Q & A Table of Contents
How Do I Recoup Lost Rental Income?
From: David, Melbourne, Australia
Question: I need some negotiation advice on property settlement and seeking lost rental income due to building delays.
In early March 2000 my partner and I entered a contract for an investment property, which was under construction. The settlement related clause was basically within 14 days of the issuing of the certificate of occupancy. The builder/developer/marketing agent verbally represented that the property was to be completed in late April 2000. Despite several sessions, requests and discussions I was unable to have project timelines included in the contract.
Since that time the property has stumbled along despite the best efforts of the vendor pressuring the builder to complete the property. The vendor has paid the builder in December 2000, holding back only $10,000 as insurance to have the property completed. Since December, there has been little work completed - funny that. Throughout this process we have been liaising with the legal people pressing the vendor & builder to complete the property. Likewise the bank who supplied funding to the vendor is pressuring the vendor to have the builder complete the property so we can settle and the bank can get paid!
We have continually logged with the solicitor's (ours and vendors) a claim for lost rental between April 2000 and now. There is a clause in the building contract between builder and vendor that penalties will apply after X days. We are in that period now.
Our question is: - how can we leverage our situation to have the lost rental income claim realised?
Response: The scenario you present raises many questions in my mind:
- Have you advanced any money to the vendor or the builder?
- Who owes the bank money? Have you borrowed money? Has the vendor borrowed?
- It is not entirely clear from your question whether there is a written contract -- or who the parties to the contract actually are. Does the vendor have a contract with you; does s/he have a separate contract with the builder, or is it all in a single document?
- Is there any documentation under which the vendor -- or any other party -- guarantees or even just promises you rental income? Without this documentation I suspect that your capacity to be compensated for lost income is extremely limited.
In negotiation it is crucial to cover all the details ahead of time; the details that are ignored during negotiation have a nasty habit of sneaking up and biting you in a vulnerable part of your anatomy at the worst times or without warning. You and your partner should go through every written record you have, particularly communication between you, the vendor, and the builder for any indications of promises or guarantees of any kinds.
I am sure that your lawyer can advise you on relevant legal issues. If you hope to derive any benefit from the situation without resorting to legal help, think hard about what the vendor or builder might have to gain or lose by offering you the compensation you are seeking. Unless it is in their interest to send money in your direction, it is hard to imagine what new motivation you might create for them to do so. Ask lots of questions -- of yourself, the other parties, and outsiders who have dealt with the vendor or builder in the past. Perhaps this will yield some clues to help you.
You are in a challenging situation. I wish you good luck,
Steve
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