Budimex Murano development (central Warsaw) Phase I

I'm trying to get as many investors as possible to pressurise the developer into renegotiating contracts to give us all significant discounts on the overall price, say 20%.

Not only have apartment prices fallen but Budimex are delaying completion until Spe 2009 - four months later than agreed.

The fact investors owe an outstanding 90% gives us massive leverage against the developer - it'll be really stuck if sales fall through.

You have been "pushing" this for the last couple of weeks, now I will give you my suggestions:-

a) Look up the word "honour" in the dictionary.

b) Try remembering that you had the chance to negociate the final price
when you signed the contract.

c) Ask yourself if you would be doing this if the capitol value of the apartment
had increased by 50%.

e) Most of the problems for the "financial crises" have been caused by people
lying and cheating, has Budimex used these tactics with you?

If you do not like the deal you had, walk away.

All fair, if not helpful, points Avalon. But:

a) "Honour" is a wonderful concept - I wish there was more of it in the world - but I really suggest you look up the word "business" in the dictionary.

b) The final agreed price was based on completion in May 2009, not Sep 2009. This delay is a new "feature" I wasn't aware of.

c) They would probably be trying to do the same to me had prices gone up 50%. See (a) above.

e) (Got something against the letter d? ;-)) Requesting that a contract be renegotiated is neither lying not cheating. They have the right to say no.

The fact that Budimex were prepared to take 90% at the end with only 10% upfront means we investors potentially have a lot of clout to use against them as they could be stuck with 90% of their cashflow missing and the apartments to sell all over again. Obviously it's not in my interests to see this happen, as I'd lose my 10%, so why don't BOTH parties try to (re)negotiate something sensible? Eh?

PS do you work for a developer? Budimex by any chance?

As was proved by several developers during the boom time: when prices are rising, developers are quite happy to return people's deposits if they do not agree to pay significantly more than the price agreed in the contract. What goes around comes around.

Nicely put, Harry.

It was not good business practice then and it is not good business practise now.


And remember it just keeps going around and around ...

If the developer has a clause written into the contract which allows for an increase in costs due to "unforseeable" circumstances, then, you know the risk you take. It is no different than the airlines having to levy a fuel surcharge if the price of oil rises substancially due to investors gambling on the price of oil.

I doubt that "Budimex" has a clause that offers a discount should property prices fall.
Ash, I hope many people do business to you, not with you. Then you will know the value of honour.

I have nothing to do with Budimex but have had my own company for 36 years.

Harry, if this is the practice that is carried out by Polish developers, then I would not condone this either.

I totally agree, airlines and developers are as "honest" (ahem) as one another


So you define "honour" as putting yourself out of pocket rather than defending your own interests? Interesting. I'm simply suggesting that both parties could be reasonable so that neither one is stuck with too much of a loss.


No, just lots of clauses in their favour, surprise surprise! The key clause is that they get to keep my 10% if I don't complete. The question now is whether they would want this or not.

I define "honour", as keeping my word. Its called "integrity", something you might learn one day.

He has given his word that he will either pay the remaining 90% of the purchase price or give up the money which he put down as a deposit. Either he buys the flat or Budimex get to keep his cash. It's not the same situation as with the developers who promised to sell people flats at a certain price and then jacked the prices up as the market went up. Those developers broke their promises, he's keeping his.

The point which he is trying to make is that the value of his property has fallen by more than 10% since he put down his deposit. So he should walk away and leave his deposit with Budimex. The question is whether Budimex want to keep him as a customer by selling him the apartment he had reserved at its present market value or whether they want to go to the trouble of finding a new customer (not an easy task in these troubled times).

But you do realize you are clearly suggesting doing what you find as (ahem) "honest" as them, don't you?.


But he is not suggesting that, he is saying that if he gets enough people he can negotiate better terms by threatening to pull out, there is another word for this type of behaviour.


We all know what is going on here.
And I know Harry if a developer was to come on here and say, something like this


You would go through them and rightly so.

I am a developer but I am not affiliated with Budimex in any way.

We could argue about morals endlessly. The fact is Budimex specified the 10/90 payment structure, not us. That would have put them in the perfect position to mess us around when the market hit the skies in 2009, as it was supposed to have done :)

Sean - when swimming with sharks it helps not to be totally toothless. Investors banding together helps to even the scales somewhat. One small private investor is NOT equal to one multibillion $ developer.

Avalon, I'm sure you've missed your true vocation as a priest somewhere along the line, but just remember, it's very easy and cheap to preach morality when it's not YOUR money on the line but someone else's. Maybe think about that, or look up the word hypocrite in a good English-Polish dictionary.


Two words, in fact: common sense

PS I'm not attributing any wrongdoing or dishonesty whatsoever to Budimex. It's just that other developers employing sharp tactics have given investors the idea that they can play the same game when the market looks different.

Thread attached on merging:
NEW: Budimex Murano development (central Warsaw) Phase I

I'm trying to get as many investors as possible to persuade the developer to renegotiate contracts to give us all significant discounts on the overall price, say 20%.

Not only have apartment prices fallen but Budimex are delaying completion until Spe 2009 - four months later than agreed.

The fact investors owe an outstanding 90% gives us massive leverage against the developer - it'll be really stuck if sales fall through.

POLITE REQUEST: Please only comment on this thread if you have useful and relevant information or indeed are a Murano investor. If you want to morally posture, there are other threads to do so. Thank you.

Does the contract not have a penalty fee for being late?.
It is standard in most contracts.


Okay.

Budimex is linked to a company in Israel, it may go into receiveship soon. watch this space

Budimex is owned by Ferrovial, the largest Spanish developer. They aren't doing too brilliantly.

ash1972,
Does your contract not have a clause about a penalty fee for Budimex being late with the build?.
It is standard, most of the time.

Not sure of the scare stories re Budimex - they have quite a lot of infrastructure projects on (roads, airports etc) which should tide them over and they are long established pre-boom.

On the other hand whatever happened to Exbud ? They used to dominate construction in Poland when I first came here !

Per your request Ash I won't moralize - business is business and some developers were doing the same (though I would be surprized if Budimex were one). Do check however that by doing this you could damage your credit score in Poland - so it might cause an issue in the future.

Interesting point - that's certainly a possibility. My strong preference would be to renegotiate rather than just walk away.

If I were a developer stuck with unsold flats I would seriously consider it because it produces far better cashflow (but not paper profits) than just sitting on them. Then again Budimex may be awash with cash, who knows!

ash1972,
Does your contract not have a clause about a penalty fee for Budimex being late with the build?.
It is standard, most of the time.

(Third time's a charm?)

Sorry Sean. To be honest I don't know. They would insist on writing these contracts in Polish..

Seriously, I'll have a look, but I don't think the penalty clause (if there is one) will be my biggest bargaining chip - market conditions will.

You may be pleasantly surprised.
I know someone whose bought a new flat in Krakow and the penalty clause is 11,000 Euro and their deposit back, if they decide to pull out.

That build is also late according to the contract.
Which I thought was fairly hefty but the developer will just get it out of the builders for it is their responsibility to be on time and considering how "warm" the previous two winters have been.

I was surprised they were late at all.
So perhaps it is worth checking out, explore all avenues.

Best regards,
Evil Developer :)

I'm sure you were one of the nice ones! Thanks for the info Sean.

Didn't you know all developers are Santa worshippers? ha ha ha ha.

No problem, we all need a little direction every now and again.

Hi Ash,

in many contracts, there is a clause that allows for delays if this is due to extreme weather conditions which prevent building works to take place.

in reality a delay of 3-4 months is not a great deal and most investors will not bother taking a developer to court over this ... going to court is an expensive and also very time consuming route.

Contracts would of course be in Polish ..... but when I had clients purchasing property in Poland I provided a service where the contracts were translated into English,that way everyone was clear what they were letting themselves in for, and also checked by a lawyer who would try and negotiate better terms if at all possible. In the boom property period, negotiations were quite tough and developers would not concede on many points, however now the tables have turned, the buyer is in a much stronger position and has a much better chance to have his conditions met:o)

It's true that there were unscrupulous developers who


However if buyers had their contracts signed in notarial form then there was nothing the developer could do to demand an increased price.

You signed a contract (was this in notarial form?) on 10/90 payment terms, but in the meantime prices have dropped , it's just your bad luck that the property market has turned this way. Like yourself most people expected prices to continue to rise and were hoping to make a substantial profit.

Just accept that you purchased at the high end and unfortunately have overpaid for your apartment in today's prices.

I'd be wary of pulling out of the original agreement , because as someone has already mentioned your credit rating could be affected, and would have an adverse effect on any mortgage application.

.

Thanks Polanglik, that's pretty useful information. Would pulling out be the same as renegotiating from a credit rating perspective?

Also, surely there's a fair chance that the developer would actually WANT to renegotiate given that it's no longer "their" market?

Hi Ash,
As a property investor in Poland myself,although not in your development ,i have read the replies to your subject with interest.
I would like to say that there is nothing wrong with trying to renegotiate your contract and this has nothing to do with honour or integrity.A business deal is all about win win.If either party is unhappy with the arrangement then their should be scope to renegotiate and if that fails,an attempt to sever the agreement is the natural course.

Which ever route you take you need to get yourself an English speaking Polish solicitor,if you dont know one ,i can put you in touch with mine.

A couple of things you may want to consider.

Check to see if your contract has a valorization clause within it.Some of the largest Polish developers have this.A decision by the Polish consumer protection board just before christmas may give you some ammunition if your contract contains this.

Some Polish banks base their lending on loan to value ie Millenium, others on loan to cost price Metrobank.If your borrowing is based on value then you may have a funding problem.You could use this when renegotiating with the developer.

Good Luck

Thanks kneehawk, that's very useful indeed. There's a chance that Budimex are simply in breach of contract as the agreement allows for only a 2 month delay and they seem to be 4 months behind.

Ash1972, you comments are getting on my nerves, hope you loose all your money, that will teach you for making money at the expense of the poles ha ha

Mr Justice Done, do you actually mean 'lose' rather than 'loose'? Apart from not being able to spell you are a complete moron. Don't you think for every foreigner who loses money due to falling property prices there are not at least 10 local Poles who'll lose too? And on the whole they're much less likely to be able to afford it.

Ash, any outcomes of your efforts to re-negotiate the contracts? I have invested 10% deposit in another Budimex development (due to be completed in Autumn 2009) and I am now considering various options, including yours one. If you already took some steps, I would be happy hearing from you any results.