A reservation fee secures a specific new-build unit in the buyer's name while solicitors are instructed and, where needed, a mortgage is arranged. Once paid, the developer removes the property from active marketing. The fee amount is set by the developer and is not regulated to a fixed figure, so it can vary considerably between schemes and housebuilders.
In practice, the reservation agreement should clearly state the deadline by which exchange of contracts must occur, what happens to the fee if the sale falls through, and whether it is credited against the purchase price on completion. For example, if a buyer withdraws because a mortgage is declined, the agreement will determine whether the fee is refunded in full, partially, or forfeited. Always have a solicitor review the reservation agreement before signing.
Overseas investors should pay particular attention to the refund conditions and the contract exchange deadline, as mortgage approvals and international fund transfers for non-resident buyers can take longer than the developer's standard reservation period allows.