New build - Upgrade Charges Sale fell through

Aldous74

Hi just looking for some opinions on the situation we are in. We had an offer on a new build property accepted through a local developer. We offered to pay the full asking price (builder wouldn't negotiate) on the condition that as the house hadn't been built yet we could personalise to our specification. The builder agreed to this. No contracts or reservation agreements were ever provided or signed and the sale was progressing as a standard subject to contract purchase. During the build we were asked to make choices for tiling, bathrooms, kitchen etc. The builder advised that we could chose to upgrade these items but these would incur an additional charge over and above the agreed asking price, which we agreed. The builder mentioned that he might need to ask us for a deposit or to sign a separate agreement to cover the cost of upgrades but neither of these were done. Over the period of several weeks we were asked to visit suppliers and make our choices which included several upgrades to tiles, bathroom fittings, kitchen appliances etc and we were advised what the additional costs for these items would be which we accepted.

The purchase was progressing slowly as the builder had a big delay in sending out the initial contracts as they were sorting out land registry boundaries etc. A couple of weeks ago we found out that someone we knew was going to sell their house, it was a house that we had always loved and is a lot more suitable for us. We decided to pull out of the purchase of the new build in order to buy this other house.

The builder has now sent us an invoice for £7,500 for the upgrades which they have already put in, which includes a £2,500 charge for changing items/redecorating as they feel that our choices are not 'neutral'. Just to reiterate we did not pay a deposit or sign any agreement for the upgrades. We weren't aware but a few days before we pulled out the developer's solicitor had sent a draft agreement to our solicitor with a request for a deposit for the upgrades but this agreement was obviously never signed and no deposit paid. We understood that we could pull out from the purchase as contracts were not exchanged and that we are not liable for any costs incurred by the developer. The developer obvious feels differently. They sent us a very lengthy letter with an invoice stating that it was 'morally unacceptable' for us to leave them to cover the cost of upgrades that we requested. Whilst we did ask for the upgrades, we never pushed the developer to fit these before exchange of contracts, they did this to ensure that the house was completed within timescales that they set and they were fully aware that contracts had not been exchanged. What do you think do we owe the builder anything?

davidmcn

Whether or not it's "morally unacceptable" is hardly the point. It's legally acceptable. You didn't have a contract with them about anything.

MobileSaver

Aldous74 wrote: »

The builder advised that we could chose to upgrade these items but these would incur an additional charge over and above the agreed asking price, which we agreed. ... we were advised what the additional costs for these items would be which we accepted.

We understood that we could pull out from the purchase as contracts were not exchanged and that we are not liable for any costs incurred by the developer.

Did your solicitor tell you that you were not liable for any costs if you pulled out?

My own view is that you do owe the builder for at least a proportion of the upgrades; a legal contract can be verbal and doesn't have to be in writing and it seems pretty obvious to me that you had agreed a contract with the builder for the upgrades - I think a court would come to the same conclusion.

On that basis I think you need to go into damage limitation mode and try to negotiate an out of court settlement. Obviously no-one on here knows what colours/styles you chose compared to what would have been standard but a starting point would be the builder is trying it on with the £2500 for non-neutral and perhaps if the upgrades were better quality products he can recoup some from the next buyer reducing what you would be liable for.

Dru99

Of course you owe them the money! However, their incompetence at getting you to sign paperwork in advance of fitting the upgrades may well mean you can wriggle out of it.

MobileSaver

davidmcn wrote: »

You didn't have a contract with them about anything.

I disagree with davidmcn but it comes down to whether a court decides that the upgrades were a separate contract to the property purchase.

My own view from your own description of events is that it clearly was but perhaps there's precedent that upgrades are considered part of the property contract (in which case a verbal contract is not binding) - I'd suggest you get proper legal advice on this.

davidmcn

MobileSaver wrote: »

I disagree with davidmcn but it comes down to whether a court decides that the upgrades were a separate contract to the property purchase.

My own view from your own description of events is that it clearly was

It doesn't sound clear to me at all that there was any sort of consensus about what would be paid when.

chanz4

you pay a solicitor, ask them

Aldous74

Our solicitor did state that we did not owe the builder before we pulled out, as verbal contracts are not legally binding in property transactions. Her view was that if the builder put the upgrades in before exchange of contract he did so at his own risk. However her caveat is that she is not a litigator.

I have had a look at the consumer code for new builds and in their FAQ section they outline a similar scenario and they state

"If the Home Builder agrees to carry out additional work that is not included in the price agreed for the Home, before the Home Buyer makes a binding commitment to purchase the property the Home Builder is advised to require payment for those works in advance. These works should be the subject of a separate contract with the Home Buyer"

It is also not clear to me what we agreed with the builder verbally, he never once advised us that we would be liable for the cost of the upgrades regardless of whether or not we bought the house. If he had we would not have agreed and would have been happy to wait until contracts had been exchanged to agree upgrades or negotiated a lower price for the house which would allow us to finish the house to our taste after the purchase. We understood this to be part of the property purchase and, therefore, subject to contract.

MobileSaver

davidmcn wrote: »

It doesn't sound clear to me at all that there was any sort of consensus about what would be paid when.

I'm basing my view on:

Aldous74 wrote: »

The builder advised ... these would incur an additional charge over and above the agreed asking price, which we agreed. ... we were asked to visit suppliers... we were advised what the additional costs for these items would be which we accepted.

There's no "when" mentioned but in the absence of that a court would work on the basis of when was "a reasonable time."

Key though is whether the separate "upgrades contract" is really separate or considered part of the property purchase contract because, as I'm sure you'll know, a property purchase is one of the few transactions where a verbal contract is not binding.

Aldous74

if it just comes down to what is reasonable - is it reasonable for the builder to assume that we were agreeing to pay for the full cost of upgrades regardless of whether or not we bought the property or reasonable for us to have assumed that this was all part of the property transaction and therefore subject to contract and only owed once contracts were exchanged?

Our solicitor did state that it was an unusual situation as usual practise was for developers to agree upgrades but not put them in before exchange of contracts.

We are of course seeking a legal opinion but wanted to canvass opinions as we care about doing the right thing.

davidmcn

MobileSaver wrote: »

Key though is whether the separate "upgrades contract" is really separate or considered part of the property purchase contract because, as I'm sure you'll know, a property purchase is one of the few transactions where a verbal contract is not binding.

Indeed, for all we know the "upgrades" could just be considered enhancements which will result in a higher price paid at completion. If I accept an offer for my house, and the buyer then offers to increase the price if I do some work on it before completion, but then pulls out before exchange of contracts, I can't see I'd have any ability to recover the cost of those works.

In any event, why is the builder already incurring costs if "no contracts or reservation agreements were ever provided or signed"?