The Ombudsman Files: Buyer’s Premium refunded

The complaint

A recent decision by The Property Ombudsman has highlighted the importance of verifying material information before marketing investment properties, after a property business was ordered to refund a Buyer’s Premium and pay further compensation.

The complaint was brought by ‘Andrew’ – whose name has been changed to maintain anonymity. He paid a £4,000 Buyer’s Premium to secure an investment property through a specialist property marketplace.

As part of its business model, the property business required buyers to pay a Buyer’s Premium to secure a property and prevent competing offers. The agent’s website promoted a range of pre-checks and verification processes designed to assist buyers with their due diligence before proceeding.

After reserving the property, Andrew progressed mortgage arrangements. However, in late January 2025, a mortgage lender determined that the property was unsuitable for lending purposes. The key concern related to the property’s only bathroom, which was located within an attic conversion that the lender did not regard as habitable accommodation. As a result, a mortgage offer could not be obtained and Andrew withdrew from the purchase on 4th February 2025.

Andrew subsequently requested a refund of the Buyer’s Premium, arguing that the property had been marketed as mortgageable and that the issue affecting the attic conversion amounted to material information which should have been disclosed before he committed to the transaction.

The property business … argued that it had relied on information provided by the seller.”

The property business rejected the request, maintaining that the refund claim fell outside the contractual refund period. It also argued that it had relied on information provided by the seller and that it could not reasonably have been expected to identify a historic building regulations issue.

The investigation

In reviewing the case, the Ombudsman considered whether it was fair and reasonable for the premium to be retained in the circumstances. While acknowledging that the mortgage lender’s decision was not, in itself, proof that building regulations had been breached, the Ombudsman concluded that the issue was clearly material because it directly affected the property’s mortgageability.

The decision noted that the property’s only bathroom was located within the attic conversion and that this should have prompted further enquiries. The Ombudsman found that the agent had not demonstrated that it had established whether the conversion had the necessary approvals, nor had it made clear to prospective buyers that this information had not been verified.

The Ombudsman concluded that, had Andrew been informed that the status of the attic conversion was unknown, he may reasonably have chosen not to proceed or to undertake further enquiries before paying the Buyer’s Premium.

Importantly, the investigation found that the agent could not fairly rely on contractual refund deadlines when the underlying problem arose from its own failure to verify or qualify material information before the agreement was entered into.

Outcome

The complaint was upheld and the Ombudsman directed the agent to refund the £4,000 Buyer’s Premium in full. A further award of £100 was made to recognise the avoidable aggravation and inconvenience caused after the issue only came to light once time and money had already been invested in pursuing the purchase.

The total award was £4,100.

The key learnings for agents to take away from this include identifying material information that could affect a buyer’s decision. Features that may affect mortgageability, insurability, use or value should be identified and addressed before a buyer commits financially.

Businesses should also complete key checks before taking a non-refundable or time-limited payment. Taking a substantial premium early in the transaction increases the importance of giving the buyer reliable information and a meaningful opportunity to carry out due diligence.