Refund of Reservation fee on a new build

helenann

Hi
I'm looking for some advice please.
My nephew is a young first time buyer, he seen some new build conversion flats for sale. Checked with the estate agent that they were for owner occupiers (as he had been disappointed on a previous flat as the HSBC did not consider it a good security as the block was mainly rentals). The estate agent confirmed the vast majority were to be owner occupied.
Viewed the flat and loved it and was asked to put a (what we thought) was a holding deposit to take it off the market of £2,500.00.
He did not sign anything and no agreement was explained to him and the full implications of paying this money was never explained, but his Mum (who is a pensioner) paid over the £2,500.00 to help her son get on the property ladder.
The HSBC sent a valuer around to the development and came to the conclusion the flats would not be a suitable security as they were of the opinion 'the development would appeal predominantly to rental investors with severely restricted demand in terms of owner occupation' and the mortgage application was refused on these grounds.
We tried the Nat West and the TSB - who were of the same opinion.
We have now withdrawn the offer and requested the £2,500.00 be refunded.
The estate agent and the developer are refusing to refund.
There is no signed paperwork to say we entered into an agreement with then or that it had been explained that the fee was non refundable.
This is a lot of money for retired sister to lose, it was out of her savings/retirement fund.
Any help or advice appreciated.:(:(:(

steampowered

The first thing is for your nephew to carefully look through his paperwork to see if he signed anything stating the fee was non-refundable.

If not, he will need to go down the legal route to get it back.

He should write the developer a formal 'letter before action' stating that he intends to bring legal proceedings unless the amount is repaid within £2,500.

The letter could note that the fee was refundable, and that no T&Cs were provided to the contrary. If the developer believes that he did sign T&Cs stating the payment was non-refundable, then they should provide a copy of those.

If the developer doesn't refund the money or produce a set of signed T&Cs within 14 days, proceed to issue a small claim at https://www.moneyclaim.gov.uk/web/mcol/welcome.

need_an_answer

What was issued in return for the fee...any paperwork/receipt?

At the point money was handed over it could be seen that some formal arrangement was entered into...I do find it hard to believe that at some point between viewing the property and handing over the money your nephew wasn't given any paperwork or at least a brochure that explained the terms and conditions.

He's absolutely adamant he signed nothing?

kingstreet

Look here;-

http://www.consumercode.co.uk/

is the builder a member, due to its use of one of the warranty schemes, NHBC, Checkmate, Premier, LABC?

helenann

Hi - there was nothing signed or gone through. We went to an open day as ordinary members of the public to view the development and my nephew fell in love with one of the flats - we were told by the estate agent we would be given money off the price if we committed there and then, so we made an offer and it was accepted. At this point we believed we were purchasing a property in usual conventional way - we are not investors and know nothing about buy to let properties.
We were told at this stage to pay £2,500.00 and they would take the particular flat 'off the market'. We had to go home and arrange for the money to be made available out of my sisters savings and we phoned the estate agent who took payment over the phone.
About 3 weeks later we started getting e-mails from the estate agent talking about completing within 28 days. I queried this and said we ordinary buyers not investors and it would take time to sort out a mortgage etc. At this point I asked for any paperwork they had to be sent to us.
They sent us a 'reservation form' - unsigned by either party, no details of my nephew (full name address etc nothing on it) as the purchaser - just his name scribbled on the top. This form was not 'gone through' with us on the day and we only received the copy about a month after the viewing when I queried what paperwork was available.
Thanks for your help.:)

sal_III

So let me get this straight. After having issues obtaining a mortgage for a different new build, you went ahead and paid £2500 without any clarity what are you paying for and/or receipt for the payment and no guarantee you will get a mortgage for that property either?

You made an offer, it was accepted. You were asked to pay some money, you did. Sounds to me like a verbal contract and likely the EA T&Cs kicked in, even though you never read them. You might have some legal recourse, but i doubt it will be easy.

Word of advise, in the future be careful what are you paying a not insignificant amount for. Especially if you are on the road of home buying.

danlewi2

Why would you pay £2500 without any paperwork is beyond me?

helenann

When we first seen these flats advertised they were advertised as suitable for first time buyers - I emailed the estate agent before arranging a viewing to check the status of the flats and his response was 'they will be predominantly owner occupied' - and yes, I believed him (I had no reason not to believe him at this stage).
I realise it seems we were a bit stupid to pay over money without any paperwork (and with hindsight we shouldn't have), but on the day we felt pressurised to do this to ensure they effectively took the flat off the market and as my nephew had a mortgage promise and the estate agent had confirmed the flats were for owner occupiers we didn't forsee any problems and thought the deposit would just come off the final payment once the sale was finalised.
It was only after 3 major lenders have refused to mortgage them as they are of the opinion they are not suitable security and they consider because ...'they are situated in a commercial town centre that the development will appeal predominantly to rental investment with severely restricted demand of owner occupation and all lenders requires the owner occupation to be the dominant form of occupation within a development'.
The estate agent knew we had 'trouble' getting a mortgage on another flat and the reasons why - but that was high rise and these did seem different and with the assurance of the estate agent that these were in a different category to the first one we thought we were 'safe' in making the offer and going ahead.
I guess we were niave - but the code of practice for estate agents say they should take extra care when dealing with consumers who may be disadvantaged because of their lack of knowledge - and we certainly had a lack of knowledge of these types of properties.and buying one of these such properties. :(:(

Slithery

helenann wrote: »

At this point we believed we were purchasing a property in usual conventional way - we are not investors and know nothing about buy to let properties.
We were told at this stage to pay £2,500.00 and they would take the particular flat 'off the market'. We had to go home and arrange for the money to be made available out of my sisters savings and we phoned the estate agent who took payment over the phone.
About 3 weeks later we started getting e-mails from the estate agent talking about completing within 28 days.

Exchange within 28 days is a standard part of buying a new-build and has nothing to do with buy-to-let.


Why on earth did your nephew pay the reservation fee if they were going to have an issue with this?

need_an_answer

But like a lot of things most people have a lack of knowledge until they are provided with the facts...you would be seen as capable of making an informed decision...whats at question here is whether you all acted much too quickly and forgot about capacity to reason.

Ideally the agent is keen to sell the properties so of course will structure the sales pitch according to the client who is interested...I bet they told BTL investors that it was a great purchase for them too and slap bang in the centre of town would be perfect for those wishing to invest in something of an Airbnb arrangement ...blah blah blah.

I genuinely don't understand why none of you asked to read any documentation before you handed this money over...I'm staggered foe example that you haven't even got a receipt or proof that you paid the money...you probably take more diligence when you buy your weekly groceries at the supermarket and get a receipt than you did handing over several thousands of pounds on this transaction.

Please seek some proper advice on the way forward ..maybe that's via citizens advice...I'm not sure quite whom else to suggest ...but please don't let yourselves be guided into anything in the future without taking away the information to fully read and understand,having someone else explain it to you if necessary...before you hand over any money at all.

eddddy

Is the estate agent a member of The Property Ombudsman Scheme?

Their code of practice says:

11. Deposits
11a Unless the buyer and seller wish to utilise a reservation agreement, you should not generally facilitate pre-contract deposits. However, if you are instructed to do so, you must ensure that before a deposit is taken, the circumstances under which the deposit is to be held, refunded, forfeited or used towards the purchase, are clearly stated in writing, agreed by the relevant parties and a copy of the agreement provided to those parties. In each circumstance the beneficiary of the deposit (and any interest accrued) must be clearly defined.

link https://www.tpos.co.uk/images/codes-of-practice/TPOE27-8_Code_of_Practice_for_Residential_Estate_Agents_A4_FINAL.pdf

You didn't get anything in writing before paying the £2,500, so as a starting point maybe tell the EA that you intend making a formal complaint to them, followed by a formal complaint to the property ombudsman - to see if that gets any results.

Also mention the 'misrepresentation' that 'they will be predominantly owner occupied'.

See: https://www.tpos.co.uk/consumers/how-to-make-a-complaint