Buyers and Owners Groups - WHERE are they?

[dufus]

Hi everybody, I will be as brief as I can be so please bear with me! This forum has provided me will lots of useful information on my first investment in Egypt. I find something quite perplexing though. There are a lot of investers in various projects and owners in completed projects asking the same questions or raising the same issues.

What I dont understand is why are the investers buying into a project not forming buyers groups or clubs to flex their buying muscle and force some change? To understand where I coming from I'll provide an example:

I bought in the Makadi Bay project and paid a reservation fee to an agent. Some time later I received the contract and noted that it had a claus which basically said that if a payment was over 10 days late then, and I quote :'the Seller may deem this Agreement automatically terminated without need for legal or judicial procedures or notice to the Buyer', after which point the property would effectively be repossessed and penalties applied.

I immediately raised two points with the agent,

1. 10 days is very short period of time for a repossesion to take place (28 days is more standard)
2. I was not happy to sign away all my legal rights in the event of an unforseen delay that could cause my payment to take longer than ten days to arrive.

I also pointed out that there were no clauses included to protect or compensate the buyers in the event of the project running late or failing.

The response from the developer was that they never change their contracts, and although the agent was supportive, they pretty much said that if you were not willing to sign, there would be plenty of people who would.

Considering that there are literally hundreds of other buyers in this and many other similar projects, why are they not banding together to implement changes. For example - buyers should demand contracts to be available for viewing BEFORE a resevation fee is paid. Buyers could push for contract amendments and rate developers for fairness and compliance. PENALTY CLAUSES should be included as standard. For owners, service agreements could be managed before each owner is hit with extortionate bills.

It seems that people only seem to seek group assistance when things start going wrong and then there is a mad scramble to find out what legal footing each person is on. And before I end my mini rant, let me add one more thing...Lawyers, solicitors! What is with hundreds of people hiring solicitors to review the same contract in the same investment project. I mean seriously, £500+ a pop to look at the same document with a different buyers name at the top? I am buying a land plot that has been split into 54 seperate deeds - the solicitors want £2000+ per buyer to complete the documentation - thats £108,000 to basically use a photocopier 54 times!

PEOPLE, as buyers we hold the cards, we drive the investments. So where are the buyers and owners groups? :hmmmm2:

Your opinions please.

 

[NeilHollingsworth]

Hi everybody, I will be as brief as I can be so please bear with me! This forum has provided me will lots of useful information on my first investment in Egypt. I find something quite perplexing though. There are a lot of investers in various projects and owners in completed projects asking the same questions or raising the same issues.

What I dont understand is why are the investers buying into a project not forming buyers groups or clubs to flex their buying muscle and force some change? To understand where I coming from I'll provide an example:

I bought in the Makadi Bay project and paid a reservation fee to an agent. Some time later I received the contract and noted that it had a claus which basically said that if a payment was over 10 days late then, and I quote :'the Seller may deem this Agreement automatically terminated without need for legal or judicial procedures or notice to the Buyer', after which point the property would effectively be repossessed and penalties applied.

I immediately raised two points with the agent,

1. 10 days is very short period of time for a repossesion to take place (28 days is more standard)
2. I was not happy to sign away all my legal rights in the event of an unforseen delay that could cause my payment to take longer than ten days to arrive.

I also pointed out that there were no clauses included to protect or compensate the buyers in the event of the project running late or failing.

The response from the developer was that they never change their contracts, and although the agent was supportive, they pretty much said that if you were not willing to sign, there would be plenty of people who would.

Considering that there are literally hundreds of other buyers in this and many other similar projects, why are they not banding together to implement changes. For example - buyers should demand contracts to be available for viewing BEFORE a resevation fee is paid. Buyers could push for contract amendments and rate developers for fairness and compliance. PENALTY CLAUSES should be included as standard. For owners, service agreements could be managed before each owner is hit with extortionate bills.

It seems that people only seem to seek group assistance when things start going wrong and then there is a mad scramble to find out what legal footing each person is on. And before I end my mini rant, let me add one more thing...Lawyers, solicitors! What is with hundreds of people hiring solicitors to review the same contract in the same investment project. I mean seriously, £500+ a pop to look at the same document with a different buyers name at the top? I am buying a land plot that has been split into 54 seperate deeds - the solicitors want £2000+ per buyer to complete the documentation - thats £108,000 to basically use a photocopier 54 times!

PEOPLE, as buyers we hold the cards, we drive the investments. So where are the buyers and owners groups? :hmmmm2:

Your opinions please.

I think you have a good idea and I have formed a group of buyers but only after things went wrong. The only flaw I see is that you need a group of buyers all buying at the same time, it doesn't happen the developments sell over a period of months even years so you will struggle to get many people together in one go.

I do however feel you shouldn't have to form a group to receive a good contract, if your solicitor reviewing the contract states a clause is wrong and you shouldn't sign it then don't sign it. If the developer won't change it or replies as they have to you, don't buy, if this is their attitude now before they have your money what will they be like once they have it. There are plenty of new projects now being released with good due diligence being carried out and even some completed ones with all legal paperwork in place.

 

[dufus]

Im sure there are more...

Thank you for your response. The facts are that for every person that turns down an unfair or badly written contract, there are 3 waiting in line who will sign it, flaws and all, and hope that nothing goes wrong.

 

[Alan Cockayne]

Buyer power

Dufus, you are perfectly correct. This is the logical way purchasing should be done.

There are issues I'm afraid which I've campaigned for since overseas investors were first entitled to buy in Egypt. Unfortunately Egyptian developers (and their associates) will never give up control of their "methods of operation" because they want to control your money in order to build and to pay their workers.

Not all buyers read these forums. Many buy impulsively and while overseas, these investors are "outside," unable to control the process, relying on Main Agents and Site Sales officials. Put simply, buying into Egyptian projects is devised to "Divide and Confuse." Buying into European Developments in Egypt allows more flexibility. Our Hurghada teams and colleagues will advise the same.

A common sense Legal Collective is effective if the Seller is prepared to accept modification to documents that benefit both parties that are legal for each and every sale. Singular contract approval requires having time to do it. 30 days is not always long enough as it needs the developer's signiture. Often, you don't get them returned approved before payment. A common method of collecting fees (profiteering) is to penalise by default.

Management fees are often "demaded by menaces," a typical Egyptian trait that unless rules and regulations are stipulated by your lawyer, you have no recourse.

What Egyptian Developers fail to understand is that global competition for your custom is extremely high, especially in this recession. With no sales, many never get started. It's a lottery. Remember the hype for Damac in Gamsha Bay...... They finally pulled out of Egypt developments. Even Orascom pulled out of Cape Citadel in Sahl Hasheesh to build a cheaper Egyptian project in Makadi Bay to subsidise its workforce and Egyptian demand for another cheap coastal habitat.

Egyptian projects sell about 12% to Europeans and Eastern Europeans. 8% other nationalities. That means 80% are Egyptian owed and managed, unfortunately with their standards prevailing. Blue Sea Bay in Makadi Bay being one of them. With a strong Orascom dominence how can foreigners have any of their rights implimented.

As many see it, cheapness will always create long term issues. My legal team help solve them before they begin. If they can't, clients have many other options to buy in projects that are less stressful. After all it's your money, why shouldn't you?

Alan. Coralife-Style Consultants.

Hi everybody, This forum has provided me will lots of useful information on my first investment in Egypt. I find something quite perplexing though. There are a lot of investers in various projects and owners in completed projects asking the same questions or raising the same issues.

PEOPLE, as buyers we hold the cards, we drive the investments. So where are the buyers and owners groups? :hmmmm2:
Your opinions please.

It means someone within has to stand up and take responsibility for forming them. That usually happens when living in the projects and many take years to complete.

Any volunteers please.....

 

[dufus]

Small steps

Dufus, you are perfectly correct. This is the logical way purchasing should be done.

There are issues I'm afraid which I've campaigned for since overseas investors were first entitled to buy in Egypt. Unfortunately Egyptian developers (and their associates) will never give up control of their "methods of operation" because they want to control your money in order to build and to pay their workers.

Lets start with something achievable. Agents should stop taking deposits without offering a contract to view. Its the fact that people are often worried that their deposit is non refundable that they agree to sign even if they are not happy. A £2500 finders fee, give or take, on a £25000 investment represents a significant outlay for buyers.

 

[Alan Cockayne]

Commission Agents

Lets start with something achievable. Agents should stop taking deposits without offering a contract to view. .

Precisely.

Many agents have no idea of the product and try to sell Egyptian promises because they see £££/$$$ signs. What enquirers fail to understand is that many overseas real estate companies place ads for many locations around the globe because they've been approached by desperate developers who can't sell their projects and need client reservation fees to keep afloat.

We've seen it all before in the Costas and European Rivieras.
Where does that culture come from? I'm afraid it's greed on behalf of both Egyptian developers and their Agents. The gullible investors fall for the regurgitated hype everytime they see a little sunshine.

Alan. Coralife-Style.

 

[NeilHollingsworth]

Precisely.

Many agents have no idea of the product and try to sell Egyptian promises because they see £££/$$$ signs. What enquirers fail to understand is that many overseas real estate companies place ads for many locations around the globe because they've been approached by desperate developers who can't sell their projects and need client reservation fees to keep afloat.

We've seen it all before in the Costas and European Rivieras.
Where does that culture come from? I'm afraid it's greed on behalf of both Egyptian developers and their Agents. The gullible investors fall for the regurgitated hype everytime they see a little sunshine.

Alan. Coralife-Style.

And keep falling for it if AFTER some agents point out the issues. They then buy this ever so cheap property, AFTER being told not to, then come and ask for help to sort out the fact the developer/builder/agent has run off with their money!!

There are good developments out there and they are more expensive for a reason, they have planning/resources/plans to be finished and in better locations, but you pay more.

Never mind Location, Location, Location, try "YOU GET WHAT YOU PAY FOR".

 

[Alan Cockayne]

Rental Pool - clarification.

and a cheap purchase means cheap income from rents because they will lack the facilities visitors need to have a good vacation, or be miles from anywhere.

And when you read "Rental Pool" option, it could mean that you join a resort scheme where your property is used by the management to fill with guests.

These are usually for overflow visitors in busy times and cannot guarantee much income if the organisers don't advertise.
Or they could be used as staff lodgings, which get little care and attention.
The pressure to buy the furniture pack for it is a con to extort more money.

The best option is for parties to create their own Rental Pool from a collection of apartment owners, which is organised by a dedicated member of the association. They could use a common communication scheme (like Facebook) to find visitors at full rents. Or they can advertise in the media and get volume rentals with companies like Thomson or Thomas Cook. But this may take a little time to get everyone involved. The resort must be fully running to maximise income.

Obviously from the income you can employ homecare cleaners etc. Even pick-up facilities for guests, but more importantly it keeps hungry Egyptian hands hands out of the "till"

This means you can furnish your apartments to your standards and not be governed by the developer to buy their extortionate packs.

Alan. Coralife-Style Consultants.

 

[NeilHollingsworth]

We have furnished apartments and NOT offered any rental management BUT have put people in touch with an independent rental company that WILL get your properties advertised with the big tour operators.

Well Placed Apartments: For a holiday to egypt, holiday to turkey or diving hurghada see our holiday apartments for rent

Use independent companies to avoid being taken for a ride !!!!!!!!

 

[dufus]

Not the best rule of thumb...

And keep falling for it if AFTER some agents point out the issues. They then buy this ever so cheap property, AFTER being told not to, then come and ask for help to sort out the fact the developer/builder/agent has run off with their money!!

There are good developments out there and they are more expensive for a reason, they have planning/resources/plans to be finished and in better locations, but you pay more.

Never mind Location, Location, Location, try "YOU GET WHAT YOU PAY FOR".

I would agree buying against advice isnt the smart course of action, thats more greed overriding good sense - however, most people investing in Egypt at the lower end of the price range are investing because it is all they can afford without taking on debt, (read mortgage). Thats not to say that more expensive projects are more secure investments, or that Europaen style developments will offer more protection to the buyer - a dodgey developer will run with your money, be they Egyptian or British. It is why I prefer to work with escrow accounts. That way the developer takes the risk, borrowing funds to build, and the funds are only released from escrow when they have met project milestones. Their risk is minimised because an investor can see that they have a pot of money sitting in escrow from which they will see a return on their investment, and as a buyer you can be assured that if the project folds you will get your initial investment back at the very least.

 

[Alan Cockayne]

Escrow Accounts

It is why I prefer to work with escrow accounts. That way the developer takes the risk, borrowing funds to build, and the funds are only released from escrow when they have met project milestones. Their risk is minimised because an investor can see that they have a pot of money sitting in escrow from which they will see a return on their investment, and as a buyer you can be assured that if the project folds you will get your initial investment back at the very least.

Ah yes, but Escrow Accounts, in their very nature are "holding accounts" and should incurr no costs. Banks don't like opening them for free admin.. I've repeatedly asked them as they work very well around the world, but it seems in Egypt only for Bank project funding to Developers and not for individuals.

So in Egypt they charge for a similar Corporate Account and it's not the essence of true money transfers for these Escrows to be trusted to the developers. Even if they promise to work alongside inspection invoices, they are likely to be abused as these are not independent.

Does anyone know of any Egypt project fully completed to full customer satisfaction? Is it a silly question?

Alan.