Women fighting to stop home bail-out

The completed homes are now on the market for $635,000. Photo / Doug Sherring

Disappointed buyers go to court after sunset-clause shock

A High Court battle looms after property developers linked to a string of liquidated companies invoked a little-known clause to get out of an agreement to sell newly-builthomes.

Melissa Jordan and Deirdre Butler have filed legal action, claiming they were unfairly left out of pocket. The builder was able to cancel their deal, despite them having paid a 10 per cent deposit, and seek a higher price on Auckland's inflated property market.

Both women signed up for two apartments in the development in Auckland's Blockhouse Bay "off the plans", when the town houses were expected to be valued at $500,000 each.

Delays pushed the completion date back until the developers, Whitney Mews, invoked a "sunset clause" in March, cancelling the sale and purchase agreement.

The properties have now been completed and are on the market with an asking price of $635,000.

Whitney Mews denies doing anything wrong.

Director Murray Alcock said it took on the development from a finance company that went bust.

"There were a lot of problems on-site to get everything fixed and going. Lots of delays. In the sale and purchase agreement there was a sunset clause which either party couldinvoke."

Property investment expert Nikki Connors wants a law change to close the loophole, lest "mum and dad investors" lose money in the overheated Auckland property market.

A sunset clause is often included in contracts where the property is still under construction, effectively putting an expiry date on an offer if certain terms within a contract are not met.

"There's no way individuals should be financing the building of these, only to find that these developers then make all the profits for themselves," Connors said.

She said a home buyer or property investor could enter into a purchase agreement at "blueprint stage" and pay a deposit to secure the property.

This gave the developer cashflow and security for their financier.

"With this agreement the buyer proceeds in good faith with the understanding ... they will take possession of the new property."

Companies Office records show Alcock and fellow director Allister Knight have a long list of liquidated companies, and that creditors of one were paid less than 1 cent in the dollar.