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New Homes Quality Code Parts 1 and 2: Sales, Marketing and Reservation

Outcome: Not upheld

Case date: 14th December 2023

The Issues

The customer complained that the developer provided misleading or incomplete information about various aspects of the property and its surroundings and that matters did not become clear until after the cooling-off period.  As a result, when the Customer decided to withdraw from the purchase, they were unable to secure a full refund of their reservation deposit and the deposit paid for extras.   

The Circumstances

The customer paid a reservation fee and an additional 50% deposit for wardrobes after the expiry of the 14 day cooling off period.

At reservation the customer was given a presentation about the development including plans showing access and green/recreational areas. The customer said that they had asked specifically about parking and access arrangements at reservation and were assured that it would not be possible for unauthorised parking to take place in a turning circle adjacent to the plot they were interested in.  When further information was released to their conveyancer as part of the contract process, details of covenants and their method of enforceability were included, at which point the customer became aware that the developer was unlikely to play an active part in the enforcement of covenants relating to access and parking.

The customer was also concerned about upkeep of an area of amenity land in front of the plot and the designation of a further area of green space in the development, both of which had been illustrated on the plans shown at reservation, with further details provided in the pre-contract disclosures.

The customer asked their conveyancer to undertake further enquiries but ultimately was not satisfied with the information provided about access and green spaces and decided to withdraw from the transaction.  The developer refunded the customer’s reservation fee less a deduction of £500 as specified in the agreement, on the basis that the customer had withdrawn after the cooling-off period and the issue of legal documentation.  The developer was not prepared to refund the 50% deposit for the optional extras.

The Ombudsman’s Decision

The Ombudsman service recognised the customer’s disappointment that they felt unable to continue with the purchase but concluded that the developer had not misled them about access arrangements and the nature of the green space.  As a result, although the developer could have exercised their discretion to return the fee and extras deposit in full, they were not obliged to do so.

There is a balance to be struck, as identified in the Code, between the information given to customers at reservation, and the more detailed information which forms part of the pre-contract process.  At reservation, the customer is paying a fee entitling them to exclusivity in their negotiations to purchase up to the end of the reservation period.  The customer needs to have enough information to feel they are making the correct choice for them and be comfortable in paying their fee, part of which may be retained by the developer if the customer decides not to proceed after the cooling off period. It is therefore helpful if any questions which the customer asks at this stage are recorded in writing to avoid any misunderstanding at a later stage.

More information is provided to the customer’s conveyancer as part of the contract process and it is important that customers check with their legal team any issues they have previously discussed with developer’s sales team to ensure they are fully informed before they become legally committed to the purchase.

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