Ombudsman warns agents to be ‘upfront’ about new-build reservation agreements

A couple in East Anglia embroiled in a long-running argument with a retirement home builder over a disputed reservation agreement have contacted The Negotiator to complain about the handling of their case after they approached The Property Ombudsman for redress.

The retired duo, who wish to remain anonymous, believe that their experience highlights a flaw in the way reservation agreement expiry dates can be exploited by new homes builders and their agents to sell on reserved properties when buyers struggle to sell their old home in time to fulfil the deal.

They put down a £2,000 reservation fee on a house within a retirement development that came with a 21-day reservation period but that, although the developer involved initially agreed to help them when the deadline passed, it then ignored and sold their house to another buyer.

The couple say the developer only returned their deposit and paid a goodwill contribution towards conveyancing costs after much badgering, some 100 days later, after the property had been sold to someone else.

The two 70-year-olds had hoped that TPO would back their claim that reservation agreements like this leave buyers exposed to financial risk and the considerable stress of recouping deposits from builders or their agents when deals fall apart.

The Negotiator asked TPO for comment. Ombudsman Katrine Sporle (left) said: “Reservation Agreements are there to protect both parties and to signify that the purchaser is clearly committed to the purchase.

“However, most reservation agreements have an expiry date by which the buyers must have exchanged.

“Unfortunately, property transactions are, by their nature, complex, and therefore there is still a risk with such agreements that things will not go according to plan to meet such time frames.

“In the case being reported, the use of a reservation agreement gave the complainant certainty – but they still had to sell their house and found that they were not in a position to exchange some months after the agreed 21-day reservation period had expired.

Be upfront

“When talking to agents up and down the country, TPO always emphasises to agents that when things go wrong it is in their interests, and in the best interests of the consumer, to be upfront and professional about the facts of the case.

Here, the position was allowed to “sit on the books” as it were, until finally the purchasers were informed that the property would be remarketed.

“Once remarketed the property sold quickly, and the reservation fee was repaid in full to the consumers. There was no evidence of there being two reservation agreements being in place either during the 21-day period of the agreement or in the months that followed.

“TPO supported the complaint from the consumers and made an award against the agent because of their failure to be absolutely clear to the purchasers of the risks to them once the reservation period had expired.

“The award was paid in full and final settlement of the dispute. TPO always emphasises that the complainant need not accept the complaint and can take the matter to court. We are here to provide alternative dispute resolution not legal rulings.”

Read more about reservation agreements.