Terminology

The terms used at various stages of each system vary slightly. The differences between these are given below, with a brief definition:

Scottish Terms

• Note Interest -  Buyers instruct their solicitor to note interest, thus keeping them informed of offers and or closing dates to be set.
• Home Report - A document giving details about the property, including a survey and valuation, property questionnaire and Energy Report.
• Agreement in Principle - An offer is accepted, but it is not legally binding.
• Survey - An inspection of a property that determines its condition and any problems for prospective buyers
• Conclusion of Missives - A legally binding contract is reached between the vendor and buyer.
• Date of Entry - The date on which the money is transferred to the vendor, and the buyer takes possession of the property and receives the keys.
• Land and Buildings Transaction Tax - A tiered tax proportional to the cost of the property.

English Terms

• Offer Accepted - An offer is accepted, but it is not legally binding.
• Survey - An inspection of a property that determines its condition and any problems for prospective buyers
• Exchange of Contracts - A legally binding contract is reached between the vendor and buyer.
• Completion - The date on which the money is transferred to the vendor, and the buyer takes possession of the property and receives the keys.
• Stamp Duty Land Tax - A tiered tax proportional to the cost of the property.

Solicitors

To purchase a property in Scotland, buyers are required to instruct a Scottish solicitor to act on their behalf. Conversely, it is advisable to instruct an English solicitor to act on your behalf during the conveyancing process of a purchase of an English property.

Noting Interest

In Scotland, buyers should instruct their solicitor to ‘Note Interest’ in a property they might be interested in buying: this ensures the buyers are kept up to date of any developments, such as a closing date for offers to be made. Noting interest is not making a commitment to make an offer or buy the property, simply to be ‘kept in the loop’.

Once interest has been noted, the vendors agent will provide the potential buyer & their solicitor with a Home Report. This is a large document comprising a property questionnaire, energy report, and a single survey and valuation. A Home Report has a usable shelf life of 90 days, following which, often for lending purposes, it requires a replacement. The replacement will take into account improvement in the property or improvement in market conditions, or deterioration in the property and or market conditions. In addition, there are rare occasions when for absolute independent opinion, the purchaser might want to commission their own survey of the property prior to making an offer, if their mortgage lender requires it or if the buyer just wants the professional opinion of their preferred independently instructed surveyor.

In England, buyers are not required to ‘Note Interest’ with the seller’s agents and are not provided with detailed information on the property before making an offer. The purchasers survey follows later in the English process.

Making an Offer

Whereas in England buyers may submit offers personally on their own behalf, in Scotland an offer letter is generally sent through the buyers’ solicitor. Therefore, in Scotland buyers should have instructed solicitors to act on their behalf before an offer is made, when they first note their interest in a property, whereas in England legal instruction is only necessary after an offer is accepted (although it is advisable to have this in place to avoid delay after their offer has been accepted).

In Scotland, in order that a bid is seriously considered, an offer of a loan in principle is sufficient at offer stage. The offer and concluded missives can be conditional on the offer of loan being issued.

An Offer is Accepted

So, an offer has been accepted on a property. Both parties have reached  ‘Agreement in Principle’, that is not legally binding; either party can walk away at this stage without penalty. From here on in, the differences in the Scottish and English systems are mainly related to the behaviours of Estate Agents and solicitors, and their respective timeframes.

Dates of entry in Scotland are typically 4-8 weeks after the offer is submitted and the whole process can be completed usually within 8 weeks.

Let us first focus on Estate agents’ behaviours. At this point, taking into account the circumstances and ability to complete the transaction, Scottish Estate Agents will normally cease marketing the property and, as a result, counter offers or further interest from other potential buyers will not normally play a role in what happens during the property sale. Conversely, in England, estate agents can continue to market a property, and as such vendors can receive counter offers and would be able to take up more attractive offers, abandoning the offer they initially accepted (‘gazumping’). Gazumping, chains and collapsed sales are all possible in the English system, so buyers in England are less assured that their accepted offer will lead to an actual property purchase.

Legally Binding Contract

Let us now focus on the difference in timeframes. Looking further into the process, a main difference between the two systems is the point at which a legally binding contract is reached. Once a legally binding contract is in place, should the contract be breached, the parties involved could face severe financial penalties, in the form of the requirement to reimburse: the other’s legal costs; all re-marketing costs; covering the difference between the bid made and the bid finally achieved, if less than the original accepted bid.

In Scotland, a legally binding contract is achieved (subject to searches and clean titles) at ‘Conclusion of Missives’, whereby negotiations between the buyers’ and sellers’ solicitors have finished and a contract has been agreed. It is worth noting that the Conclusion of Missives is reached before the conveyancing process begins, generally, with willing participants on either side, 4-8 weeks after an offer has been accepted. Therefore, in Scotland a legally binding contract can come around relatively quickly and with little or no additional input from the buyer in some cases. It is therefore important that anyone buying Scottish property has their finances in place at the time an offer is made.

In England, a legally binding contract is achieved at ‘Exchange of Contracts’. Exchange, as it is often referred to, is only reached after the survey and lengthy conveyancing process is complete; therefore, there can often be a substantial delay of up to several months between an agreement in principle (when an offer is accepted) and a legally binding contract in England.  

There is an obvious problem for anyone looking to buy property in Scotland subject to the sale of their English property. Whereas the English buyer can be legally bound to the purchase of their Scottish property relatively quickly, the sale of their English property will not be legally secure until much later on (and subject to the goings on in any ‘chain’).

In theory, it is the Scottish solicitor’s job to ensure that an English buyer does not reach ‘Conclusion of Missives’ until Exchange of Contracts has been reached on their English property or to ensure the Scottish contract is concluded subject to the sale in England completing. However, this would be no mean feat given the difference in timeframes of these milestones in the respective systems, and the likelihood of any property chain upsetting the process.

In reality, without the correct advice, the vast difference in timeframes can make navigating such transactions unappealing to Scottish sellers. 

If the pillars of the deal structure are not properly agreed at the stage of agreement in  principle, a Scottish vendor will carry all the risk in accepting an offer from a Scottish or southern based purchaser, which is subject to the sale of their property. According to Charlotte Hogarth, Associate Director of middle to prime market estate agents, Robb Residential the onus is therefore on Scottish Estate Agents to develop mechanisms to ‘disrupt’ the process in such a way as to protect their vendor clients and create shared risk across both parties in the transaction. In this way, Scottish vendors can entertain offers from both Scottish & southern based buyers with much greater confidence.

One such mechanism pioneered by Robb Residential is to counsel their purchasers and vendors to accept both Scottish and southern based offers under one of two conditions:

1. Conclusion of Missives is reached within two weeks, which should be achievable using the Scottish Standard Clauses as the basis of the Missives
2. A non-refundable deposit is paid at agreement in principle. Such a deposit is deducted from the final sale price.

Whilst neither of these conditions guarantee a completed sale, according to Robb Residential, they demonstrate purchaser intent, create shared risk and certainly “focus the mind” of Scottish & southern based buyers. And it seems to be working, with all such sales with deposits reaching completion under their watch.

Outlays

The outlays buyers can expect are similar in both systems. Legal fees for purchase and conveyancing, search fees, fees payable for entry in the Land Register etc. apply to both Scottish and English property purchases.

Additionally, tax on the property purchase itself is payable in both countries. In Scotland, this is called Land and Building Transaction Tax (Stamp Duty Land Tax was abolished in 2012), whereas in England this remains Stamp Duty Land Tax. Both are tiered taxes, such that the amount paid depends on what was paid for the property. Across the board, LBTT is higher in Scotland than SDLT in England. In addition, ADS (Additional Dwelling Supplement) is 4% in Scotland, 3% in England.