A client of ours rang up the office to enquire about getting a refund for the reservation fee he had paid to buy an off plan development. The reason for asking for the refund was that the developer had delayed the competiong date and therefore this was causing problems which meant our client wanted to pull out and get a refund of his reservation fee.
We advised our client that as he had paid the reservation fee he had entered into a reservation agreement with the developer. Whether he was entitled to a refund would really depend on the terms of the agreement.
Reservation agreement terms usually provide the purchaser with an option to buy the property for the price agreed and require the developer to remove the property off the market and not offer it for sale to other potential buyers. The buyer is usually required to exchange contracts within a specified period oftime which is generally 28 days from the date on which their solicitors receive the contract papers from the developers solicitors. Some reservation agreements do state that the reservation agreements do sate the reservation fee is non refundable.
The Consumer Code for Home Builders provides protection and rights to buyers of new homes. We recommended that our client found out if the developer had signed up to it because if a sale falls through, the code requires them to refund any reservation fee paid. The developer, often will deduct an administration fee from this fee.