Legal Q&A: can I get the reservation fee for an off-plan flat back from a developer if the terms have changed?

Question: I have just paid £5,500 as a reservation fee for an off-plan flat via an agent. It is supposed to be an investment flat. However, when I received my draft contract, the terms were totally different from those that the agent had promised. The completion date was a year later than he’d said, for a start, and rental income was not guaranteed for five years, though he’d said it would be. My solicitor has tried and failed to get my contract reworded to reflect what I was promised. I certainly don’t want to buy the flat now but the agent says I can’t have my money back. Am I stuffed?

Answer: Paying a reservation fee to a developer allows a buyer to reserve a property for a period, usually of 28 days, so that they and their solicitor can carry out the necessary due diligence and exchange contracts.

There should be a written agreement setting out the terms of the reservation.

Often the reservation fee is stated to be non-refundable if the buyer fails to exchange contracts within the time period specified. Whether you are entitled to the return of your fee will depend on the terms of your reservation agreement.

To protect your interest you should have asked your solicitor to review the agreement before you entered into it and paid the reservation fee.

Your solicitor would have ensured that the fee was not stated to be non-refundable and that in the event of you failing to exchange contracts, the developer could only retain reasonable administration expenses from the reservation fee.

Hopefully your developer is registered with a home warranty provider such as the National House Building Council. If so, then the developer will have agreed to comply with the Consumer Code for Home Builders.

This means they can retain reasonable administration expenses, but the reservation fee has to be refunded to you.

If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE.

We regret that questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a solicitor specialising in residential property.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.