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How to get out of a Preliminary Purchase Contract?


morgy 1 | -  
2 Oct 2009 /  #1
I purchased an Off plan property in Katowice about 18 months/2 years ago, which is due to be ready for handover end of December. I paid an initial deposit of about 15% I believe, then later a further 80%, and the last 5% is due to be paid on handover. I could do without the financial burden now, and will struggle to even pay the final 5% (about 14,000 zloty). What options do I have of getting out of the purchase and getting back all, or at least most of, the money I have already paid? Can anybody out there advise?
delphiandomine 85 | 18,254  
2 Oct 2009 /  #2
Common situation, and I'm afraid many people are unlikely to have sympathy with you as presumably, had the housing market been strong, you would've happily sold or rented it for a profit to Polish people that could hardly afford it.

I've heard that there can be loopholes in the contracts, but you'll need to engage a Polish lawyer with property market experience - and even then, there are tales of people being locked into contracts in developments that are still months away from completion.

You certainly won't get any of the money back - in the very best case scenario, you'll lose the deposit and any additional money paid thus far. If you can't afford 14,000zl, then you're unlikely to have the money to engage a lawyer who can get you out of the contract.
Harry  
2 Oct 2009 /  #3
Your best bet is to start saving: if you haven't got the 14,000zl when needed, you can kiss goodbye to all your money.

As for longer term, you can either sell soon (and lose 10% to 15% of your investment) or you can hold it and four or five years sell it for what you paid for it.
inkrakow  
2 Oct 2009 /  #4
It all depends on the terms of your contract. Often the first payment is a "zadatek" - a form of deposit that if you pull out the seller keeps it, whereas if the seller pulls out, they have to pay it back + the same again (as a penalty). There's another form of deposit called a "zaliczka" which is just returned in full if either party pulls out. It would be a very unfavourable contract that means you loose 95% of the agreed price if you can't pay the last 5%!

Given the state of the market at the moment, if I were in your shoes I'd negotiate with the developer as the last thing they want is to have to give any money back and be left with an apartment they can't sell. If your contract allows, you could also try to sell the contract to someone else and assign it to them in exchange for a reduced price.
Wroclaw Boy  
2 Oct 2009 /  #5
you would've happily sold or rented it for a profit to Polish people that could hardly afford it.

Ahh god forbid making a profit from Poles. Here he goes with his blindly defending Poles again.

As for longer term, you can either sell soon (and lose 10% to 15% of your investment) or you can hold it and four or five years sell it for what you paid for it

lose 10-15% now, or sell in four to five years for what you paid. That would mean an annual capital appreciation rate of 1-2% Harry ahnd that property prices have decreased in Poland. Are you suggesting she over paid in the first place.?
Harry  
2 Oct 2009 /  #6
lose 10-15% now, or sell in four to five years for what you paid. That would mean an annual capital appreciation rate of 1-2% Harry ahnd that property prices have decreased in Poland. Are you suggesting she over paid in the first place.?

The chances are that she did pay slightly over the odds.

Are you really saying that property prices haven't decreased in Poland? Round here they certainly have. Some of the high-end new-build stuff is down by as much as 20%, although the average is much less than that. I hear from some real experts that Wroclaw is down by as much as 25%.

Personally I don't see the fall in prices stopping until 2010 at least and they won't climb up to where they were two years back for at least another four years.
polsky 2 | 84  
26 Oct 2009 /  #7
Yes I also believe that the prices will continue to fall until 2011 even.

It's not normal that the prices in Poland to be HIGHER than in Austria or Germany...

Lawyers are said to be paid by hourly rate in Poland.

But ask yourself this: in which ways does this lawyer, guarantee that the property is safe
and the contract is good, and the property
doesn't have any requests or unpaid debts to other 3rd parties?

A lawyer could check just nothing, charge you 2000 PLN saying that he did check,
and that's it.

How does the lawyer guarantee anything at all?
vndunne 43 | 279  
27 Oct 2009 /  #8
Given the state of the market at the moment, if I were in your shoes I'd negotiate with the developer as the last thing they want is to have to give any money back and be left with an apartment they can't sell.

Just following on from this suggestion, can you check to see if there are still apartments available in the development that you bought. And if Yes, can you see what prices they are now going for? There has definately been a decrease in prices since your initial purchase, and while the level of decrease may differ from city to city, I dont think it would be extreme to think that prices have gone down by at lease 5 % in Katowice. Try and check with some estate agents to see what has happened. Maybe then you can go back to the developer and re-negoatiate i.e. get out of paying the final 5%. Of course, this is totally dependent on your desire to keep the apartment in the first place.

If you are looking for the return on your investment, it will be an uphill struggle. There has been such a change in the property market over the past 2 years, that developers will be very unwilling to give back money especially if they have a lot of unsold stock on their hands.

Best of luck with whatever you decide.

Regards,
vincent

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