ooo - look what I found from a solicitor's website..........
A Lincolnshire County Court case earlier this year, when a judge ordered a nursery operator to repay a deposit to parents who cancelled a nursery place that they had secured for their child, highlights concerns in the sector about when an operator can treat a deposit as 'non-refundable'.
It is always difficult to comment on a specific case that is not reported in full so the comments in this article are of a general nature. However they set out the legal position and are intended to provide guidance to the main pitfalls.
It is important to understand that an operator can retain a deposit paid by parents to secure a nursery place but there must be a contract between the operator and the parents that clarifies the non-refundable nature of the deposit and the contract must comply with certain legal requirements.
A contract does not, of course, need to be in writing, but an unwritten contract is always open to dispute as there is no clear evidence of what was agreed. Therefore, if you want to be able to treat a deposit as non-refundable you need to have written terms signed by both you and the parents, which clarify that the deposit is not refundable. Taking a deposit without this is always open to an argument about the terms on which the money was paid over. Even if you argue that your staff always explain that a deposit is not refundable, it is up to you to prove that. That is generally very hard to do.
However even if you have a written contract, you can only enforce a clause which states that a deposit is not refundable if you can show that it complies with the Unfair Terms in Consumer Contracts Regulations. These Regulations are designed to protect 'the consumer' which, for nurseries, means parents. Unfair terms are those in your contract with parents that give you an unfair advantage over the parent. Unfortunately, terms that may appear to be perfectly reasonable to you (and to protect your interests) may be unfair under the Regulations.
It is clear from the guidance to the Regulations issued by the Office of Fair Trading (OFT) that a genuine deposit, (like a reservation fee paid to secure a nursery place) can be kept by the operator as payment for the reservation but only if it is a small amount. It is a matter of judgment as to what amount is acceptable but if the deposit is of such a size that it could be regarded as an excessive payment to stop the parents from cancelling the nursery place then it may be a disguised penalty and won't be enforceable.
The Unfair Terms Regulations don't just apply to deposits. There are various aspects of contracts between nursery operators and parents that may fall to be assessed under the Regulations. It is a requirement that terms in contracts with consumers must be clear, easy to read and avoid jargon but the overriding principle is that the terms must be fair to the consumer, both in their content and the way they are brought to the consumer's attention.
The Regulations are enforced by the OFT, which can order unfair terms to be altered and suspend use of the contract until this is done. That can involve significant management time while it is resolved and potential adverse publicity as the OFT can (and does) publicise those cases where changes have been required.