星空传媒

I have been asked to advise on an issue that has not troubled developers or contractors for many years 鈥� the falling value of property being sold off plan.

The issue is this: a development for sale is due to complete by a particular date. Sometime before that date, the developer intended to market the development off plan. At that time, the property market was healthy and the developer believed all properties would be sold, if not off plan, then shortly after completion of the development. But delays occurred. The development could not be marketed or sold until later, by which time there were no buyers and the properties were being sold for significantly less than expected.

I have met developers wanting to know if they can recover this loss from the contractor, namely the difference in sale price as a result of late completion. Similarly, contractors want to know if they are liable to the developer for losses caused by the downturn in the market. The answer is an unsatisfactory 鈥渕aybe鈥�.

There is little legal authority on this point. The cases of negligent surveyor valuations from the nineties are not particularly helpful because those cases concerned property being purchased rather than sold. In those cases, the claims concerned losses that the purchasers or lenders would have suffered in any event by reason of the falling market.

One such case was South Australia Asset Management Corporation vs York Montague in 1997, in which the House of Lords decided that the damages recoverable in respect of a negligent valuation in a falling market were limited to