How Does Conveyancing Work?
If you’re looking to buy or sell a property, it’s important to understand that the conveyancing process in Scotland has some unique elements that differ from the process in other parts of the UK. Conveyancing is the legal process of transferring ownership of a property from one person to another. It is typically carried out by a conveyancing solicitor or chartered conveyancer.
One of the key differences in Scotland is that estate agents often handle the conveyancing process, which means that conveyancers are more involved in the selling process than they are in other parts of the UK. The responsibility for providing the Home Report lies with the seller, not the buyer.
The documentation involved during conveyancing in Scotland
Instead of exchanging contracts, as is done in the rest of the UK, the process in Scotland involves a series of letters known as “missives” between the solicitors representing the relevant parties.
In Scotland, there is also a “Note of Interest”. This document notifies the selling agent of the buyer’s interest in the property, as well as the fact that Stamp Duty Land Tax has been replaced with Land Buildings and Transaction Tax.
Gazumping is when a seller accepts a higher offer for their property from a different buyer after already accepting an offer from another buyer. Essentially, it means that the original buyer has been “outbid” by a new buyer, even though their offer had already been accepted. This practice can be frustrating for the original buyer, as they may have already invested time and money in the conveyancing process, only to have the sale fall through due to the seller accepting a higher offer from someone else. In Scotland, guidelines from the Law Society aim to reduce the risk of gazumping, as once a conveyancer accepts an offer on behalf of the seller, they are not permitted to accept subsequent offers from other buyers. If another offer is made, and the seller wishes to accept it, their solicitor must withdraw from acting on their behalf, and they must find another conveyancing solicitor to complete the sale.
This can prolong the time it takes to buy or sell a house and potentially increase the cost of selling the property.
How do you begin the conveyancing process?
When find a home you would like to buy in Scotland, you must engage a solicitor to formally note your interest with the selling agent. This action does not obligate you to make a purchase, but it will enable you to remain informed about developments such as when an offer should be made. You will be notified of the closing date, which is the date when the seller stops accepting offers on the property. The seller will subsequently decide which offer to accept.
The seller needs to supply a Home Report when a potential buyer shows interest. This report is a legal requirement and provides crucial information about the property. Sellers must take the cost of producing a Home Report into account when preparing to sell their property. It’s important to note that the process is different in Scotland than in England, so individuals moving from England to Scotland should be aware of this.
What’s included in a home report?
The Home Report comprises two main parts: the Property Questionnaire and the Energy Report. The Property Questionnaire contains information about the property, including the council tax band, while the Energy Report rates the property’s energy efficiency and environmental impact. It also provides an estimated cost for heating, lighting, and hot water in the property. The Energy Report also includes details for seeking advice on how to make the property more energy-efficient and reduce fuel costs.
While the Home Report is available to potential buyers, they may still opt to arrange an individual survey at an additional cost. Missives, a series of letters exchanged between the buyer’s and seller’s solicitors, are used to negotiate and agree on the final terms of the sale. These letters include terms and conditions, and the seller formally accepts the buyer’s offer. The process is equivalent to the exchange of contracts in England and Wales.
The letters go back and forth between parties until a qualified acceptance is reached, known as “the conclusion of missives.” It’s essential to note that if a buyer wishes to pull out of the sale, it must be done before the conclusion of missives. Once missives are concluded, neither the buyer nor the seller can withdraw from the transaction.
While there is no exact time frame for conveyancing, the process in Scotland is generally quicker than in the rest of the UK.
How does Stamp Duty work in Scotland?
LBTT is the equivalent of Stamp Duty in Scotland, having replaced the previous Stamp Duty Land Tax in April 2015. Administered by Revenue Scotland with support from Registers of Scotland (RoS), LBTT is typically paid by the solicitor on behalf of the buyer. Like Stamp Duty and the Land Transaction Tax in Wales, LBTT applies to both residential and commercial land and building transactions above a certain value, with tax payable at varying rates for each portion of the purchase price within specific tax bands.
- 0% on properties up to £145,000
- 2% on properties between £145,001 and £250,000
- 5% on properties between £250,001 and £325,000
- 10% on properties between £325,001 and £750,000
- 12% on properties over £750,000
For commercial properties, the LBTT rates are as follows:
- 0% on properties up to £150,000
- 1% on properties between £150,001 and £250,000
- 5% on properties over £250,000
It’s important to note that these rates and bands can change over time with government budget announcements. Your solicitor will be able to provide you with up-to-date information on LBTT rates and how much you will be required to pay.
For more advice on the home buying process, talk to us at The Mortgage Hub.