Dispute: Deductions from Reservation Agreement (Fifth edition of the Code)

Case Study
The buyer’s complaint

The buyer stated that the builder retained an unreasonable amount of money from the reservation fee paid following their withdrawal from the purchase. They requested a further reimbursement of £1,000.
The builder’s defence
The builder failed to submit a defence to the claim.
The adjudicator’s findings
The adjudicator found that the Code permits a builder to retain sums from a reservation fee that has been paid in instances where a buyer has withdrawn from a purchase outside of the 14-day cooling-off period provided under a Reservation Agreement.
However, the Code is clear in that these costs must be outlined in advance, and the sum retained from a reservation fee must represent the reasonable costs incurred as a result of a buyer withdrawing from a purchase.
The adjudicator found no evidence to show that costs of £1,500 were incurred by the builder following the buyer withdrawing from the Reservation Agreement, nor any evidence to suggest that the builder had sought to breakdown these costs for the buyer.
The adjudicator noted that while the Reservation Agreement does refer to the fact that £1,500 will be withheld from the Reservation Agreement paid, and that this would be for administration costs, the adjudicator found the amount in question did not appear to reflect reasonable costs incurred and in breach of Section 2.2 of the Code (fifth edition).
In the absence of a response from the builder, the adjudicator also accepted that the builder breached Sections 1.2 and 1.5 of the Code in as much as they failed to ensure that the Code was readily accessible to customers visiting the builder’s website and that the Code was visible through its advertising materials.
Decision
The claim succeeded and the builder was directed to reimburse £1,000 of the reservation fee paid.
Learning points
For buyers:
- Your builder is required to provide you with a Reservation Agreement which sets out the terms of the Agreement. This includes the range of possible monetary costs the builder may retain if the Reservation Agreement is cancelled outside of the 14-day cooling off period.
- Buyers may use the Independent Dispute Resolution Scheme to challenge any deductions they consider excessive.
For builders:
- It is important for you to engage with the Independent Dispute Resolution Scheme operated as part of the Code and to provide a defence for the adjudicator to consider as part of any claim.
- Your Reservation Agreement should set out the buyer’s right to cancel within the reservation period and the range of possible monetary costs you may retain. This amount should represent the reasonable costs you have genuinely incurred in processing and holding the reservation and which you should be able to evidence if challenged.
A Code compliant Reservation Agreement can be freely downloaded here: Sample-reservation-agreement-form
Adjudication: HOME006795