What is a layby?
A layby is an agreement between a consumer and a trader (e.g. a retailer) in which you pay for goods in two or more instalments, and the retailer holds onto the goods until you have paid off the amount owing on the goods. You don’t own the goods until you have made the last payment.
In a layby sale you should not have to pay any interest or other fees (except perhaps a storage fee in some cases).
From 17 June 2014, the definition of a layby sale is defined as an agreement between a consumer and a trader (e.g. a retailer) in which:
- goods will be supplied to the consumer but the consumer doesn’t take possession of the goods until an agreed portion of the price has been paid, and
- payments are to be made in three or more instalments (2 or more if the agreement specifies that it’s a layby sale) and
- the price is less than the upper limit for Disputes Tribunal cases (currently set at $15,000)
- no interest charges or credit fees are charged to the consumer (otherwise it is effectively a credit contract)
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What are my rights when I buy something on layby?
Layby sales which were made before 17 June 2014 are covered by the Layby Sales Act 1971. This Act does not cover part payment arrangements for vehicle sales, services, or sales worth more than $7500.
Under the Layby Sales Act 1971 the retailer must hold the goods for you until you complete your instalments (they can’t sell the goods to someone else). If the retailer puts up the price of new stock of the same goods, they can’t increase the price of the goods held on layby.
Layby sales made on or after 17 June 2014 are covered by the Fair Trading Act (FTA), which incorporates the provisions that were set out in the Layby Sales Act and gives you additional protection. For layby sales agreed to from 17 June 2014 the retailer must give you a copy of the layby agreement when you purchase the goods.
The agreement must be easy to understand and include the following information:
- On the front page:
- a clear description of the goods,
- a summary of your right to cancel,
- whether a cancellation fee will be charged and how much (if it is not a fixed amount, how the fee will be calculated),
- the total amount payable
- the date of the agreement
The cancellation fee can’t be more than reasonable costs that would be incurred as a result of the cancellation e.g. if the goods have lost value since the start of the agreement then the fee could be the amount equal to the loss in value. Other reasonable costs include the cost of storing and insuring the goods during the layby period, and administration costs associated with the agreement.
You can ask for a free written statement at any time, which tells you:
- The total amount payable
- How much you’ve paid so far
- The cancellation charge to date, if any
- How much is outstanding, if any, and how that amount is to be paid
If you request a written statement, the trader has to give it to you within five working days.
Until you take possession of the goods, the trader is responsible for looking after them.
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I put something on lay-by and have paid a couple of instalments but have changed my mind. Can I cancel and get my money back?
You are entitled to cancel a layby agreement at any time before you actually take possession of the goods. You can cancel in any way which clearly shows you wish to cancel the agreement (unless you’ve agreed to communicate this in a particular way). You are entitled to a refund of the money you have put down on the item (minus any cancellation charge) and are entitled to get the money back in cash.
The trader is allowed to charge you a cancellation fee as long as:
- the charge is in the layby agreement and
- you were the one who cancelled the agreement and
- the trader did not breach the agreement
The cancellation fee is meant to cover selling costs or loss of value. Selling costs include things like storage costs and staff time to write receipts. The amount charged must be reasonable, including only the actual costs incurred by the seller for your lay-by. Loss of value means any drop in the retail value of the item because, for example, the item is no longer in season or a newer model is now available. Usually loss of value can't be claimed if the lay-by agreement is cancelled within one month.
If the amount of your instalments is less than the selling costs and loss of value, the seller can keep your money but they cannot ask you for any more. The Consumer Protection website provides more information about lay-by purchases and cancellation of lay-by agreements.
Note that the rules for cancellation and refunds for goods bought on credit are different from those which apply to goods bought on lay-by. Read our Consumer credit purchase page if you need information regarding cancellation and refunds for consumer credit transactions.
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Can the shop cancel my layby agreement?
A retailer can cancel a layby in the following circumstances:
- The consumer has breached a term of the agreement (e.g. by not paying instalments as agreed)
- The goods are no longer available, due to circumstances beyond the trader’s control, and they can’t reasonably get hold of an appropriate substitute
- The trader has ceased trading due to bankruptcy, receivership, liquidation or voluntary administration. See the next question for what you can expect in this situation.
If the retailer cancels the layby they must tell you (by phone, in person or in writing).
For laybys taken out on or after 17 June 2014, if a shop cancels a layby due circumstances beyond its control (e.g. the item was stolen in a burglary and a suitable replacement isn't available) then the shop can't charge a cancellation fee. A shop can charge a cancellation fee if they cancelled the layby agreement because the consumer has breached a term of the agreement - as long as this information about the cancellation fee is in the layby agreement.
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I put something on layby and now the company has gone out of business. What can I do?
If a company goes out of business then the goods you have on layby will become part of the assets in the bankruptcy, receivership, liquidation or administration. If your payments are up-to-date, you have the right to pay for and collect your item. If the seller is not able to give you your lay-by item because they do not have enough stock left, then they will owe you money.
If your payments are up to date but you aren’t able to complete your layby, then you are entitled to be refunded any money you’ve already paid.
You will need to contact the company's receiver or liquidator to register your claim for the item or the money you are owed. Put your claim in writing, providing evidence of what you are owed, for example a receipt. Although as a lay-by customer you have priority over some other creditors (such as unsecured creditors) when a company goes out of business, there is no assurance that you will actually get your lay-by item or your money back.
Contact your nearest Citizens Advice Bureau for further information and assistance.
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Who do I complain to if I have a problem with my layby agreement?
If you find that the goods are damaged when you collect them, you have the right to cancel the layby and get a refund. If the goods are damaged then under the Consumer Guarantees Act you are entitled to ask the retailer to give you a suitable replacement or get the goods repaired at no cost to you.
If you aren’t able to get a satisfactory resolution from the retailer, you can make an application to the Disputes Tribunal for a decision.
You can report the retailer to the Commerce Commission if the problem is with the layby agreement itself, e.g. the retailer did not disclose the right information to you at the time of the sale or mislead you about your rights, While they can’t advocate on your behalf, the Commerce Commission can investigate a retailer and take action against them.