ᐅ Condo Scams – The Property Developer Company Dissolution Trick
Created on: 24 Sep 2020 15:35
T
Tolentino
Dear all,
I’m not sure if I want to post this here without mentioning specific company names, but personally, I don’t have all the documents and don’t want to name anyone involved in the ongoing proceedings yet. I hope the thread will be approved anyway, as I find the topic interesting and it might help other property owners or potential buyers.
So, this is about my condominium unit. I bought it in 2015 from a developer (hereafter “the developer”). The completion was in 2016, when I moved in.
The purchase contract was with a limited liability company (GmbH) set up specifically for the project, which was a 100% subsidiary of a well-known large development firm. Actually, the parent company (hereafter “the parent company”) was responsible for planning and supervising all trades. The people we dealt with were all employed directly by the parent company (or possibly hired as freelancers?) and had, for example, email addresses with the parent company’s domain.
During the handover, a few minor defects were reported in my private property and most were corrected. What remained was not much (maybe about EUR 500 in value).
An independent expert was appointed for the handover of the common property (although commissioned by the developer/parent company), who found so many, partly serious defects (including the roof) that, according to his statement, will cause problems in the future, that the owners’ association refused to accept the handover.
This led to back-and-forth defect notifications, offers for discussions, lawyers etc. Meanwhile, the developer GmbH was dissolved, and now the second legal successor, an investment company, is our counterpart. Currently, there is a preservation of evidence procedure against this investment company, whose lawyer only used stalling tactics, and recently a mediation appointment ordered by the judge failed because the lawyer did not show up.
A court hearing is now scheduled (February 21), and it seems likely that our claim will be granted in absentia. Since the amount involved is over EUR 300,000 (about USD 330,000), it is assumed that the investment company will go bankrupt.
Our owners’ association as well as the supervisory board, which includes a real estate lawyer, say that nothing can be done.
I am wondering, if it is obvious that this developer GmbH and its legal successors existed mainly to avoid liability for warranty and defects, meaning that the liquidation and ultimately bankruptcy of these companies with outstanding claims were knowingly accepted or even intended, couldn’t one then hold the respective managing directors or founding shareholders personally liable for fraud?
What is your assessment? Does anyone have experience with this?
Thanks and regards
Tolentino
I’m not sure if I want to post this here without mentioning specific company names, but personally, I don’t have all the documents and don’t want to name anyone involved in the ongoing proceedings yet. I hope the thread will be approved anyway, as I find the topic interesting and it might help other property owners or potential buyers.
So, this is about my condominium unit. I bought it in 2015 from a developer (hereafter “the developer”). The completion was in 2016, when I moved in.
The purchase contract was with a limited liability company (GmbH) set up specifically for the project, which was a 100% subsidiary of a well-known large development firm. Actually, the parent company (hereafter “the parent company”) was responsible for planning and supervising all trades. The people we dealt with were all employed directly by the parent company (or possibly hired as freelancers?) and had, for example, email addresses with the parent company’s domain.
During the handover, a few minor defects were reported in my private property and most were corrected. What remained was not much (maybe about EUR 500 in value).
An independent expert was appointed for the handover of the common property (although commissioned by the developer/parent company), who found so many, partly serious defects (including the roof) that, according to his statement, will cause problems in the future, that the owners’ association refused to accept the handover.
This led to back-and-forth defect notifications, offers for discussions, lawyers etc. Meanwhile, the developer GmbH was dissolved, and now the second legal successor, an investment company, is our counterpart. Currently, there is a preservation of evidence procedure against this investment company, whose lawyer only used stalling tactics, and recently a mediation appointment ordered by the judge failed because the lawyer did not show up.
A court hearing is now scheduled (February 21), and it seems likely that our claim will be granted in absentia. Since the amount involved is over EUR 300,000 (about USD 330,000), it is assumed that the investment company will go bankrupt.
Our owners’ association as well as the supervisory board, which includes a real estate lawyer, say that nothing can be done.
I am wondering, if it is obvious that this developer GmbH and its legal successors existed mainly to avoid liability for warranty and defects, meaning that the liquidation and ultimately bankruptcy of these companies with outstanding claims were knowingly accepted or even intended, couldn’t one then hold the respective managing directors or founding shareholders personally liable for fraud?
What is your assessment? Does anyone have experience with this?
Thanks and regards
Tolentino
So, if the net rental income from the condo, after all expenses (including taxes), significantly exceeds the savings achieved by using the net proceeds from the sale (sale price minus possible agent fees, loan repayments, and prepayment penalties) for the new financing, I would consider keeping the apartment for another 10 years. After some time, when the market has calmed down, it might even be possible to sell it at a better price in 10 years.
Selling is definitely the less risky option (no rental losses, no unpredictable maintenance costs due to defects)...
Maybe you could negotiate a mortgage swap with your bank so that the existing loan continues. That way, you wouldn’t have to pay the prepayment penalty...
Of course, if the entire financing is only viable with the rental income from the condo, you probably don’t really have a choice...
It’s quite similar with us regarding the condo. We plan to keep it at least until the end of the fixed interest term in 7 years and then reconsider selling. I did the calculations: to come out ahead from a sale, we’d need to sell the condo for about 300,000 (approximately 300k). We bought it 3 years ago for 200,000 (approximately 200k). Its current value is probably around 240,000 (approximately 240k). Still, we wouldn’t find a buyer for 300,000, so we’re keeping it.
Selling is definitely the less risky option (no rental losses, no unpredictable maintenance costs due to defects)...
Maybe you could negotiate a mortgage swap with your bank so that the existing loan continues. That way, you wouldn’t have to pay the prepayment penalty...
Of course, if the entire financing is only viable with the rental income from the condo, you probably don’t really have a choice...
It’s quite similar with us regarding the condo. We plan to keep it at least until the end of the fixed interest term in 7 years and then reconsider selling. I did the calculations: to come out ahead from a sale, we’d need to sell the condo for about 300,000 (approximately 300k). We bought it 3 years ago for 200,000 (approximately 200k). Its current value is probably around 240,000 (approximately 240k). Still, we wouldn’t find a buyer for 300,000, so we’re keeping it.
If I remember correctly a point recently discussed here again, you could now sell without paying capital gains tax, but once you rent out the property, you no longer can, and only after holding it for ten years again.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
11ant schrieb:
If I remember correctly, which has also been discussed here more recently, you could sell now without capital gains tax, but once you rent it out you can’t, and then only again after holding it for ten years. That’s not entirely correct. If he bought in 2016, he can sell tax-free in 2026, even if he rents it out starting in 2021. Alternatively, he can sell now tax-free (as long as he still lives in it):
“To avoid paying tax when selling a house, apartment, or land, the owner must have either lived in the property exclusively since completion or purchase or used it as their main residence in the year of sale and the two previous calendar years.
If the property was not owner-occupied, it must have been held for at least 10 years by the seller to avoid capital gains tax.”