Purchasers of new homes under stage-payment schemes are each being charged an average of €7,000 for the construction industry practice, a new report claims.
The study, prepared for the Law Society by Dublin-based financial adviser Mr Des Peelo, found that stage payments are sought by builders on up to 25,000 new houses annually in various parts of the Republic - costing purchasers up to €175 million.
The report said the practice was largely confined to Cork, Limerick, Galway, Sligo and Mayo. But there was evidence of the practice re-emerging in other counties where it had been discontinued in recent years.
Under the practice, new house buyers are asked to pay up to 90 per cent of the cost of their new home before taking possession, starting with a payment of 20-35 per cent of the total cost to cover the purchase of the site.
The report said purchasers were forced to pay interest on their mortgage well before their house was completed, costing them an additional €5,000 in interest and a further €2,000 in engineering and certification costs.
The chairman of the Law Society's conveyancing committee Mr Patrick Dorgan said, stage payments had "no justification" other than the historical ability of house builders to enforce the practice. "It is an anti-consumer and anti-competitive practice that needs to be stopped immediately."
The Irish Home Builders' Association defended the practice, however, saying that it offered purchasers flexibility and other benefits. The group's director, Mr Hubert Fitzpatrick, said: "If you did away with stage payments you would find the cost of housing in these areas would increase."
He also queried the report's figures, adding that the courts had examined the fairness of the practice recently and had found it to be "reasonable".
