Buy-to-let investors are being forced to go through with the purchase of new builds that have fallen sharply in value, according to the law firm Wedlake Bell.
Many investors agreed to purchase off-plan properties - which were not yet built - at the height of the housing boom in 2007. However, with property values having dropped by about 20%, many had hoped to cancel their contracts. They now face a court battle to avoid going through with the sale when the building projects reach completion.
Wedlake Bell said a string of recent judgements suggested buy-to-let investors would have to go through with the purchase, rather than just forgo their deposit.
Jeremy Raj of Wedlake Bell: "There is worryingly widespread belief among buy-to-let investors that if they decide to withdraw from a purchase for which whey have exchanged contracts, that only their deposit is at risk.
"The legal position is clear: they are obliged to complete. Damages are not even restricted to the difference between today's market price and the price they contracted to purchase at."
Investors who cannot complete because they have not put in place funding may face debt recovery measures.
Published in the The Sunday Times, 6 September 2009