When you’re buying a property, whether it’s a new build, a shared ownership home, or something at auction, you may be asked to pay a reservation fee. It’s a common part of the process, but many buyers aren’t sure exactly what it covers or whether it’s refundable if the sale doesn’t go ahead.
In this guide, we’ll explain what a reservation fee is, how much you’re likely to pay, and the rules around refunds. We’ll also cover how reservation fees work in different situations, including shared ownership, new builds, and the modern method of auction, so you can move forward with clarity and confidence.
What is a reservation fee?
A property reservation fee is a payment made by the buyer to reserve a specific property. It gives you a set period to proceed with the sale while the seller or developer agrees not to accept offers from anyone else.
This fee is often required when buying new build homes, shared ownership properties, or homes sold through the modern method of auction. The aim is to secure the property for a short time, typically 28 days, while legal checks and mortgage arrangements are underway.
How much is a typical reservation fee?
Reservation fees vary based on the property type and who you are buying from. For new builds and shared ownership homes, the reservation fee is typically a fixed amount — usually between £250 and £1,000. For example, many developers charge around £500 to reserve a new build, while housing associations often request a £250 to £500 fee for shared ownership.
If you’re buying through the modern method of auction, the reservation fee is usually a percentage of the agreed sale price, often between 2 and 5 percent. This amount can be considerably higher, especially for more expensive properties.
Related: Understanding the costs of buying a home
Is the reservation fee refundable?
Whether the reservation fee is refundable depends on the agreement you sign when paying it. Some agreements allow for a full reservation fee refund if you change your mind during the cooling off period. Others may retain part of the fee to cover administrative costs or make it entirely non-refundable once the cooling off period has passed.
If the seller pulls out or cannot proceed with the sale for any reason, most agreements will allow you to claim a full refund. It’s important to confirm this in writing before paying the fee.
Related: How does exchange of contracts work in a chain?
What is a cooling off period?
A cooling off period gives you the right to cancel the reservation within a set timeframe, usually 14 days, and receive a full refund. This is common with new builds and shared ownership properties, and is designed to protect buyers from committing under pressure.
Always check whether a cooling off period applies and how long it lasts before signing any paperwork.
What does the reservation agreement include?
A reservation agreement sets out the terms of your payment and what happens if either side withdraws. It should state:
- How much you’re paying
- How long the property will be held for you
- Whether the reservation fee is refundable or non-refundable
- Any deductions if you back out
- Conditions for a full refund if the seller withdraws
For new build homes, the agreement should also comply with the New Homes Quality Code, which requires clear information about costs and terms.
What is a reservation deposit in a new build?
In new build transactions, the reservation deposit is a common step. It holds the property for an agreed period, often 28 days, while legal and mortgage arrangements are made. The fee typically ranges between £500 and £1,000.
The New Homes Quality Code ensures that developers must provide clear details about this fee, including whether a refund is available and what deductions might apply.
Shared ownership reservation fees explained
If you’re purchasing through a shared ownership scheme, you’ll usually pay a shared ownership reservation fee, often around £250 to £500 to secure your share in the property.
Refund policies vary. Some providers offer a shared ownership reservation fee refund if you withdraw during the early stages, especially within the cooling off period. Others may retain part of the fee if your application progresses further or if checks have already been carried out.
How reservation fees work in modern method of auction
With the modern method of auction, the buyer is required to pay a non-refundable auction reservation fee once the bidding ends. This fee is typically between 2 and 5 percent of the final agreed sale price, or a minimum fixed amount set by the auction provider, which can be around £5,000 to £6,000.
The reservation fee secures the property and gives you a set time frame, usually 28 days, to exchange contracts. However, if you decide not to proceed with the purchase, the reservation fee is usually non-refundable. It’s also important to be aware of any additional property auction fees or buyer premiums set out in the auction terms.
When to expect a refund and when not to
You’re more likely to receive a refund if:
- You cancel within the cooling off period
- The seller pulls out or changes the terms
- The property becomes unavailable
You’re less likely to get a refund if:
- You withdraw after the cooling off period without cause
- You’re unable to arrange finance in time
- You’re buying through an auction where the fee is explicitly non-refundable
Make sure the refund policy is clear before you commit.
What to ask before paying a reservation fee
- Is the fee fixed or percentage-based
- Is it refundable, and under what conditions
- How long is the reservation period
- Is there a cooling off period
- Are there any deductions for admin or legal work
- Is the fee part of the purchase price
Asking upfront ensures there are no surprises later and gives you more control over the process.
Understanding what a reservation fee covers and knowing when it’s refundable can help you make better decisions during the buying process. Each type of property sale may have different rules, so taking the time to read the small print and ask the right questions is always a good move.
If you’re looking for professional advice or friendly support on how to tackle property reservation fee, contact your local Whitegates brand today.
