Neil Risk

If you have a solicitor acting on your behalf, the process of buying a house in Shetland should be a straightforward matter.

The legal process is the same as that for the rest of Scotland, and is very different from the English system. The process of purchasing or selling a property is called “conveyancing”. Agreeing the terms and conditions of buying or selling a property is becoming more complex than ever as new guidelines and laws come into force, and things can become very distressing if something goes wrong. You should therefore obtain sound advice from a solicitor before you commit yourself.

I hope that I can provide a quality professional service – good advice, prompt attention to your business and effective communication to keep you up-to-date with what is happening in your particular transaction. I have prepared this note to guide you through the conveyancing process with respect to purchasing a property in the islands.

1. Initial Consultation

The first stage in the process is generally a meeting or telephone consultation with me so that we can discuss the property you are interested in.

I will first of all check to see whether I have been consulted by someone else regarding the same property, as I cannot act for more than one person in submitting an offer. I also cannot act for you if I already act for the seller of the property. I will happily recommend another solicitor to act for you.

Matters we will discuss at the initial consultation are the property itself (its condition etc), any valuation you have received and the price you are proposing to offer for the house, your financial arrangements for the purchase of the property (eg whether you require a mortgage and whether this has been approved by your Bank or Building Society). I will also provide an estimate of my fees and outlays and a note of my terms of business.

2. Money Laundering Regulations

If I am to act for you in the purchase of your property, and have not acted for you previously, I will need to obtain evidence of identification from you for the purposes of the Money Laundering Regulations.

In this regard, I will need to see the originals of your passport or photo drivers licence and a bank statement or public utilities bill sent to you at your home address. There are various other items of identification which can be used as alternatives, and I shall be happy to advise you on what documents to provide. Copies of the identification are not sufficient. If you live outwith Shetland and I have not met you before, you will need to have a solicitor in your locality certify copies of your identification documents and send them to me.

3. Noting your Interest

If you find a property you are interested in, the next thing to do is to “note your interest” with the selling agent. It is best to have a solicitor do this for you. Noting your interest does not oblige you to buy the property (or even submit an offer), it merely lets the seller know that you are interested in the property and want to be kept informed of developments, eg whether a closing date for offers is to be fixed.

4. Obtaining a Survey

You should always have a property inspected by a professional surveyor before making an offer (or if you need to submit a quick offer, make the offer itself subject to having a survey carried out).

The survey will provide an independent valuation and provide you with information about the condition of the property. There are various levels of survey, and a surveyor will provide advice on what is available. There are 2 local firms of surveyors in Shetland who can do this for you:

David Adamson & Partners
4a North Ness Business Park
LERWICK
Shetland
ZE1 0LZ
Telephone: 01595 696788
Email: lerwick@davidadamson.co.uk

Michael Thomson FRICS
10 Charlotte Street
LERWICK
Shetland
ZE1 0JL
Telephone: 01595 695555
Email: michael@michaelthomson.co.uk

5. Obtaining a Mortgage

I cannot provide financial advice regarding mortgage options as I am not authorised to do so. If you need help in choosing a mortgage from amongst the hundreds of products available, I shall be happy to recommend an independent financial adviser to guide you. Again, if you have not received formal approval of your loan, I would recommend making any offer you submit subject to your obtaining a mortgage. Otherwise, you could find yourself tied into buying a property without a mortgage.

6. Making an Offer

If you decide to go ahead and submit an offer to the seller’s agent, I will draw up the formal offer on your behalf.

The offer is quite a long, complex document intended to cover all the questions which can arise during the purchase of a property – I will provide you with advice regarding these. If a closing date for offers is set by the seller’s agent, the offer must be submitted on that day. In other situations, you may have agreed a price with the seller or you may want to chance your luck and submit a quick offer for consideration by the seller. Again, I can advise you on the best course of action.

7. Acceptance of the Offer

If you are successful with your offer and the seller wants to accept it, I will receive an acceptance. This document is usually called a “qualified acceptance” because it contains further conditions or “qualifications” to amend or delete certain conditions in my offer.

The conditions in the offer which I submitted on your behalf are designed to make the seller disclose certain facts about the property and the title to it. Upon receipt of the qualified acceptance, I will send you a copy and generally I will provide you with a letter discussing each of the qualifications in relation to the offer and providing advice as to what you should do in response to the acceptance. This may not happen if there is a very tight timescale for the conveyancing, in which case I would meet with you to discuss the qualifications.

Once I have taken your further instructions, I will issue a further “formal letter” to the seller’s agent – in some cases there are several exchanges of formal letters before both sides reach agreement.

8. Concluding the Bargain

Once negotiations are concluded, the final formal letter is issued. This is usually known as the “letter concluding the bargain”. The initial offer, qualified acceptance and all subsequent formal letters, are collectively known as the “missives”. The final letter concludes missives, and this means that a legally binding contract has been entered into requiring you to purchase property at the agreed price on the specified date of entry. I will provide you with copies of all the formal letters as the transaction progresses.

9. Checking the Title

I will receive the title deeds to the property from the seller’s solicitor, and these will be examined to check that the seller is the owner of the property and that there is nothing to stop them from selling the property, title is valid and describes the precise extent of the property, and that there are no onerous conditions which apply to the property. You will be asked to confirm that what is described in the title deeds is precisely what you understand you are buying.

The new system of Land Registration was introduced to Shetland in April 2003. If the property you are buying has not previously been registered in the Land Register for Scotland, the seller’s agent must produce a “P16 Report” which compares the extent of the property as detailed in the title deeds with the extent of the property as shown on the Ordnance Survey map.

The new system of Land Registration is map based, and so the title and the Ordnance Survey map must match. If there are any discrepancies, these must be corrected before your title to the property can be registered. Sometimes it is the Ordnance Survey map which is not correct or up-to-date, but usually the title needs to be rectified in some way. I will advise you upon what will be needed should this situation arise in your case.

The seller’s agent will also produce various other certificates and documents which I will need to check before I am satisfied that you should go ahead with the purchase. Again, I will advise and consult you at each stage of the process.

If the property you are buying has previously been registered in the Land Register, the whole process is much easier because a Land Certificate will have been issued to the previous proprietor. The Land Certificate is covered by a government indemnity.

10. Your Title and Mortgage Document

I will draft the “Disposition” in your favour (your title) and this will be checked (“revised”) by the seller’s agent. I will then prepare the final version of the document and send this to the seller’s agent so that it can be signed by the seller in time for completion of the transaction.

If you are obtaining a mortgage, I will receive loan instructions from your Bank or Building Society and will prepare the Standard Security (mortgage document) for signature by you. I will then request the loan funds from the Bank or Building Society in time for settlement of the transaction.

11. Completion of the Transaction

On the agreed “date of entry” (ie completion date), I will pay over the purchase price to the seller’s agent in exchange for the title in your favour, other supporting documentation and the keys to the property. You will then be able to move into the property.

12. Stamp Duty Land Tax

The Finance Act 2003 was introduced in December 2003. Under this Act, every purchase transaction must be notified to the Inland Revenue, whether or not stamp duty is payable. Stamp duty is payable at the rate of 1% on any purchase price over £125,000 but below £250,000.

For prices above £250,000 the rate is 2.5%, above £500,000 it is 3.5%. I will complete a form SDLT1 which must be signed by you and submitted to the Inland Revenue along with the stamp duty payable (if any). In this regard, if there is stamp duty payable, I will require to have funds to pay this at settlement of the transaction.

13. Registration of your Title

Once I have received the Land Transaction Return Certificate from the Inland Revenue, your title (and mortgage deed, if any) can be registered in the Land Register. If Register House find everything to be in order, they will issue the Land Certificate. If you have a mortgage, a Charge Certificate will also be issued, and both documents will be sent to your lender to be retained by them during the term of your loan.

14. Free Will

If you decide to use my firm in the purchase or sale of your property, I shall be pleased to offer you the opportunity of having a straightforward Will prepared at no extra cost.

Next Steps ...

I hope the information provided above is of some assistance to you in understanding the conveyancing process.

If you require any further advice, please get in touch with me or a member of my staff.