A lay-by is an agreement between a consumer and a business where:
- the goods will be paid for over a period of time
- the consumer agrees on a fixed sale price and payment conditions
- the consumer does not take the goods until the payments are finalised.
Make sure you read the terms and conditions before signing anything or paying any money.
The lay-by period could be one week, up to many months. The business must then hold the goods for that period of time.
An agreement is classed as a lay-by if:
- the goods are paid for in three or more instalments; or
- the business calls the agreement a lay-by, even if the consumer pays in only two instalments.
When a business starts a lay-by agreement, a business must ensure the customer knows about the terms and conditions
Agreements must be in writing and should contain:
- what goods are being sold
- how much they cost
- how much deposit the customer paid
- how long the lay-by will last (maximum)
- what cancellation and refund policies apply.
Cancelling a lay-by
If you cancel a lay-by agreement, the business must refund the money paid. The business may charge a termination fee if it was a term of the agreement.
There is no set amount or percentage for a termination fee, but it must not be more than the business’s ‘reasonable costs’ relating to the lay-by agreement (for example, storage and administrative costs that apply to the lay-by agreement). What is ‘reasonable’ will depend on the circumstances and a business needs to be prepared to justify those costs.
Besides the termination charge, a business is not entitled to damages or any other remedy for the termination of the lay-by agreement.
A business is not allowed to break a lay-by agreement unless:
- the consumer breaks one of the terms of their agreement; or
- the business closes down; or
- the goods are no longer available for reasons the business can’t control (they can’t choose to remove the goods from sale).
You are entitled to a full refund if:
- the business closes down; or
- the goods are no longer available for reasons they cannot control.