English and Scottish property law differ in slight but distinctive ways. So, what do your estate agents need to know?
There are some key differences between Scotland and England, further than the Scots’ hardiness to endure extreme weather conditions. Laws surrounding legal property contract exchanges, transfer of ownership, reaching out to solicitors and sale practices are all key differences between the Scottish and English property markets.
More buyers than ever are looking into going cross-border in a post pandemic world, with Edinburgh being one of the top ten UK locations searched for according to Rightmove. For your estate agency to get a slice of the property market in Scotland, it is key that estate agents understand these differences when selling properties in Scotland.
A quick overview of the property sales procedure in Scotland
The seller of a property takes more responsibility over the financial burden for listing their property in Scotland. Engaging with a solicitor, rather than an estate agent is usually the sellers first point of call as they handle the conveyancing of the property.
The solicitor will also list the sale with a Home Report - a legal requirement in Scotland. A home report includes an estimated property valuation, property survey and an energy performance efficiency certificate. The property then goes to a blind auction, and the sale is agreed.
This article explores the top three differences between the Scottish property market and the English property market that your estate agency must know in order to nail those Scottish instructions:
- There are no leasehold properties in Scotland
- Blind auctions eliminate gazumping
- Differing stamp duty (Land and Building Transaction Tax) thresholds
No Leaseholds in Scottish Properties
What is a leasehold?
What is a leasehold?
A leasehold is when the buyer has ownership of the property but the land itself is owned by a freeholder who charges ground rent. Leaseholds can last between 99 and 999 years. It can be difficult to sell these properties because mortgage lenders do not usually provide mortgages for properties with less than 70 years left on the leasehold. There are also major complications if the leasehold ends whilst the tenant is in the property. Unfortunately, landlords can charge unfair and increasingly costly ground rents.
For estate agents, it can be tricky to tackle leasehold sales. You may be interested in how to avoid headaches when selling leasehold properties.
What do agents need to know about Scottish leaseholds?
What do agents need to know about Scottish leaseholds?
It is simple. Scotland does not have leasehold properties.
All properties as of the Abolition of Feudal Tenure (Scotland) Act 2000 and the Tenements (Scotland) Act 2004 brought 'fuel holds' (the equivalent of Scottish leaseholds) to an end. Long leases (Scotland) Act 2012 stipulated that any remaining long leases over 175 years were to be converted to outright ownership.
With cutting unfair abuses of leaseholds, buyers and sellers alike benefit from a fairer system than the leasehold system for buyers and sellers in England and Wales.
Blind Auctions Reduce The Risk of Gazumping
Blind Auctions Reduce The Risk of Gazumping
In England, nothing is legally binding until the formal exchange of contracts. Until that point any party, sellers, buyers and solicitors, can withdraw without any legal consequences, making gazumping and gazundering big issues for English property sales. The process of making an offer on a property in Scotland is far more legally weighted as it will go through the solicitor.
What is Gazumping?
When a seller accepts a verbal offer from a potential buyer of the property but accepts a higher offer from another buyer. Gazumping in England is perfectly legal.
Scottish sellers have more financial responsibility within the transaction. So if they pull out of the sale for any reason (for example, a higher offer), they are legally bound to compensate for the financial damage.
Blind Auctions
Blind auctions are the way in which most clients sell their property. The seller will ask for offers around the asking price, and potential buyers will make an offer blindly. They do this by contacting their solicitor who will send a ‘note of interest’ to the seller of the property.
Notes of Interest
Notes of Interest
In Scottish Real Estate, Notes of Interest indicate to the seller that there is a buyer interested in submitting an offer on their property.
Notes of Interest on Rezi are automated and your agent can get to know the quantity of notes a property has, making the sales process much simpler. Using this information, agents can automatically notify potential buyers of the closing dates allowing them to place their offers.
Closing Dates
Closing Dates
It is a legal requirement under Scottish Law to set a formal closing date by which all written offers must be submitted by the solicitors of interested parties.
CRM software enables your agency to notify solicitors with notes of interest in a property automatically. Using Dezrez’s cloud based CRM, Rezi is an effective Scottish estate agent software that holds all necessary information, including notes of interest within the property profile, making it simple to access.
What happens next?
When the estate agency and the seller accept an offer, they will send a letter of qualified acceptance. Once the missives are accepted by both parties, you now have a binding contract.
The missives of a sale are the legal communications and negotiations which conclude the sales process. The missives outline the contract of the transfer of heritable property (land). If at any point during the missives either party withdraws, they are legally liable to compensate for financial detriment.
Stamp Duty
Stamp Duty
In Scotland, stamp duty is called Land and Buildings Transaction Tax (LBTT) and is a tax applied to the purchase of land or property which is payable depending on the property price and whether the client is a first time buyer.
LBTT replaced stamp duty as of 1st April 2015 following the Scotland Act 2015 and the Land and Buildings Transaction Tax Scotland (2013).
See below for a breakdown of LBTT and house prices, which are set to change 2022-2023. source: www.gov.scot.co.uk
Purchase price | LBTT rate |
Up to £145,000 | 0% |
£145,001 to £250,000 | 2% |
£250,001 to £325,000 | 5% |
£325,001 to £750,000 | 10% |
Over £750,000 | 12% |
For first time buyers, property purchases will not be tied down by a large LBTT cost. However, unlike the rest of the UK, selling houses in Scotland has a lower threshold to begin taxing property transactions. In England, a property worth £250,000 requires nil tax (i.e. no stamp duty). However, in Scotland houses worth between £145001 to £250,000 incur a LBTT cost of 2%.
How can Estate Agency Software help?
How can Estate Agency Software help?
With Dezrez enabling Scottish specific features to their estate agency software, your Scottish clients will reap the benefits of an agency with estate agents in the know. The benefits of using an estate agency software which has the option to configure location to Scotland means that your estate agents know exactly what they need to do to reach out to a Scottish market.
To find out more, book a free, non-obligation demo to find out how estate agency software can help you navigate the Scottish property market.
