All Topics / Help Needed! / Is the 10% refundable if developer goes bankrupt

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  • Profile photo of YEONGYEONG
    Participant
    @yeong
    Join Date: 2012
    Post Count: 2

    As topic said, is the 10% deposit (in developer trust account) refundable if the developer goes bankrupt? Can the developer use the money in trust account before settlement?
    If that is refundable, when is the buyer have right to take the money back?
    Thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Depends on the terms of the contract.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of BuyersAgentBuyersAgent
    Participant
    @knightm
    Join Date: 2005
    Post Count: 338

    Depends on the terms of the contract.

    As well as what they actually did with the money (remember they went bankrupt for a reason)

    BuyersAgent | Precium
    http://www.precium.com.au
    Email Me | Phone Me

    South Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    The contract may allow them to access the funds to complete development works, or it could be held in trust until completion. I have seen purchasers lose their deposits as the developer has used the funds to develop, only to go bankrupt – leaving the buyers without any recourse.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Generally deposits are held in trust for the vendor. This means it is still your money until certain conditions are met – such as completing the contract.

    I just reviewed a contract which allowed release of deposit and I quickly struck this clause out as there is a risk the vendor won’t complete and could go bankrupt or someone else could put a charge over their property and it may be impossible to get the money back.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of ChaintopChaintop
    Participant
    @chaintop
    Join Date: 2021
    Post Count: 0

    Quite a familiar situation, especially after the pandemic and the liquidation of many companies

    Profile photo of AmbassadussAmbassaduss
    Participant
    @ambassaduss
    Join Date: 2021
    Post Count: 0

    And if a person had some benefits in the process of running a business, and then decided to sell it, does he receive any money for being a manager for more than 5 years?

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