Partly constructed buildings left abandoned are the most difficult to sell in a mortgagee sale; a point accepted by the High Court when dismissing Herschel Gupta’s complaint that Bank of India failed to properly market a mortgagee sale of his failed South Auckland townhouse development.
Mr Gupta was defending liability to Bank of India on a guarantee given in late 2021 for a $4.8 million loan to his property development company Kauri Investments Ltd. There was a $2.1 million shortfall when Bank of India sold up the unfinished development in 2024.
Mr Gupta demanded the amount due on his guarantee be reduced; the Bank had failed to comply with Property Law Act requirements to take reasonable steps to get the best price, he claimed. The Bank had sold the property hastily, at a knock down price, he said.
Kauri Investment’s initial purchase three years previously at $4.79 million was a better guide as to market value, he claimed.
The Bank engaged Ray White Real Estate in Takanini for its mortgagee sale.
Ray White properly tested the market, Associate Judge Paulsen ruled.
It carried out a five week marketing campaign. The property was listed on TradeMe and One Roof. Flyers were distributed. Details promoted on social media. Signage placed on site.
At auction in April 2024, there were eight registered bidders; six active bidders.
The highest bid was $3.3 million. The Bank accepted this bid, withdrawing its initial reserve set at $5.1 million.
The townhouses sold were not complete: they had been vandalised; one was damaged by fire.
The court was told abandoned commercial sites are always difficult to sell. Purchasers cannot clearly assess what extra work is needed to complete construction. Past vandalism indicates further vandalism is likely. Obtaining insurance prior to settlement is difficult.
Mr Gupta’s claim current market value to be around $4.9 million was dismissed.
Prices from 2021 did not reflect a drop in market prices over the subsequent three years, Judge Paulsen said.
And the suggested $4.9 million did not itself reflect a true market price as at 2021; it was the price set in a related party sale between two companies, both controlled by Mr Gupta.
Mr Gupta was ruled liable to pay $2.1 million due on the Bank guarantee.
Bank of India v. Gupta – High Court (30.04.25)
25.110