KEY POINTS:
A small investor owed $50,000 by property group Merlot says he has been told he won't get his money back.
Concern is high that deposits for investment properties Merlot was to build in Pukekohe, Tuakau and Gulf Harbour have been lost.
Three Merlot companies have gone into liquidation since July, leaving investors and suppliers out of pocket.
Merlot built homes which it onsold, promising investors a guaranteed rental income. Around 300 investors are understood to have put money into $100 million of property.
Last June Merlot told investors it had problems making the guaranteed rental payments because of the economic environment. On July 18 Merlot Homes, which built houses for the group, went into liquidation.
A year earlier, Dave Cole borrowed so he could pay Merlot $133,000 towards a property in the Dalia Rose subdivision at Gulf Harbour.
By the time of the first liquidation, the original home hadn't been built and the replacement property Merlot had offered him wasn't completed.
Cole used a sunset clause in his sale and purchase agreement to cancel the deal. Although he got $82,000 back through his broker he is still owed the $38,000 original deposit, and has lost $12,000 in administration fees.
In a letter to Cole on July 23 Merlot's solicitors Quay Law said their client was "not currently in a position to repay the deposit".
Cole said he managed to get Merlot group director and shareholder Grant Petrie on the phone last week. He said Petrie told him that because he had cancelled the contract the deposit would not be returned.
"He laughed at me, jeered at me, and said 'you're never getting your money' and slammed the phone down in my ear in the end."
Petrie told the Business Herald the deposit was "certainly in question".
"He hasn't lost his money at this point in time, but I'm being very honest with you to say that, you know, it is a major issue."
Petrie said Merlot had been caught by the liquidation last month of Singaporean company Consolidated Technologies, the original owner of the sections at Gulf Harbour.
He said Merlot had not "received the benefit" of deposits which should have been held in a solicitor's trust account. There were ongoing inquiries into why the full amount hadn't been returned.
Bryan Williams, liquidator of Consolidated Technologies, confirmed he was investigating an issue.
Petrie said the future of the Merlot group depended on issues at Gulf Harbour being resolved and on the property market.
"We're sort of in limbo."
He said Merlot was still building at Gulf Harbour and had just completed four homes. But it still had 24 more to build, and that was "very doubtful because of the turmoil up there".
Property developer Mark Hackshaw said Merlot owed him $2.5 million for 20 sections it was supposed to buy in Gibson Rd, Tuakau.
He said the group had bought 40 other properties off him and had always been late in settling so paid him tens of thousands a month in late settlement interest.
"I'd get titles ready, and they'd be paying me 12-14 per cent interest on a couple of million dollars which I was comfortable with when I thought that they were doing okay in business."
When it became clear last winter that Merlot was in trouble he issued settlement notices for the remaining 20 sections. Investors had paid deposits on those properties, he said, but Merlot never completed the purchase of the land.
He understood that the investors' deposits were meant to be held in trust, but most of the agreements were unconditional meaning the deposits could be released.
ANGUISH OF UNBUILT HOMES AND LOST MONEY
Dave Cole's $510,000 investment property in the Dalia Rose subdivision was meant to be finished six weeks after he first invested in mid-2007.
At that stage he was dealing with a company called Merlot Investments, now in liquidation.
A year later, when the house still wasn't built, Merlot offered him a replacement in the nearby Auradale subdivision, with his deposit transferred to that property.
Cole stated in the new sale and purchase agreement that if the home didn't have code of compliance by July 17 he would cancel the agreement and seek the return of his deposit.
A valuation on July 8 showed that the house was still under construction.
"By this stage we had realised we wanted out because things were looking extremely shaky," Cole says.
When July 17 came and went with no code of compliance, Cole gave notice he was cancelling the agreement. By now he was dealing with Merlot FX Management, which is still trading.
House builder Merlot Homes went into liquidation on July 18.
Cole says he was always told his $38,000 deposit was in a solicitor's trust account.
On July 23 Quay Law, Merlot's solicitors, told him that the deposit had been paid to Merlot FX because the deal on the original Dalia Rose property had been unconditional.
Waiuku investors Sheridene and Darron Swift are also owed $38,000 for a deposit they put on a property in Merlot Lane, Pukekohe, through Merlot Investments. The house was never built.
Sheridene Swift says they too were told the money would be kept in a solicitor's trust account. They found out much later it could be used for the development of the property.
She knows of at least three other investors in the same position, and says she has been told by the liquidators of Merlot Investments that "the chances of getting any money [back] are absolutely zero".
