Posted: March 10th, 2016
Hypothetical Problem 1
Laura Drott operates a retail cycling business. She owns a small commercial premise on the Gold Coast in which to sell bicycles and accessories. She is the registered proprietor of the fee simple. In order to raise funds to allow her to commence her business Laura had obtained a loan from Supporting your Dreams Bank (SDB) in March 2012. SDB advanced Laura the amount of $200,000, with the mortgage requiring repayment of the principal plus annual interest of 6% over 8 years in monthly instalments. Security for the loan was provided by a registered mortgage over the business premise. SDB agreed to the loan only after advising Laura to seek independent advice before entering into the mortgage.
Once the retail business was opened, Laura quickly developed a large and growing customer base. However, by 2014 her profitability started to decline. Her customers deserted her in increasing numbers for the large online retailers offering cycling goods at lower prices. By 10 November 2015 Laura’s business was running at a significant loss, and she failed to make a monthly repayment. SDB issued a notice of default in correct form on 15 November 2015, seeking payment of the outstanding instalment. In January 2016, no repayment having been made by Laura, SDB exercised a power of sale. SDB obtained an independent valuation of $350,000 for the property, advertised the property widely and disclosed all relevant information about the property. Sale at auction occurred on 3 March 2016, with the property selling for $320,000. There was only one bidder at the auction, and Laura has discovered that the buyer was Distressed Sales Pty Ltd, a wholly-owned subsidiary of SDB. Advise Laur
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