Robert and Margaret Smallridge sold their Avondale home to Paljeet Singh at the peak of the property market, in November 2021, for $1.925 million. Photo: RNZ
A property reseller caught out by the falling housing market has been told to pay an Auckland couple more than $750,000 in damages, plus more than $100,000 in interest.
Robert and Margaret Smallridge took their case against Paljeet Singh to the High Court in Auckland, where Justice Tracey Walker ruled in their favour.
The couple sold their Avondale home to Singh at the peak of the property market, in November 2021, for $1.925 million. The price was significantly more than the Ray White real estate agents handling the sale had valued the property at.
He was to have a year to settle the deal, giving him time to find a new buyer and on-sell the property.
But in the interim, property prices in Auckland fell sharply. Real Estate Institute data shows that in the year to November 2022, Auckland prices were down 18 percent.
Six weeks before he was due to settle, Singh alleged that the couple had breached a clause of the agreement, which gave him access to the property to show potential buyers. He argued he could cancel the contract as a result and should get his deposit back.
But the Smallridges said they were only asked for access once and co-operated immediately. They wanted compensation for their losses.
Walker said, shortly after Singh won the auction, he engaged Barfoot & Thompson to sell the property for him.
Two weeks later, the agency put a "for sale" sign in front, to which the Smallridges objected, saying no one had consulted them.
Their son, Tom, spoke to an employee of Barfoot & Thompson, who emailed the office and told them that the sign needed to be removed, and the house occupants had not given permission for viewings.
Tom Smallridge said this meant that they were happy to give access on request but did not want regular viewings or an open home plan, as had been communicated to Singh before his purchase.
Salesperson Kapil Rana said he went to the property ask about access and was not allowed.
But the Smallridges denied this and said they would have allowed access if they were asked.
Singh told the court he had an offer from a buyer who was willing to spend more than $2.1m on the property, but who walked away because of a lack of access.
Rana said access was important to the buyer so when it could not be arranged, he asked to look for another property instead.
But Walker noted that under cross-examination, Rana agreed the buyer had walked away because Singh countersigned his offer wanting $2.45m. The buyer would not increase his offer beyond $2.155m.
"Rana also gave evidence that throughout the period through to August 2022, during which time he was telling anyone who made enquiries that the price guide was $2.3m to $2.4m, the interest in the property was low. He confirmed that no party had requested access."
In August 2022, there was a meeting held with Ray White salespeople. One salesperson, Jason Cooper, said Singh told them he needed to reduce the purchase price to go ahead with his settlement.
His colleague, Mark Bryant, who had handled the Smallridge's sale, said that was not something he had the authority to do and it would need to go through lawyers.
A week later, Singh and Rana visited the property to talk to the couple.
"The Smallridges insist that Singh indicated he wanted to back out of the agreement because he was unable to obtain lending," Walker noted.
"They say that Singh appeared upset at the time. They vehemently deny that anything about access was discussed or that Mr Smallridge said that there would be no access until there was settlement."
Singh denied telling them he wanted to back out and said his concern was only about access.
But two weeks later, he asked for access for a valuer and that was immediately granted.
In November, there was a call between Singh, Bryant and auctioneer Craig Dafroch, who had knew the Smallridges' solicitor. He had met with her and they had decided to contact Singh to suggest a discounted sale price to ensure the settlement took place.
"Darroch's evidence was that he explained to Singh his concerns regarding the crash in property prices and Singh's purported cancellation," Walker's judgement noted.
"He advised Singh that he was dealing with motivated vendors and suggested that he should offer to settle for a reduced purchase price. He suggested starting off by seeking a $400,000 reduction in the purchase price. His evidence is that Singh had no interest in a reduced price and responded saying he had found a lawyer who would get him out of the contract."
The Smallridges' lawyer issued a settlement notice on 24 November, 2022, giving Singh 12 days to settle but this did not happen.
They went on to resell the property, with a much larger marketing campaign, but only received $1.13m.
That left them with a total loss of $753,803.25, including the difference between the two sale prices, the commission on the resale, marketing costs and more legal costs - offset by the $96,250 deposit they had received.
Walker said the single issue to decide was whether they had refused reasonable access, and they had not.
She said it was clear there was little interest in the property overall.
"Combined with this, the development character lessened any need to physically view the property, particularly the dwelling, even if there had been interest."
Walker said negotiations with the one interested buyer did not stop because of access but because the price could not be agreed on.
"The issue with the 'for sale' sign shortly after Mr Singh purchased is immaterial… At best, it is equivocal but more likely consistent with Tom Smallridge's recall of that conversation. While he has no recollection of using the word 'viewings', it is just as likely that he said his parents did not want to have any 'open homes' scheduled."
Walker said there were no grounds to cancel the agreement.
Singh was told to pay damages, as well as contractual interest at 14 percent from 23 November, 2022 to the resale on 14 April, 2023, to a total of $99,604.48 and contractual interest on the net loss on resale at $268.01 per day from 15 April, 2023 until it was paid.
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