The practice of builders operating a staged payment system whereby buyers pay for their homes in instalments as the work progresses is unfair to house buyers, a member of the Law Society has said.

A former chairman of the Incorporated Law Society Litigation Committee, Mr Colin Price, said the standard contract used between builders and home-owners was a balanced agreement which ensured fairness to both parties.

But the introduction of staged payments into the contract tilted the agreement in favour of the builder as it involved the purchaser having to fund the staged payments by means of a bridging loan which was particularly unfair on first-time buyers.

It also tilted the element of risk in favour of the builder and against the buyer in that the builder constructed the house with the purchaser's money, said Mr Price, adding that home bonds only covered 50 per cent the house cost.

Mr Price was giving evidence for Mr John Leahy, Mallow, Co Cork, and the Educational Building Society, who were being sued by builders Kenny Homes of Limerick for interest on late payment of staged payments under a building agreement.

Kenny Homes argued that Mr Leahy owed the company £3,952.86 (€5,003.62) in interest in respect of a contract from April 1998 where he agreed to buy a £66,500 apartment at Lios na Greine, South Douglas Road, Cork.

Mr Sean Durcan, solicitor, for Kenny Homes, argued the contract was a fair agreement to which Mr Leahy had signed up after consultation with his solicitor who explained the penalties involved if he was unable to meet stage payments.

Earlier Mr Price said the practice of staged payments had disappeared in Dublin and the rest of Leinster around 20 years ago but it was still prevalent in Cork, Limerick and up along the west seaboard into Galway and Sligo.

The Law Society favoured phasing out staged payments, considering them to be contrary to the public interest, said Mr Price, adding that Dublin builders were happy to operate on a 10 per cent down-payment system with the balance being paid upon completion.

Mr Price pointed to comments by the former Director of Consumer Affairs, Mr William Fagan, who had described the system of staged payments as "a system operated by greedy builders fuelled by greedy lenders".

Justice Con O'Leary reserved judgement in the case at Cork District Court until next Friday.