thread. Thank you to all those who take the time to contribute.

Clearly there are questions to be answered in relation to the effectiveness of the homebond product. If it doesnt do what it says on the tin, then what was the point. Ill watch this one from afar.

The point re termination of contract due to late completion is very important. I'd just like to emphasise how useful it would be to have a reference to the case in question.

Finally, a point for the solicitors who provide very interesting insight here. In the past I have seen legal opinions from senior council support the setting aside of contract terms where both parties were professionally advised on the basis that the terms were (among other things) unbalanced or that the intent of the parties entering into the contract were not reflected in specific clauses and both parties were aware of this at the outset. This wasin an english law / jurisdiction environment. Surprised me at the time (but not the lawyers from a top 4 UK firm that were representing us at the time).

Reason that I mention this is that I suspect that many property purchasers have a stronger position in relation to repudiation of long dated purchase contracts under law than a strict interpretation of the contract may suggest.

Any thoughts?

P.S. Thanks again to all those contributors who really do help people who would otherwise have nowhere to go for some common sense advice.

 

Under section 17 of the Companies act this is the case. The problem is in the examinership this fact was not allowed be brought to light and when the question was placed by trade creditors, we were ignored as the process had already been ratified irrespective of the vote. The weighted creditors (Anglo & Revenue) accepting the offer supercedes all other votes.

Laragan accounts for 2008 are in the middle of lodging with CRO, due within the next 24 days. The section 17 statement should be included in these returns.

Case is in the High Court next tuesday.
 
Sorry may have the section number wrong re the companies act, dont quote me on that, all other info is correct.
 
Sconhome said:
Sorry may have the section number wrong re the companies act, dont quote me on that, all other info is correct.
Click to expand...

Hi Sconhome,

No you are referring to the correct act.

I can understand why the Examiner did not entertain questions of this nature. The Examiner is only there to investigate the possible survival of Laragan and no other company within the group. The Examiner is not there to necessarily get the best deal for the company's creditors.

Section 17 would kick in if Laragan was placed into liquidation. However, this may be on no use if the whole group is insolvent!

Can I ask how you learned about the completion of the financial statements.

Regards

Jack.
 
Jack,
B1 annual return has been received by CRO up to 09/2008, the actual account details have not been received or possibly not yet posted by CRO for this period
This information has been circulated among the trade creditors.
 
Sconhome said:
Jack,
B1 annual return has been received by CRO up to 09/2008, the actual account details have not been received or possibly not yet posted by CRO for this period
This information has been circulated among the trade creditors.
Click to expand...

That B1 has accounts for the year ended 31 December 2007 attached to it and is available from CRO!
 
The confirmation hearing for the Scheme of Arrangement put forward by the Examiner is on Tuesday 7th July. With that in mind can I ask if anyone can advise on the format that this confirmation hearing will take? For example are creditors allowed to raise / ask questions to the Judge at this hearing? Or is the protocol that any issues which a creditor wishes to raise or feels is important for consideration - must be submitted in advance?

I wish to attend the confirmation hearing myself - but I am looking for advise on what will happen on the day.

Thanks.
 
Andy I would suggest you get your lawyer to represent you as Judges like questions raised/asked in a particular tone but. Also, it may be inappropriate to ask some of the questions you may have so I would suggest that you run your questions by your lawyer.

However, you may find that there is a creditor already contributing to this forum who may plan to attend on 7 th July so perhaps you could team up with them!
 


Plywood can i send you a pm as I have a question for you?
 
Just a quick note to add; the limitations on Homebond cover are very clearly set out in the Homebond Guarantee documents. This used to be printed on the 'HB10' and 'HB11' documents; then it was included in a separate booklet which came with the HB10 and HB11. Policy documentation has changed again recently. But the point is, the information was always there for anyone who wanted to read it. It is entirely possible that some solicitors may be found to have been negligent in not specifically bringing this to attention of clients - but I think this finding ( if made) will be harsh. Builders have been goiing bust for years. Buying off plan is inherently risky. Such is life.
 

Mob speaking for myself , I was not aware of the time limits on this and nor was it pointed out on signing contracts. Also our solicitor allowed the contract to be extended from 18 to 24 months when the time limit would have already expired without gaining any further insurance or pointing this out to us at the time.
 
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