Failed sales in cheapest suburb cost developer
Reneging on deals to pay high prices to land-bank four homes in Christchurch’s cheapest suburb has cost a townhouse developer dearly.
Crawford Group was sued by the owners of four neighbouring Phillipstown homes after backing out of an agreement to buy them for a total $3.5 million. It planned to demolish them and build a townhouse complex. At the time of the sale homes in Phillipstown had a median value of $388,050, according to property analyst Core Logic. That figure is now $450,250.
Crawford Group signed the deals to buy the Olliviers Rd properties in November 2021, agreeing to settle the purchases 12 months later in November 2022. The company defaulted on the deals in May last year, saying it was unable to pay.
It has been ordered by the High Court at Christchurch to pay the owners a total of $1.4m in compensation.
The Crawford Group is a Christchurch-based housing developer headed by Harry Crawford. It has already completed townhouse developments in Linwood and Sydenham, and has three others under way.
The sellers were property investor Blackwater Properties, which owned three of the houses, and Andrew and Yvonne Smith, who owned the fourth.
Evidence was given at the hearing that the value of sites to a townhouse developer is higher when neighbouring properties can be bought together.
There was evidence from a valuer that an “appealing block of units” could be built on the Phillipstown site, which covered just more than 3600m2.
At the time of the purchases, high demand and heavy competition for development land in parts of Christchurch zoned for medium-density housing, including Phillipstown, was pushing prices up.
Crawford Group had agreed to pay $1.05m for the long-term home owned by the Smiths. The property’s rating valuation was $455,000 at the time and is now $755,000. The court accepted that when the sale was cancelled in 2023 the home was worth $570,000. While awaiting the sale, the couple entered an unconditional agreement to buy another home, on which they later lost their deposit.
Crawford Group had agreed to pay Blackwater Properties $2.5m for its three properties. The court accepted they were worth a total of $1.58m when the contract was cancelled.
The court was told that by the time the company said it was unable to pay and cancelled the sales last May, 18 months after the original contract, market values had dropped. The judge accepted the properties were worth considerably less by the time the contracts were cancelled.
“Looking at all the evidence before me, I am satisfied Crawford Group purchased the plaintiffs’ properties in a booming market and at peak prices ... It was then faced with a market that went into significant decline ...,” his ruling said. Deposits of 5% (Blackwater) and 10% (Smiths) paid when the sales became unconditional were forfeited. None of the four houses have been resold in the meantime.
The owners sought damages for loss of profit, outgoings including insurance, rates and maintenance, legal and valuation costs, and penalty interest.
Crawford Group had offered to pay damages, but told the court the amounts claimed were excessive and/or not recoverable. It also said Blackwell Properties and the Smiths failed to mitigate their losses as they did not try to sell their homes to anyone else once it became clear they could not pay.
Harry Crawford personally guaranteed his company’s obligations to Blackwater Properties, but not to the Smiths.
The court’s ruling said with the 12-month delay between the sales agreement and scheduled settlement, Crawford Group was “effectively land-banking the properties while it completed other projects”.
The Smiths asked for $483,000 in compensation and were offered $66,600 by Crawford Group. The court awarded $476,000.
Blackwater Properties sought $952,000, with Crawford Group offering $300,700. They were awarded $942,000. Both owners will also be able to seek court costs from Crawford Group.