From finding a buyer to handing over the keys
This article is intended to provide a brief guide to the main legal elements involved in selling a domestic property. Obviously as such it cannot cover all the things that might arise, but we hope it will be useful in understanding the steps involved. The marketing or estate agency side of the transaction is covered in other leaflets available from us.
Any property being marketed for sale must now have a home report available for inspection by potential purchasers. The Home report comprises a survey and valuation, property questionnaire and energy performance certificate. More detailed information on this is available through our range of marketing leaflets and information packs.
If more than one party wants to offer for your house a closing date will often be set. This means that all interested parties will be invited to submit their offer at a set time (usually 12.00 noon) on a set day. Even if an offer has been made previously the details of any such offers or prior discussions will not be divulged by us to another person. Each person offering therefore should have no inside knowledge about what any other person may be intending to bid. Just because a closing date is fixed it does not follow that one of the offers must be accepted. Similarly there is no obligation to accept the highest price; any or none of the offers may be accepted. However, a closing date generally produces the best offer available at the time and in the majority of cases the highest offer is accepted. If none of the offers is accepted at the closing date The Law Society lays down strict guidelines as to how matters should then proceed.
Most offers these days are many pages long. A number of clauses are of a purely technical nature and may not require to be discussed in great detail with you. Some practical points are, however, common to most transactions. These include the following.
Moveables – Care has to be taken to ensure that the offer does not include any items which you do not wish to include in the sale.
Repairs – If you have instructed any repairs to the property which are not completed, or are completed but not paid for, then you will remain responsible for these. It may be appropriate to refer to these in the acceptance.
Local Authority Notices – If the local authority has served any notices on the property for repairs or the like then again these will generally remain your responsibility and should be referred to in the acceptance.
Warranties – Most offers will require you to warrant that the central heating and other appliances, and in some cases the whole electrical, gas or plumbing systems, will be in good working order at settlement. If you are aware of any problems with any of these you should let us know.
Alterations – A warranty is also usually sought to the effect that all alterations to the property have the necessary local authority consents, and any consents which may be needed under the title deeds. We would be expected to produce these to the buyer. The local authority consents needed would be building warrant and completion certificate, and sometimes planning consent. The title deeds sometimes provide for further consents being needed. If there are alterations to the property it is best for us to know as soon as possible to enable us to check the documentation. If alterations have been carried out without local authority consent this can generally be resolved by applying for either a retrospective building warrant or a “Letter of Comfort”. A Letter of Comfort is a letter issued by the local authority confirming they are aware that works have been carried out without consent but that they do not intend to take any action in relation to that.
In almost all cases the acceptance issued will be a qualified acceptance. This means the acceptance will contain some additional conditions to be incorporated into the contract. The bargain is not concluded, and is therefore not binding, until there are no further qualifications from either side and the last set of qualifications has been accepted in writing. Up to that point either party can withdraw from the deal without penalty.
The letters forming the contract are also referred to as the missives.
Until recently letters forming the contract had to comply with certain rules to be valid. Recent changes in the law now mean that any signed letter can form part of the contract. You should be careful therefore not to commit any prior discussions in writing to either the buyer or the buyer’s agents as that could end up being accepted and forming the basis of the contract.
The Matrimonial Homes (Family Protection) Scotland Act
This Act provides that even if the title to a matrimonial home is in the name of one spouse only, the property cannot be sold without the consent of the other spouse. These provisions now also apply to civil partners under the Civil Partnership Act 2004. Single people have to sign an affidavit confirming the house is not a matrimonial home or one occupied by a civil partner.
What happens next?
Under the Scottish system the aim is to tie up the deal as soon as possible so that it is binding on each party. The contract is concluded subject to various items being completed to each party’s satisfaction. Once the bargain is concluded much of the subsequent work involved in the transaction will be carried out between the buyer’s solicitors and ourselves – indeed if the transaction proceeds smoothly there can often be little of substance to report until nearer the settlement date. Although many problems can potentially arise the main points on which we must satisfy the purchaser are:-
Title – Before settlement we must exhibit your title to the buyer’s solicitor and deal with any queries which may arise. We also approve the draft deed to be delivered to the buyer to transfer the title (the disposition) and arrange to have the disposition and any other relevant documents signed by you.
Property enquiry certificate – This also has to be obtained by us and exhibited to the buyer’s solicitor. This certificate is based on local authority records confirms various matters affecting the property . These include whether the road is adopted or private, whether there are mains services, whether there are any planning notices, orders or applications affecting the property, outstanding matters relating to building control, environmental health and so on. The contract is usually conditional on this certificate being clear of any problems.
Legal reports – These used to be referred to as the searches. These reports confirm whether there are any impediments to the sale, or any deeds relating to the property which have not been examined.
The Land Register and Plans reports
The Buyer’s disposition is registered in The Land Register of Scotland. Once registered, the buyer will receive a title sheet. In the title sheet the definition of the extent of the property is based on the current Ordnance Survey map and is a title which is guaranteed by the State.
Where a property has not previously been registered in the Land Register it is necessary to ensure that the boundaries as shown in the existing title deeds match the Ordnance Survey map. This is done by the seller by instructing a Plans report. This report will disclose any discrepancies between the boundaries as shown in the title and the OS map. In some circumstances where discrepancies do occur it may be necessary to obtain a corrective deed from a neighbour to resolve matters. It is important therefore that this report is obtained at an early stage.
Also, where a property has not previously been registered in the Land Register the Seller will have to undertake in the missives to obtain any further information required by the Land Register to enable the buyer’s title to be registered. In the majority of cases all such matters can be identified and dealt with prior to settlement of the sale, but this does occasionally mean further work if the Land Register issues a requisition for something which was not expected.
Where a property has previously been registered the title sheet generally makes examination of title simpler and there is no need for a Plans report.
On completion of the sale the existing mortgage has to be paid off. We will obtain a redemption figure from your lender and redeem the loan from the sale proceeds. Often we will not get a redemption figure until after the contract has been concluded and you are committed to the deal. If you think there may not be sufficient funds from the sale price to pay off the loan you should alert us as soon as possible as the transaction cannot settle unless we can pay off the loan in full. If it is an endowment loan any life policies held by your lender will be released to you after the loan is repaid. Sometimes this will be attended to by us. Sometimes the lender will deal with this direct. Some lenders no longer hold life policies at all.
The buildings insurance cover should generally be continued until the sale is completed. If the buildings insurance was arranged through the lender then the lender will cancel the insurance once the mortgage is paid off. If you do not have a mortgage you should remember to cancel the buildings insurance from the settlement date. Depending on the payment arrangements there may be a refund due to you of part of the premium.
On the date of entry the purchaser has to pay over the agreed price in exchange for the title documents and the keys. There is no time (unless specified by the contract) by which this must be done but in most cases the purchaser will wish to settle by Mid-day. It is helpful if you can let us know as soon as possible when you will be able to hand in the keys to us. To save time on the actual settlement date you may wish to hand in one set of keys to us a day or so early and then leave the rest of the keys in the house when you move out. If there are any problems which are likely to delay settlement you will have been made aware of this in advance.
On the day of settlement any mortgage will be repaid and we will advise the Council tax authority of the change of owners. Where there are sufficient funds to do so we will deduct our fees and outlays and then promptly remit the balance to you.
As stated, the purpose of this article is to provide some background information on the main points which often crop up during a normal transaction. Each individual transaction is different and we will guide our clients through each stage, ensuring attention to their own individual requirements as we go.