The Scottish Property System
Buying a House In Scotland

Vive La Difference-The Scottish and English systems.
Surely I don't need a solicitor
Now we are all in the single market place in Europe my solicitor in England should be able to deal with the purchase.
What will it cost?
Identifying the real price.
Subject to Survey
Do I need to have the cash available on the day I offer?
Noting Interest
What is a 'Closing Date'?
Concluding Missives
Make use of our local expertise.

Vive La Difference-The Scottish and English systems.

For anyone buying property in Scotland it is important to be aware of the correct way to go about it. This is particularly the case for anyone moving from England, as there are fundamental differences between the Scottish system and that operating South of the Border. Although the basics are the same it is the timing of when the contract becomes legally binding that has led to two different approaches. It is important to understand that there is no second step in the Scottish procedure and that the contract can become legally binding at a relatively early stage, unlike in England where contracts are often exchanged towards the end of the process. Here we prefer not to wait until the removal men are at the door before concluding a binding deal!

In Scotland the contract takes the form of a series of letters known as "missives". There is nothing for the purchaser to sign to commit to the contract as the "missives" are generally signed by the parties' solicitors. Once the offer has been accepted on all points, you have entered into a legally binding arrangement and neither party can withdraw without potentially being held liable for the consequent losses of the other party. Accordingly, you should be careful and only submit a written offer through a Scottish solicitor and make sure your solicitor is aware of your situation. If you offer in writing yourself and this is accepted, you could end up being committed to buy a 'pig in a poke' - a well known Scots non-legal term! Once committed, if you want to get out of the deal, you might be liable for any loss on resale and other costs.

The different legal systems have to be considered particularly carefully if you have a house to sell in England and you are relying on that sale to fund the purchase in Scotland. You will require separate solicitors and it is important that your English solicitor is aware of the need to progress the sale procedures as swiftly as possible and the need to communicate effectively.

Surely I don't need a solicitor its just a case of filling in a form.
Certainly in areas where Land Registration is in place the conveyancing part of the process is more straightforward but most properties in the Borders are still not registered. Even where the property has been registered there are still incidental but important aspects of the transaction, which requires a careful eye. Solicitors are used to dealing with properties. The length of a standard Scottish offer is built on the experience of problems, which to a layperson would not be obvious. If you are borrowing from a bank or a building society they will certainly require the security work to be done by a solicitor so why take on any unnecessary worry?

Now we are all in the single market place in Europe my solicitor in England should be able to deal with the purchase.
Perhaps - but they can't. Scotland has its own separate and distinct legal system. The legal environment is different and you will require a Scottish solicitor to look after your interests. Although some agents, including solicitors, sell houses on either side of the border, the estate agency part of the selling process should not be confused with conveyancing. You will still need a Scottish solicitor.

What will it cost?
As property prices have risen the government has taken a bigger slice of the cake in terms of indirect taxes. Stamp Duty is paid at a variable rate-1% for properties between £120,000 and £250,000, 3% between £250,001 and £500,000 and 4% above that. This is payable on the whole of the price so a purchase at £450,000 would involve a stamp duty bill of £13,500. On top of that there is the cost of registering the title, which is charged on a sliding scale increasing with the value of the property and any security. Any solicitor should be prepared to give you an indication of the likely costs at the outset of the transaction and you might be pleasantly surprised at how the fee element compares. At the end of the day you will need a bottom line figure for budgeting purposes so make sure the figure quoted includes VAT and outlays.

Identifying the real price.
In Scotland properties are usually marketed on an "offers over" basis. This is just an indication of the price that the seller is being advised to market the property at to attract interest and while a lower offer is rare in the current market it does not mean that a lower offer would be refused. In a sellers market where scarcity and demand combine to push up prices, 20% over has been the general rule but this should only be taken as a rule of thumb and trends can change. You should always start by considering how much you can afford and also how much it is worth paying to secure the deal. A property may also be offered for sale at a "fixed price". Again that should be treated as a guide and you will still need to offer acceptable terms to be successful. For example a seller may be looking for early settlement and in that situation a "cash buyer" has an advantage. At the end of the day the selling price will depend on the interest and level of competition as well as various other factors such as whether the property has been on the market for a while. If the selling agents indicate that the sellers are prepared to consider realistic offers, it might be worthwhile giving an indication of your position and making your offer subject to survey. If the property is attracting a lot of interest due to the price sought, location or the type of property, you may have to pay well over the asking price to take it off the market or to secure it at a closing date where there are no certainties.

Subject to Survey
An offer "subject to survey" is less attractive to the seller as it puts the buyer in control, so if your offer were acceptable in principle a seller would generally set a time limit for the survey to be done. An offer "subject to survey" may be accepted at a closing date if it is the most attractive on the basis that the survey will be done within 48 hours. This approach is also useful where you test the seller with a verbal offer, reach an agreed price and then submit a formal offer "subject to survey" which is instructed on your solicitor being advised that the offer would be acceptable in principle. In that situation speed is of the essence and you should arrange the survey through your solicitor and not the financial adviser or lending institution who will not generally act with the same haste as they are operating in the main south of the Border where a different approach and timescale applies. This tactic also saves wasting time and money on surveys for properties that you don't get which is an often cited criticism of the "Scottish System" known as the "Multiple Survey" problem.

Do I need to have the cash available on the day I offer?
Not strictly so- you will only need the funds for the purchase at the settlement date - i.e. the date of entry agreed in the missives. This can be a matter of weeks but is more usually several months ahead. The "entry date" is when you will pay the price in exchange for getting entry to the property. If you have a house to sell, particularly if the house is in England where a different system applies, you must be confident that the funds will be available from your sale or elsewhere e.g. bridging finance. If you have a substantial equity in your existing house some banks will still agree open ended bridging but generally a "closed bridge" is preferred and cheaper. With interest rates as low as they are at present it might be worth taking a "minimal risk" to secure the property of your dreams. However, you should be careful and get the bank to put any bridging facility in writing. Another approach may be to extend your existing mortgage pending sale, taking some of the stress and worry away.

Noting Interest.
If you don't want to miss out on a chance to offer you should ask the selling agents to note your interest. In that way if another party offers you may be given an opportunity to submit a competing formal offer in which case a closing date may be fixed. However the selling agents are not bound to do so and you should be aware that by waiting you take the risk that if an acceptable offer comes in, the property could be sold without going to a closing date. Increasingly properties are sold to purchasers who make an attractive offer without waiting for the closing date.

Closing Date.
If a closing date has been set and you have noted your interest you or your solicitor will be notified of the date set and invited to submit a formal offer. The Closing Date system has its critics as you are in the blind bidding situation but it generally means that the seller achieves the best price and where there are a number of interested parties it gives each an opportunity to submit an offer. The downside is that you may incur costs, particularly for a survey, which will be no further use to you if your offer is unsuccessful. If a closing date is fixed you will need to have done all your homework before you are ready to offer. If you are confident you will have the finance in place an offer "subject to survey" may be worth considering. It may be helpful to have a survey carried out and your funding arrangements should be in place. Your solicitor can instruct a surveyor (and obtain quotes from specialist contractors for woodworm, damp, dry/wet rot etc) and help you find a mortgage, either directly or through a broker.

Concluding Missives and the Conveyancing.
If your offer is successful, your solicitor and the seller's solicitor will then negotiate the "missives" which are the formal letters passing between them dealing with the finer points of the contract which will finally be concluded. You should be kept involved throughout this process, as the solicitor is your agent and can only act with your express or implied instructions. Your solicitor is under a duty not to delay concluding missives and you should instruct him to delay to the prejudice of the seller. However you still have the final say on when to go that final step to enter into the binding contract but you must keep in contact with your solicitor and ensure that you fully advise him or her of your position and ability to proceed. Once "missives have been concluded" (roughly equivalent to the "exchange of contracts" in England) you are contractually bound to buy the property at the agreed date of entry and the seller is bound to sell. The date of entry may be some weeks, or even months ahead, and it is at that point that the full purchase price is payable. On occasions the contract provides for a deposit payable at an earlier stage but usually only in the case of a new house where the builders tend to dictate the terms, or in high value transactions. If a deposit is required this should be clear from the sales particulars. From that point, your solicitor will examine the title deeds provided by the seller's solicitor and prepare the "disposition" (the document which will transfer the ownership of the property to you), liaise with your lender, prepare loan documents for your mortgage, check all the necessary searches and ensure that the seller's title matches the title plan. Your solicitor will also report to you on any title conditions affecting the property and any relevant planning or other considerations. To protect your position the appropriate clauses will have been included in the offer and in the unusual situation where something unexpected crops up and either the sellers are unable to give good title or there is any other material failure to meet the conditions specified in the missives, the deal may fall through leaving the purchaser to seek remedies for breach of contract. However that will only apply if this situation arises after missives are concluded.

Make use of our local expertise.
These are the main features that you should look out for when buying property in Scotland. It is not as daunting as it may seem and by discussing your plans with your solicitor at an early stage you will ease the process and avoid potential pitfalls. If you are looking for a solicitor to assist with your house purchase in the Scottish Borders, call 01573 226999 or e-mail to discuss your plans.

Updated 5th October 2005

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