New Build Reservation Fees, What You Pay and What Protection You Have

What is a Reservation Fee?

When you agree to buy a new build property directly from a developer, you will typically be asked to pay a reservation fee before any legal work begins. This fee secures the plot in your name for a fixed period, commonly 28 to 56 days, during which no one else can be offered that property while you instruct solicitors and arrange your mortgage.

The reservation fee is distinct from the exchange deposit. It is paid at the very start of the process, often before you have even instructed a solicitor.

How Much Are Reservation Fees?

Reservation fees vary between developers. They commonly range from £500 to £2,000 for standard residential properties, though on higher-value developments fees of up to £5,000 or more are not unusual. Always ask for the exact amount in writing before handing over any money.

These are indicative ranges. There is no legal cap on reservation fees in England and Wales, though Trading Standards and the Advertising Standards Authority have both addressed misleading marketing practices in the new build sector.

What the Reservation Agreement Should Say

Before paying any fee, ask the developer for a written reservation agreement. A properly drafted agreement should set out:

• The plot number and property address
• The agreed purchase price
• The reservation period (how long the plot is held for you)
• What the fee covers
• The circumstances in which the fee is refundable
• What happens if the developer cannot proceed

Do not hand over money on the basis of a verbal promise alone. Under the Consumer Code for New Homes, a voluntary industry code supported by the Home Builders Federation and others, developers should provide clear written terms before accepting any reservation payment.

When is the Fee Refundable?

This is where buyers most commonly run into difficulty. Reservation fee refund terms vary significantly between developers.

**Typically refundable in full:**

• Developer withdraws from the sale
• Planning permission is refused for a reason outside your control
• The build is significantly delayed beyond agreed timescales

**Typically non-refundable or partially refundable:**

• You change your mind and withdraw
• Your mortgage application is declined (check the agreement carefully, some developers allow a refund in this circumstance)
• You fail to exchange contracts within the reservation period

**Key point:** If the agreement does not specify that the fee is refundable if your mortgage is declined, you risk losing it entirely. Raise this explicitly before paying, and ensure the agreement is amended if necessary.

The Reservation Period

The reservation period is the window you have to complete your legal work and exchange contracts. Developers set this period to manage their build programme and cash flow. It is commonly 28 to 56 days, though off-plan purchases, where the property is not yet built, may have longer reservation periods.

If you cannot exchange within the reservation period, some developers will extend on request, particularly if you can demonstrate that solicitors and mortgage are in place and the delay is due to circumstances outside your control. Extensions are at the developer's discretion and may involve paying a further fee.

Your Rights Under the Consumer Code for New Homes

The Consumer Code for New Homes sets out minimum standards that subscribing developers must follow. These include:

• Providing a reservation agreement before any fee is paid
• Giving clear information about what the fee covers
• Clearly stating refund conditions
• Providing key information about the property and the purchase process

If a subscribing developer fails to meet these standards, you can raise a complaint with the Code's Independent Dispute Resolution Scheme. Check whether your developer is a subscriber, not all housebuilders participate.

Before You Reserve

Use Property Passport UK to check whether the development's address or postcode has any historical data, EPC registrations on completed units in the same development, for instance, can give you a useful indication of energy performance. Always instruct an independent solicitor (not one recommended by the developer) and have them review the reservation agreement before you sign anything.