Dispute: Cancelled Reservation Agreement (Fifth edition of the Code)

Case Study
The buyer’s complaint

The buyer complained that the builder cancelled the Reservation Agreement before it expired and that the builder gave inconsistent advice about part exchange.
The buyer asked for an apology, an explanation, an extended reservation expiry date and £1,065 in compensation.
The builder’s defence
The builder said that the plot was reserved “sold subject to contract” but, when the buyer lost their buyer, this process was no longer viable and that they had tried to resolve the buyer’s complaint.
The builder said it offered to provide £1,065 in cash upon exchange of the purchase of a plot but that this offer was rejected
The adjudicator’s findings
The adjudicator considered the Reservation Agreement and concluded that it did not show the reservation expiry date but instead showed a “Targeted Exchange Date”. The buyer argued that the Reservation Agreement was valid until that date which the builder did not contest in its defence.
While the builder argued that a requirement of its “Sold Subject To Contract” reservation process was that there must be a complete chain in place in order to reserve a plot, and, when the buyer’s sale of his existing home fell through, he was no longer in a viable position to proceed, they failed to provide a copy of the terms and conditions of the Reservation Agreement. The adjudicator therefore found the builder had not explained the legal basis upon which a break-down of a chain affects the Reservation Agreement and therefore the effect on the validity of the Reservation Agreement. They found the termination of the Reservation Agreement to be a breach of section 2.2.4 of the Code (fifth edition).
In relation to the allegation that the builder breached the Code when it gave inconsistent advice about part exchange, the adjudicator found the buyer had not established the builder had failed to provide a customer service to a reasonable standard.
Decision
The claim succeeded. The adjudicator directed the builder to pay the buyer £1,065 for the significant upset and inconvenience caused.
Learning points
For buyers:
- Your builder is required to provide you with a Reservation Agreement which sets out clearly the terms of the Reservation. This includes how and when the Reservation Agreement expires as well as any dependent or conditional matters, for example part-exchange details, if applicable.
- Keeping a detailed record of all correspondence, including any emails and correspondence, can be vital in the event of a dispute.
For builders:
- You must give buyers a Reservation Agreement, written in plain English, which has been signed by both parties (digitally or in person) and which clearly sets out the terms of the reservation. These include how long the price and the Reservation Agreement remain valid; how and when the Reservation Agreement will end and any dependent or conditional matters for example part-exchange details, if applicable.
- While the Reservation Agreement remains valid, you do not have the right to terminate the Reservation Agreement and must not enter into a new Reservation Agreement or sale agreement with another customer on the same home.
- If the terms of the Reservation Agreement have to be altered, you should cancel the existing Reservation Agreement and enter into a new agreement without any deduction from the reservation fee.
A Code compliant Reservation Agreement can be freely downloaded here: Sample-reservation-agreement-form
Tags
Reservation agreement, pre-purchase information, Succeeded, Fifth Edition