Hi all,

I would like to ask if anyone know how will this actually goes around..

Let's say I am a property developer. I got a piece of land, and that land is being charged to a bank (Say A bank) for bridging loan finance of the project.

Let's say the property is RM 1million (new development properties), and let's say it takes 3 years to be completed.

The question here is this.

Let's say a buyer, MR C, comes and buy this new under-construction property from me at a price of RM 1million, borrowing 90% of loan.

SPA and Facilities agreement all signed..

The construction begins and developer start to claim bank for the progressive billing on the construction status.

Let's say after 2 years, claiming 40% which is 400k, the purchaser start to default already..

Now the question is...

1. When the purchaser default with bad payments, will it affect the developer in claiming the remaining 50% of the sum ?

2. When the purchaser bankrupt, will it affect the developer in claiming the remaining 50% ?

Anyone had any knowledge on this?

Dam.. post in wrong thread.. Can Moderator help me to shift this to Finance Business Investment general section?

wow bone gor sejak bila u shift to property section

Die...property bust signals sighted

I shift to property section?

Lolz.. I was in property segment 3 4 years ago already till now also lor.

Where got die??

Got die ah???

People still rushing to buy 1k psf REVO suites at bukit jalil ma

My fren in property field...

20-30% discounts are commonplace...

Even got 1 developer, buy a house (about RM1mil), free Honda Civic!

now when u buy property.. u not only buy property..

U buy along...
Personal loan - free cash
Hire Purchase - free car

Well.. if u need cash and car.. thats a good option, because leveraging the borrowing from property, it is a lower interest charge..

hahaha..

Ohhh... I want learn with u liao..
Bila u free? Want lunch with u leh

This post has been edited by djhenry91: Nov 2 2015, 12:52 PM

i do sales and financing only..

recently want to know about developing a little bit only..

my leg patah already lor.. wont be able to move around for at least 1 mth.. haha

lol..suddenly leg patah..want lunch or yamcha with u..
u tak boleh move pulak..sien lo

Easy. Just go to his house and have free food on the house. Healthy home cook food some more.

hope so he will let me go his house haha

Need to see the letter of undertaking exchanged between the developer & bank. Usually the bank will want to have their undertaking to release the loan amount subject to purchaser having not defaulting in conditions of loan agreement. If developer accepted this, then bank has the right to stop further loan drawdown.

However, if the developer did not agree to that proviso, then bank is bound to release the loan and go after the purchaser for any default.

In event of bankruptcy, the SPA will terminate. In this case, the termination clause will kick in, There will be a forfeiture sum and any balance after deducting all outstanding will be refunded.

I am not a lawyer, but my understanding is as per above.

This post has been edited by ??!!: Nov 2 2015, 04:14 PM

Wah.. based in your first scenario.. that is scary.. so if the project many bankrupt/default kaki, the whole project might be affected because of those kaki lor ?

In the event of bankruptcy, spa not valid.. but bank got disbursement towards tat unit. So how ? The property is bank punya or developer can resell the prop ?

Need a lawyer that really does this before to comment a bit

parking dulu

but from my understanding, if the buyer loaned from bank to buy, bank should take up the unit and go for auction right? since bank has been paying up till the day Mr.C bankrupt. unless the buyer didnt take loan...

waiting for more replies.

Legally..........if a purchaser declares bankruptcy in the middle of a purchase, then the Letter-of-Undertaking will be the first point of reference on how this matter will be treated. Second stop will be the Department of Insolvency, who will decide the stage at which the progress payments have been released, then from there provide judgement on which party has right to the proceeds recovered from the property that is indicated in the Sales and Purchase Agreement.

The Sales and Purchase Agreement will reference the property in-question, though one party in the agreement has given up his rights to the property because of a bankruptcy filing, and judgement that has been passed down by the courts.

Hope this helps.

It's the risk one bears when one buys a property that is under construction.
You don't need bankruptcy to present this 'scary' scenario.
Buyers can opt out anytime by refusing to pay progress bills and force developers to terminate the SPA. Of course, they lose the forfeiture sum in the process. In a bad downturn, we see many of such cases.
Therefor, it's prudent to select development by strong developers who have the holding power to finance the project during the bad times, irregardless of low sales and/or buyers' default. Also may want to avoid developments that encourage speculators with no holding power.



The property belongs to the buyer, but the bank has a lien on it.

The SPA is signed between buyer and developer. The bank is like an agent of the buyer paying on behalf of the buyer.

As i remember seeing in many agreements, a bankruptcy event will bring the agreement to an end.


if the property is not fully paid up at time of bankruptcy, the ownership rights has not fully passed to the buyer.
Banks are not interested in holding property. they are in the business of lending money.

Hansel has explained the position of parties involved in the event of bankruptcy.

thanks for many good input..

however, i would still want to seek more input on the disbursement part of it..

If the buyer default and unable to pay up...

A. Bank will freeze all future disbursement in relation to the unit
B. Bank will continue to disburse until completion

If scenario is A, that would be a tough game for developer. Developer cannot claim progressive billing to complete the unit. But however, if SPA voided, means Developer can resell the unit, that might solve the problem looking at it on surface.

But the issue is.. If Bank A had a certain disbursement amount in the under con unit, and Buyer B come and buy with financing from Bank B, how would it be ah? The under con unit cannot be charged to 2 banks right? Unless Bank B settle Bank A outstanding and pass it to the purchaser B ?

If that is the scenario that Bank B settle Bank A, then Purchaser A (default purchaser) jao no more liability on this undercon property ad???

Can be arranged like this one ah?

haha

This post has been edited by Bonescythe: Nov 2 2015, 11:46 PM

I stay under the bridge one wor, u sure u want to come visit me under the bridge beside klang river?