Scotland has its own legal system and this applies to the home-buying process, which is markedly different from England and Wales. If you’re looking to buy a new home in Scotland, here are the seven main differences you need to be aware of.
1. Instruct a solicitor early on
In Scotland, solicitors have a much more active role in the home-buying process. Whereas estate agents have a large role to play in helping prospective purchasers find their new homes in England and Wales, solicitors in Scotland very often take on this role, including marketing and selling the property.
They also handle the job otherwise carried out by conveyancers. Estate agents in England and Wales tend to have their preferred solicitors to refer business to and work closely with but they are separate organisations. In Scotland, though, many solicitor firms have their own estate agency departments so automatically take on the legal work.
It’s important to instruct a solicitor early on when looking to buy a property in Scotland. This is because you cannot make an offer on a property without one. In England and Wales, you can make an offer and negotiate, only instructing a solicitor once your offer has been accepted. In Scotland, however, once an offer is accepted it’s legally binding so you have to instruct a solicitor beforehand.
2. You can register your interest in a property
A common practice in Scotland, although it’s not obligatory, is to note your interest in a property via your solicitor. If you’ve seen a property you like in Trinity, Edinburgh, for example, your solicitor can then advise you when a closing date has been set by the seller to put an offer in by.
3. The prices are usually listed as ‘offers over’
In England and Wales, properties are advertised at specific prices, which are usually negotiable. Properties for sale in Scotland, however, are typically listed with an ‘offers over’ price. This means the seller will consider offers received over a specific price. All interested parties place their sealed bids by a set date and the highest bid wins.
These properties usually sell at a percentage over the ‘offers over’ price depending on the type of property, the local area and the current market conditions. You can expect to pay between 10 and 40 per cent on top of the ‘offers over’ price. Your solicitor will be able to guide you on what to offer on the particular property you’re interested in.
You can also find properties marketed at fixed prices. These tend to be when the seller needs a quick sale or there are difficult market conditions. For these properties, the first person to offer the stipulated price enters into a legally binding transaction.
4. Missives are exchanged
Once your bid has been accepted, missives are exchanged, which are legally binding letters. These formal letters are exchanged between the solicitors for each party and include essential details of the transaction. The missives act as an acceptance of the offer, confirm the buyer’s mortgage arrangement with the lender, cover legal enquiries and agree on a date to enter the property as well as other relevant documents.
These are usually handled quickly as there is no contract until their formal conclusion. Once they are concluded, the seller has to transfer the property title to the buyer. If this doesn’t happen, the buyer can be released from the transaction and seek recourse against the seller.
This process differs from the one in England and Wales as offers are made subject to contract. This means that neither party is legally bound to the transaction until the contracts have been signed and exchanged.
5. Gazumping rarely happens
Once your offer has been accepted, the seller is obliged to take the property off the market. This means gazumping – when the seller accepts a higher offer after agreeing to an original offer – is very rare. Solicitors in Scotland are also required to stop acting for a seller who accepts another offer — unless the first one has fallen through.
In England and Wales, even when properties have been taken off the market, offers can still be put forward to sellers until the contracts have been signed and exchanged.
6. Sellers must prepare a Home Report in advance
One aspect of the home-buying process in Scotland that helps make the transaction proceed much quicker than in England and Wales is the Home Report. With the exception of new builds and recent conversions, a Home Report must be provided by each seller before their property is marketed. This includes a completed questionnaire about the property, an energy efficiency report and a survey, which also notes the property’s value on the current open market.
In England and Wales, only an Energy Performance Certificate is required upfront. The onus is put on the buyer to arrange a survey, particularly if a mortgage is needed. The result of the survey determines any further action that may be needed, such as a renegotiation on the price or resolving an issue noted by the lender.
7. You pay Land and Buildings Transaction Tax
Instead of paying Stamp Duty Land Tax (SDLT), you’re liable for Land and Buildings Transaction Tax (LBTT) in Scotland. Compared with the first stamp duty threshold of £125,000 in England and the Land Transaction Tax (LTT) due on properties of £180,000 or more in Wales, LBTT is payable on homes worth £145,000 or more in Scotland.
First-time buyers are not charged LBTT on properties below £175,000. In England, however, no stamp duty is payable by first-time buyers for purchases of up to £300,000.