Plea to change law on 'glittering' deals for apartments
Four years after exchanging contracts on an apartment in Birmingham's "new icon", one woman fears being sued or made bankrupt.
Marketed as a "glittering jewellery box", Rosie Dyer, 30, said she was very excited about buying her first home in The Cube.
She saw plans for the canal-side tower and signed up to buy one of the 244 apartments it would offer - so purchased "off-plan".
The 23-storey building, devised by London "gherkin" designer Ken Shuttleworth, also offers shops, offices, a restaurant and panoramic city views.
But the glass-clad building, designed to echo the city's links to precious stones, has been hit by falling property prices and recession.
And Miss Dyer found she was in negative equity before even moving in.
"Myself and many other investors now find ourselves in the impossible position of being unable to complete on the apartments we exchanged contracts on - for reasons outside our control," she said.
She is now calling for changes to laws governing the sale of off-plan properties, to give people greater protection.
Miss Dyer agreed to buy the studio flat for £116,500, paying an £11,600 deposit when she exchanged contracts in 2006.
She said she wanted an investment for "her pension" and believed she was getting a bargain as was told by the seller it was worth £137,500.
However, Miss Dyer, a trainer for a mobile phone firm, said the flat was recently valued at £105,000.
She used her life savings for the original deposit, hoping to get on the property ladder despite a booming market.
"At the time, the pressure was on to be a first-time buyer, and property was getting more and more expensive," she said.
Lenders, who have since tightened their rules, have told her she needs a 35% deposit to get a mortgage - which she cannot afford.
Miss Dyer, who bought the property through an investor group, was originally told her flat would be ready in spring 2008, but it was not finished until December 2010.
The Cube developers, Birmingham Development Company, went into administration in March and the project's completion was overseen by administrators Pricewaterhouse Coopers (PwC).
Miss Dyer said PwC was now threatening legal action, unless buyers completed.
"I just don't have any assets to sell to raise the money.
"My car is a company car, so I don't even have that to sell," she said.
Miss Dyer said mortgage brokers had advised her few banks were willing to lend on mixed-use, high-rise developments because they presented greater financial risks.
Miss Dyer has set up a Facebook group with 39 other buyers of Cube apartments. Some had completed their purchases, but most were facing similar problems.
She said many were first-time buyers and "not cash-rich investors" and believes there should be greater legal protection.
"I just don't think they should allow these 'open-end' completion contracts," she said.
"It isn't fair that people have this financial burden hanging over them for years.
"Eventually I want to have children, but I can't even think about it with this hanging over my head."
PwC said before Birmingham Development Company went into administration about 130 purchasers entered legally-binding contracts to buy apartments at The Cube "as and when the building was completed".
Joint administrator Matthew Hammond said in a statement in spite of the development being placed in administration, the building was completed on 26 August "broadly in line with expectations".
He said a significant number of flat sales had now gone through.
"Birmingham Development Company naturally expects purchasers to fulfil their legal obligations failing which the Company will avail itself of the normal contractual remedies where purchasers do not complete contracts into which they have entered," he said.
Miss Dyer has suffered stress-related health problems because of her situation.
"The unreasonable delay has also dragged the stress out for many of us," she added.
Miss Dyer, who has moved to Newcastle from Redditch, Worcestershire, said she would rent the flat out if she could get a mortgage.
Charles Cook, managing partner of Bristol solicitors Charles Cook & Company, said legislation around buying off-plan "needed to be refined".
He said such cases were "becoming increasingly frequent due to the severity of the recession" and its impact on banks and property developers.
"The law is, in my opinion, currently a grey area and urgently needs clarification from the courts," he said.
"It is a shame that individual purchasers buying properties off plan for their own use are being caught up in this situation."
He said buyers should get their solicitors to look carefully at the contract provisions and in what circumstances the deposit was returnable.
In 2009, administrators were called in after the collapse of a development company renovating a block of 112 apartments called Thames Tower in Leicester.
Contracts had been exchanged on 111 apartments, but only 14 completed.
Joint administrator, Chris Stirland, partner of FRP Advisory LLP, said: "Thames Tower was an unfortunate casualty of the credit crisis.
"Property values plummeted at such a rate that would-be purchasers backed out - even though deposits had been paid."
He said prospective buyers could have been pursued for damages for breach of contract, but in this case it was concluded the legal cost and time to pursue individual buyers "would not be in the best interest of creditors".
Administrators found a buyer for Thames Tower and it was sold in November.