A case study recently published by the New Homes Ombudsman Service (NHOS) provides useful guidance for the developers in relation to the marketing of financial incentives.
As higher mortgage rates, coupled with the end of the help-to-buy scheme, have affected demand for new build homes, developers have offered a range of incentives to encourage sales. In many cases these have included financial incentives, such as offers to contribute to a buyer's deposit, pay their mortgage for a period or pay the LBTT or SDLT which is due on the purchase.
The Ombudsman has now reached a decision in a case where a customer complained about the way in which a financial incentive was advertised.
The facts
The customer purchased a new build home on terms which included a financial incentive described in the reservation agreement as a contribution towards mortgage payments.
The headlines in the developer's marketing material about this type of incentive suggested that the payments were mortgage related and would be made monthly. However, the detail clarified that the developer would make a single payment rather than monthly payments. In practice, the payment was simply deducted from the sum the customer was due to pay on completion.
The complaint
While the customer understood that the incentive would be paid in a lump sum, they expected it to be paid directly to their bank account rather than being offset against their completion payment.
The customer complained that they had wanted the incentive to be paid directly and that the developer had not been clear that this would not happen.
The Ombudsman's decision
The Ombudsman found that, although the headline marketing material indicated that the developer would make regular monthly payments towards the customer's mortgage, that had not caused an issue in this case because the customer had understood that the incentive was a single payment.
Even though there had been a misunderstanding about how the incentive would be paid, this had not caused the customer any loss. The end result was the same whether the incentive was paid directly to the customer or deducted from their completion payment.
The Ombudsman recommended, however, that the developer consider whether their advertising of financial incentives was sufficiently clear for customers to understand how the incentives would work in practice.
Key takeaway
Developers have to tread a difficult line between creating snappy and eye-catching marketing materials about financial incentives and making sure that they convey enough detail to customers about how the incentives work.
The key takeaway for developers from the Ombudsman's decision is to be as clear as possible with customers about when and how incentives will be paid. That need not necessarily be set out in the headlines of their advertising, but developers should ensure that customers are given all the details they need before they reserve a home.
For more advice on complying with the requirements of the NHQC, developers can get in touch with our Real Estate Litigation team or their usual contact in the Brodies Living team.
Contributors
Associate
Partner
