Reservation Agreements – what home buyers need to know

Signing a Reservation Agreement is your first step toward buying a brand new home. It’s an exciting time but also a really important one. Reserving a home is about much more than a promise to buy – it’s the start of your protection under the Consumer Code for Home Builders (the Code) and the first step in helping to make your purchase as smooth and positive as possible.

Builders who operate under our Code scheme are required to meet standards designed to give you a good service throughout the purchase process and for the first two years after completion. All that starts with the Reservation Agreement. We’ve outlined some of the main things you need to know before signing your agreement, and some questions to consider based on disputes that have been handled by our Independent Dispute Resolution Scheme (IDRS).

Definition:
A Reservation Agreement is when a buyer and a builder jointly make a written statement of intent (subject to contract and whether or not a fee is paid) to buy and sell a home.

Key facts

• Since January 2024, all reservation agreements under the Code must include a 14-day cooling off period. If you change your mind within this time, your reservation fee must be returned in full.
• You are still able to cancel your reservation after the 14 days and receive a refund minus any administrative expenses incurred by the builder. Your builder must tell you what these will be (which can be a range) and they must relate to actual costs incurred.
• Under the Code, your builder cannot offer a reserved home to another buyer during the agreed reservation period, protecting you from gazumping.
• Under the Code, builders are not allowed to use high pressure selling techniques to pressure you into reserving a home before you are ready.

Before you sign

Builders are required to provide you with sufficient information to enable you to make an informed decision. At reservation stage, this should include:

• A list of contents that are included in the price including white goods, curtains, carpeting, wall tiling, door-entry systems, power points and sanitary-ware fittings.
• Information about the type of material used and the standards the home is being built to, including the home’s expected energy-performance standards.
• Clear and truthful brochures and/or plans showing the size, specification, general layout, plot position and orientation of the home.
• An explanation of the cover provided by the Home Warranty and contact details of the provider
• Details of any future build phases of, and the facilities on, the expected completed development if this is known.
• Advice on your termination rights, arrangements for protecting contract deposits and any pre-payments paid.
• A Reservation Agreement.

(For a complete list, download the Consumer Code Scheme with Builder Guidance)

Take the time to read all information provided and ask your sales agent and/or legal adviser to clarify any aspects that are unclear, to help prevent any unpleasant surprises. Understanding exactly what you are buying is particularly important when buying off plan. Sales brochures are often generic and may not provide an exact representation of your new home.

You may be asked to sign a checklist to confirm you have received certain information, including a copy of the Code. Only sign if you have received and understood everything on the list. If not, ask your builder to fill in any gaps first.

Useful questions to consider

Being given information is one thing – understanding it is another. At this crucial stage of buying a new home, it’s important that you feel confident and comfortable about your purchase so ask plenty of questions and make a note of the responses to refer to later. Some things to consider include:

• Are you clear about the measurements and sizes of the property? If you’re buying off plan, can you see a show home? If so, ask the builder to clarify any differences in sizes so you can visualise the size of your rooms.
• Ask about lighting and aspect – how much daylight will different parts of the home get?
• Does your plan show gradients? Don’t be afraid to ask about sloping driveways and/or gardens as well as general access so you know what to expect.
• In some cases, builders may not be able to specify the exact nature of white goods or flooring. Don’t assume the brochure is an accurate reflection of exactly what will be included in your home – ask for clarification.
• There may be an opportunity to influence colour schemes or materials in certain parts of your home. Ask your builder what the options are and what impact this might have on your reservation fee reimbursement if you were to subsequently change your mind.

We strongly recommend that you keep a note of all discussions and ideally follow-up any verbal agreements by email or letter. This will help to avoid any misunderstandings later on and can be crucial in the unlikely event that you may have cause to raise a complaint with your builder or a dispute via our IDRS.

Remember: Your builder is required to provide you with a Reservation Agreement which sets out clearly the terms of the reservation, including how and when the reservation agreement expires.

Visit our Resources centre for more information and resources about what to expect when buying a new build home.