Off the plan deposits in Ralan Group apartment projects not kept in trust funds
Buyers in a Sydney apartment block being built by the failed Ralan Group have been told deposits from their off-the-plan purchases have likely already been spent.
The administrator of the collapsed apartment developer is ascertaining the whereabouts of hundreds of deposits for the Arncliffe block and the Ruby at Surfers Paradise.
The semi-complete development, Orchid, was expected to be the showpiece of the private property developer company which fell into voluntary administration earlier this week estimated to owe creditors $500 million.
“The development is currently on time with a good proportion of pre-sales,” the administrators Grant Thornton advised yesterday.
But the administrators also noted their “initial estimate is that there is a significant deficiency owing to purchasers who elected to release their deposit.” Grant Thornton are investigating whether the “side agreements” had effectively granted use of the funds to Ralan as unsecured loans.
It is not usual practice for off-the-plan buyers to release their 10 per cent deposits with most developers instead safeguarding the money in trust funds.
“It is uncertain how much, if any, of your deposit you may receive back if you had agreed to release it as an unsecured loan,” the administrators told anxious Arncliffe buyers.
“We are currently in discussion with the relevant stakeholders about next steps regarding the development.
“We believe that the majority, if not all, of the deposits released have been used to fund the expenses of the group, including payment of interest on unsecured loans.
“The administrators will be undertaking an investigation into the group’s financial position to establish how these funds have been used and whether any recoveries can be made in the future that will be available to pay you back.”
It is not known what sale prices were achieved but realestate.com.au puts the average Arncliffe apartment price at $630,000, suggesting the deposits could average $63,000.
“If a purchaser did not elect to release their deposit, it is our understanding these funds are being held in the group’s trust account,” Grant Thornton’s Said Jahani advised the 1200 off-the-plan buyers.
The Ralan Group applied in 2014 to build seven apartment towers for the $132 million project on the Princes Hwy.
This article was first published in the Daily Telegraph.
