A falling out between a financial planning group and a home builder has exposed the inner workings of the burgeoning house and land sector and the sales process employed.

The marketing of house and land packages differs only slightly from other real estate products in that the transaction involves both the buy of a vacant lot from a developer and a construction contract with a builder.

The builder typically offers a number of standard house designs suitable for the lot. He pays the marketer’s commission or has a profit share arrangement with him.

In January 2013, Kevin Ross’s Optima Wealth Solutions signed up Peter and Leonie Heaysman for a package purchase using a Housing Industry Association standard form contract for a house build by MJ Arthurs P/L.

OWS referred the buyers to its in-house finance broker, Optima Lending Solutions to arrange CBA bank finance.

Peter and Leonie settled on the land purchase in June by which time, Optima’s relationship with Arthurs had unfortunately broken down.

It was the builder Michael Arthurs who made the call requiring the buyers front with the $15k deposit for the build.

The Heaysmans claimed not to have known any building contract had in fact ever come into existence. If Arthurs had accepted the contract they signed in January, that was news to them.

To protect their position, they hired lawyers who gave notice of termination in September.

Having none of that, Arthurs lodged a caveat over the land and sued them for damages for breach of the building contract.

The investors defended the claim under s 40 of the Domestic Building Contracts Act which specifies that among the formal contract requirements that the builder must observe, a Contract Information Statement must be to given to the owner within 5 days of the contract being entered into.

The owner may terminate the deal within 5 business days of receipt of the statement and the signed contract itself.

It transpired that although Optima received a copy of the signed contract back from the builder, it had not notified the investors that the builder had countersigned.

The requisite Contract Information Statement was not in fact given until it was faxed to them in September, making the customer’s notice of withdrawal being given within the 5 day window.

The investors defeated the builder’s damages claim and their contract termination was upheld.

Arthurs was also ordered to remove his caveat and pay the customers’ legal costs of the two day Brisbane trial.

Optima Homes was also a party to separate litigation with Arthurs and Shaun Davidson’s Portfolio Housing, in Brisbane’s Supreme Court in July.

That six day dispute related to the marketing arrangements for 83 house and land packages in the Mackay area which included a 50/50 profit split between Portfolio and the builder. That relationship was also terminated by Arthurs but not before Portfolio had qualified for its profit share on many.

MJ Arthurs Pty Ltd v Heaysman & Anor [2014] QDC 160 McGill SC DCJ 21/07/2014