The property at 22 Manapau St, Meadowbank was at the centre of the case which went to court.
The property at 22 Manapau St, Meadowbank was at the centre of the case which went to court.
Failing to settle an Auckland house purchase has resulted in vendors winning bankruptcy proceedings against the buyer and a Ray White Remuera agent, despite the buyer trying to strike that out.
David and Fionna Mills, trustees of the Mills Family Trust, got a bankruptcy award against Weiqiang (Brian) Feng forfailing to settle the agreed purchase of their Meadowbank house.
That’s at least the second failed Auckland house deal to go to court lately after the Herald last month reported the case of another man who contracted to buy a $1.16 million Manurewa house but was ordered to pay $429,000 for not going through with the deal.
In the Meadowbank case, the Mills Trust initially agreed to sell a Manapau St house to Feng who then nominated Ray White Remuera agent Kai Wang as purchaser under the sale and purchase agreement.
Associate Justice Clive Taylor in the High Court at Auckland wrote in his decision that Wang subsequently failed to settle.
Feng was self-represented in the proceedings. Katerina Wendt appeared for the judgment creditors - the trust.
Feng claimed the Mills Trust was in breach of the Fair Trading Act but Wendt said the trust was not “in trade” for the sale of their residential property, hence the act wasn’t applicable.
The house in Meadowbank, subject of court proceedings last year and this year. Photo / Google
Feng also claimed the trust was negligent to allow him to sign the sale and purchase agreement and should have allowed the Overseas Investment Office and finance conditions to be inserted in the agreement.
But Wendt argued these matters weren’t raised when the trust won summary judgment against him. It was Feng’s duty as the buyer to identify and request conditions to go into the agreement.
Feng argued he didn’t consent to the trust re-selling the property. No valuation was obtained before that happened. Wendt said this again wasn’t raised at summary judgment. Property steps were taken on the re-sale, she submitted.
Feng also said he wasn’t named as the purchaser because the Ray White Remuera agent Wang was nominated as the buyer.
Wendt again said this wasn’t argued earlier but the trust’s knowledge of the arrangements between the two men were irrelevant. Feng and Wang were jointly liable under the agreement, she submitted.
Feng also said he didn’t view the property before signing the agreement but the judge said that didn’t exonerate him from his liability. It was Feng’s responsibility to ensure due diligence was done.
Feng’s strikeout application was heard on September 5.
The judge decided none of Feng’s arguments challenging the bankruptcy were tenable and ruled his strikeout application failed so he must pay the money.
One property listing site showed the trust’s Meadowbank home had sold for $1.94m last August. It was valued at around $2.3m two years ago.
At this Manurewa house, the buyer failed to settle and got a $400,000+ penalty. Photo / Dean Purcell
Failing to settle house purchases comes with a warning: lawyers say we can learn from the case of would-be buyer Jay Bath, walloped with a $429,000 ruling last month.
Joanna Pidgeon of Pidgeon Judd, specialist real estate barrister John Waymouth and Jeff Walters of Albert St practice K3, said the $429,000 Bath case showed what could happen if you agreed to buy, but didn’t.
Pidgeon said reneging was rising, particularly among people who bought at the peak of the market with longer-term settlements.
The market had turned on them with property values dropping, decreasing sale prices used to fund purchases or reducing the amount able to be borrowed against a property, and interest rates increasing, increasing the cost of finance.
This was a perfect storm of events, with developers in particular caught out, unable to settle.
Waymouth said buyers can’t think they can control what the vendors do once a contract is unconditional. Those buyers must have the money they offer, or access to it from a financier.
Walters said he was seeing situations like the Manurewa one more frequently, with buyers squeezed by the downturn and high interest rates.
A deposit - often of tens of thousands of dollars - was usually enough to cover losses but in a market where prices have fallen by up to 30 per cent, the vendor may sue for the extra loss, he warned.
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.
