A customer reserves a plot on a new build development. Before completion, the housebuilder reduces the price of other plots of the same type at the development. Does the housebuilder need to inform the customer and offer them the same price reduction?
This was the question facing the New Homes Ombudsman in a case study it has recently published.
The facts
The customer reserved a property at a price of £250,000. Before completion, the developer reduced the prices of four nearby plots by £7,500. The developer did not inform the customer of the price reductions and the customer only became aware of them after they completed their purchase.
The complaint
The customer argued that they should have been told about the price reductions and offered the opportunity to withdraw from their purchase and buy one of the reduced plots.
The developer argued that it was not required to tell customers who have reserved a property of changes in the price of other plots. The new sales prices had been available on their website and on the price list in the sales office.
The Ombudsman's decision
The Ombudsman acknowledged that, had the customer been told about the price reduction of the other plots, they would have either withdrawn from their purchase or would have asked the developer to reduce the price of the plot they had reserved.
However, the Ombudsman ultimately decided that developers are not required to proactively inform customers of price changes on a development during the course of a transaction.
While the New Homes Quality Code requires developers to notify customers of major changes to their property, including those that alter the value of the new home, the Ombudsman held that this does not include changes to the selling price of other plots.
Key takeaway
The Ombudsman's decision will be welcomed by housebuilders, who will avoid the administrative and commercial implications of having to keep customers informed about price changes on a development throughout the course of every transaction.
Developers should note, however, that the Ombudsman held that the Code's requirement for transparency meant that customers should have ready access, throughout the sale process, to information which might influence their decision to complete the transaction, and that this may include information about price changes.
The outcome of this case indicates that, in the case of price changes, it will be sufficient for new prices to be available on the developer's website and at the sales office for the development. In practice we anticipate that developers will already be doing this as a matter of course.
For more advice on complying with the requirements of the New Homes Quality Code, developers can get in touch with our Real Estate Litigation team or their usual contact in the Brodies Living team.
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