Outcome: Complaint not upheld

Case date: 23rd January 2024

The Issues

The customer submitted a new home sales complaint in regards that the developer did not tell them that neighbouring plots had been reduced in price prior to them completing their purchase. The customer considered the developer’s behaviour to have been unfair and unethical.

The Circumstances

The customer reserved the property in June 2023 at a price of £250,000 and completed the purchase in August. Several weeks prior to completion the developer reduced the prices on 4 nearby plots by £7,500.  The customer did not become aware of the price reductions until after they had moved in and made a new home sales complaint against the developer in that they had not been told about the reductions and offered the opportunity to withdraw from the purchase and buy one of the reduced properties.

The developer argued that they are not required to tell customers who have reserved a property of changes in prices upwards or downwards prior to exchange of contracts and that there were a number of factors which affected sales prices, including general economic factors.

In response to further enquiries the developer confirmed that the new sales prices had been available on their website and on the price list in the sales office. Although direct marketing emails were usually discontinued at the point of reservation, in this case the customer continued to receive them until they opted out of further communications.  This happened shortly before the new prices were released.

The Ombudsman’s Decision

The Ombudsman acknowledged that the customer would have withdrawn from the purchase if they had been aware of the price reduction or would at least have discussed with the developer whether the price of their property could be reduced by a similar amount.

However, the central issue was whether the provisions of the Code would require the developer to inform the customer specifically of the reduction in the sale price of similar properties prior to exchange.

The Code requires developers to notify customers of major changes affecting their property.  The definition of a major change includes reference to “value”, but the Ombudsman concluded that this is not the same as the selling price of a particular property or other similar properties, which can be affected by a number of factors. On that basis, the developer was not required to inform the customer about the price changes.

The Code also expects developers to treat customers fairly and to be transparent in their dealings with them. The customer’s view that the outcome from their perspective was unfair was understandable, particularly given the sequence of events and the significance of the financial transaction.  Other than commercial factors, there was nothing to prevent the developer alerting the customer directly to price changes, or to have recognised the customer’s dissatisfaction when handling their complaint.

Having taken all the factors into account of the new home sales complaint, the Ombudsman concluded that the principle of fairness in the Code did not extend to a general requirement for the developer to inform customers proactively of changes in prices on a development during the course of a transaction.

In relation to transparency, the Ombudsman concluded that developers should ensure that customers have ready access to information throughout the sale process, which might influence their decision to complete the transaction. This would apply whether prices were generally rising or falling but is particularly important in an environment where selling prices may be reduced, making it more likely that a customer would cancel their agreement, or seek to agree a price reduction. 

In this case, the customer opted out of direct marketing shortly before the price reduction became effective, meaning that they did not receive the information which could have resulted in them withdrawing from the transaction.