THE HIGH Court has refused to grant a developer orders requiring three couples to complete contracts to buy investment apartments in Citywest, Co Dublin.
The contracts were entered into in 2006, at the height of the property boom. Aranbel Ltd is, however, entitled to damages in lieu of the order for “specific performance”, to be assessed later, Mr Justice Frank Clarke ruled. The decision has implications for people who entered similar contracts but cannot perform them.
The judge said he was satisfied three couples who contracted in 2006 to buy apartments in Fortune Lawns at Citywest cannot complete the contracts because they have neither adequate assets nor borrowing capacity to do so, the value of the properties being now considerably less than the agreed purchase price.
In those circumstances, making specific performance would be in vain and the court would not therefore make those orders, he said. He was satisfied impossibility of enforcing specific performance due to lack of adequate funds on the part of a purchaser provided a reason for refusing specific performance. The onus of proof to prove impossibility rested on persons making that claim, he added.
The judge also stressed he would defer to a more suitable case a decision as to whether specific performance which might be possible, via for instance the sale of a family home, could be refused on hardship grounds.
He was giving his reserved judgment on separate sets of proceedings by Aranbel against Stephen Darcy and Linda Crampton; Seamus and Audrey McGivern and Richard and Mary Darcy, aimed at securing orders requiring them to specifically perform contracts signed by them in September and October 2006 to buy three investment apartments in the Fortune Lawns development. Mr Darcy and Ms Crampton bought the apartment for €360,000 and, with interest, would have to pay €400,000 to close the contract, the judge noted. Even if they sold their family home, they would have to borrow up to €260,000 to close the contract and he was satisfied there was no realistic prospect they would get those funds.
The court heard the net assets of Stephen Darcy and Linda Crampton are just over €70,000 while investment properties held by them and another defendant couple, Richard and Mary Darcy, were said to have a net deficit of some €160,000. The financial situation of Richard and Mary Darcy and of Seamus and Audrey McGivern was less favourable than that of the first couple, the judge said. He was satisfied the statements of affairs were broadly accurate and he noted property prices had fallen since they were prepared by another 10 per cent.
The judge earlier noted many people who bought property at the height of the market are now in significant financial difficulty with many facing negative equity.
Those who bought investment properties also faced significant losses and many had come before the courts relating to their obligations on loans. The couple before him fell into a second category of persons who entered into contracts to buy property at or near the peak of the market who were being called on to complete the sales when the agreed purchase price significantly exceeded the current value of the property.
The judge noted the apartments were purchased at a time when it was anticipated it would take another year or so for the building to be completed. It was not disputed, by March 2008, each of the defendants was legally obliged to complete the purchase.
Previously, when a purchaser was unable or unwilling to complete, they often simply forfeited the deposits paid, the seller kept the property and dealt with it as they wished. However, more recently, the seller was concerned that the deposit would not compensate for the difference between the contract price and the price the property would now get.
Given that deposits are 10 per cent of the price and prices appeared to have fallen by over 50 per cent, it was hardly surprising that case was made, he said. All the defendants accepted there was a binding contract of sale and they were in breach of their obligations under those contracts, the judge said. He was satisfied they could not complete those contracts.
