Advice and Information related to Rule B2.1: Applying for Waiver

Process and Timescales

All applications for waiver should be made on the relevant form (see the Forms and Fees related to Rule A5) and addressed to the Secretary of the Rules, Waivers and Guidance Sub-Committee.  Applications may be submitted by email to secrwgsc@lawscot.org.uk.

The Rules, Waivers and Guidance Sub-Committee typically meets on the first Thursday of each calendar month (subject to that being a business day and there being sufficient business for the Sub-Committee to consider).  For an application to be considered by the Sub-Committee all relevant information to be included in the application should be with the Secretary to the Sub-Committee no later than 5pm of the Wednesday of the week preceding the week during which the Sub-Committee is due to meet. 

The Secretary of the Sub-Committee (and in the absence of the Secretary certain other senior members of staff of the Society) may grant certain applications for waiver under authority delegated by the Sub-Committee but this is highly dependent on the precise circumstances and the safest course is to assume that any application may require to be considered at a meeting of the Sub-Committee and time the submission of the application accordingly.  It may not be possible to consider any application outwith the usual monthly meeting schedule.

Preliminary Considerations before Applying

Is a waiver competent?  Will it allow you to act in all the applicable circumstances?

Before applying for a waiver of any provision within Rule B2.1 you should consider whether the waiver sought, if granted, would be sufficient to allow you to act in the precise circumstances pertaining.   There are rules other than those at B2.1 which are relevant to conflict of interest – see, for example, the Standards of Conduct at B1 – in particular the requirements of B1.7 and B1.8.  Note that those rules are not capable of waiver and no waiver of any practice rule will relieve you of any obligations under any other applicable practice rule (and the Standards of Conduct apply at all times). 

Rule B2.1.2 states that ‘you shall not act for two or more parties whose interests conflict’.  That rule reflects the terms of the Standards of Conduct and hence will not be waived.

There is clearly no point in applying for a waiver of one practice rule if acting would also breach another rule which cannot be (or has not been) waived. 

Is a waiver necessary?

Conversely, before applying for a waiver you should also consider whether the rules already permit you to act in the manner you wish without any waiver. A waiver will not be granted where it does not appear that the rule would otherwise prevent your acting.

It may assist you, when considering these questions, to have regard to the conflict of interest flowchart here. 

Risk Management

It should be remembered that even the grant of a waiver does not indicate that it is necessarily good practice or effective risk management for you to act in all the circumstances which apply.  Further guidance is available on the website (see Guidance related to Rule B2.1) or from the Professional Practice Department of the Society.  The grant of a waiver obviously does not accord any immunity from complaints or claims.

Policies governing consideration of applications

Overarching Waiver Policy

All applications for waivers of practice rules are considered in light of the Society’s overarching waiver policy.

Practice rules are intended to promote compliance with the regulatory objectives and hence waivers are only granted in exceptional circumstances.

An applicant for waiver of any requirement of Rule B2.1 is expected to set out the exceptional circumstances and explain why, in the applicant’s view, those circumstances justify waiver.  Circumstances which may justify waiver may include the fact that application of the standard rule in the precise circumstances would:

  • cause an unintended or capricious effect not consistent with the principle intended to be achieved by the rule;
  • cause undue hardship to the applicant or client not consistent with principle;
  • prevent a benefit to clients or consumers.

The applicant would also be required to establish to the Society’s satisfaction that grant of the waiver requested would not carry any appreciable risks to the interests of clients or consumers or achievement of the regulatory objectives or adoption of best regulatory practice (which requires that regulatory activities are targeted appropriately and carried out effectively, and in a manner which is transparent, accountable, proportionate and consistent).

Waivers will also not be granted where to do so would prejudice the integrity of the principle which the standard rule seeks to achieve.

Further information and considerations specific to applications re Rule B2.1

The circumstances which may apply to any application for waiver of a requirement of Rule B2.1 may obviously be many and diverse and it is neither appropriate or practicable to attempt to set out, in advance, detailed and exhaustive information in relation to what factors will be considered relevant in every possible scenario or the weight likely to be accorded different factors in every different situation.  Each application will be considered on its own individual facts – but the following paragraphs attempt to provide some assistance in relation to identifying factors which have been considered significant when considering previous applications for waiver in certain circumstances. 

Applications for Waiver of Rule B2.1.4 – general principles

Rule B2.1.4 builds on the more generic restrictions in the Standards of Conduct and Rule B2.1.2 and operates to prohibit the same practice unit acting for clients on what might be regarded as opposite sides of common transactions involving heritable property, as the nature of such transactions may mean that there is a heightened risk that the interests of the clients may conflict at some point in the transaction.  The rule recognises that this heightened risk may not apply universally, however, or may be offset by another factor – it does this by allowing exceptions to the rule (at B2.1.4 (a) to (f)) but restricting the ability to rely on those exceptions so that (i) none of the exceptions will apply where a dispute has arisen or might reasonably be expected to arise; and (ii) only the exception at (a) applies where the transaction concerns the sale or lease of  a residential property[1] by a builder or developer[2]

Where a dispute has already arisen there is likely to be an actual conflict of interest and hence seeking a waiver would not be sufficient to allow the practice unit to act – as that may involve breach of Rule B2.1.2 and/or the Standards of Conduct.  Where a dispute might reasonably be expected to arise (and hence none of the exceptions may be relied upon) it is unlikely that granting a waiver will be regarded as appropriate – and regard should be had to the Standards of Conduct (particularly at B1.7.2). 

Conversely, where the circumstances fall within an applicable exception then seeking a waiver is not appropriate. 

Some Examples

Applications have been submitted and granted, however, in a number of different scenarios in relation to Rule B2.1.4, for example:

1. Acting for the purchaser of residential property where the same practice unit acted for the builder/developer seller in relation to estate agency services in relation to the property

Factors considered relevant:

  • Both purchaser and seller are established clients;
  • Applicant has provided and will provide no advice on price to either party;
  • Applicant acted for builder/seller in relation to estate agency only – seller separately represented in relation to sale transaction.

2. Acting for purchaser and seller of residential property where both are builders/developers

Factors considered relevant:

  • Both purchaser and seller are long established clients;
  • Applicant has provided and will provide no advice on price to either party;
  • Parties have equivalent levels of bargaining power;
  • Parties separately and independently advised on substantial terms of transaction – e.g. price;
  • Commercial terms agreed prior to involvement of applicant;
  • No reasonably foreseeable need for the applicant to negotiate between the parties (or advise on such negotiations) (e.g. contract not conditional on acceptable consents etc.);
  • The same individual will not act for (or supervise work done for) both clients; adequate and appropriate measures have been taken to secure the confidentiality of client information;
  • Lenders separately represented and aware applicant acts for seller and purchaser;
  • Clients have given informed consent

3. Acting where clients have close connection but not within exceptions

Various examples –

  1. Acting for the seller and joint purchasers of residential property where no party is a builder or developer and the seller has a familial connection with one of the joint purchasers which, if it applied to both purchasers, would allow the prohibition in Rule B2.1.4 to be lifted by exception (c) (e.g. mother selling house to son and son’s girlfriend)

Factors considered relevant:

  • Applicant has provided and will provide no advice on price to any party;
  • Sale at independent valuation;
  • Substantive terms agreed prior to involvement of applicant and no reasonably foreseeable need for the applicant to negotiate between the parties (or advise on such negotiations) (e.g. contract not conditional on acceptable consents, works etc.);
  • Clients have given informed consent;
  • No inequality of treatment as between purchaser with connection to seller and purchaser without that connection which would suggest that any party’s interests may be prejudiced by the lack of separate representation;
  • No party is vulnerable

2. Acting for seller and purchasers of property where purchasers are Trustees of Self Invested Personal Pension Plan (SIPP) where SIPP is in the sole name and for the sole benefit of the seller

Factors considered relevant:

  • Parties established clients (or at least seller is established client);
  • Trustees are seller and SIPP provider (or agent of SIPP provider);
  • SIPP provider has given informed consent to applicant acting for all parties;
  • Instructions from purchaser confirmed by all Trustees;
  • Price at independent valuation;
  • Applicant has not advised and will not advise any party on the price;
  • Lenders separately represented and aware that applicant proposes to act for all parties;
  • No reasonably foreseeable need for the applicant to negotiate between the parties (or advise on such negotiations) (e.g. contract not conditional on acceptable consents, works, guarantees etc.)

Common Features where Waiver Granted

It can be seen from these examples that, generally speaking, a waiver is more likely to be granted where the applicant can show that all the clients have a clear common purpose with:

  • a strong consensus on how it is to be achieved – having agreed the substantive  terms without advice from the applicant;
  • equivalent levels of sophistication and bargaining power – and no client is vulnerable;
  • no reason to anticipate any need for the applicant to negotiate (or advise on negotiations) on any matter of substance between the clients;
  • no reason to anticipate that the applicant’s ability to comply with its duties to any of the clients will be fettered or that any client may be prejudiced by lack of separate representation.

Supporting Material

The material which may be sought in support of an application for waiver will vary dependent on the circumstances.  However, applicants should note that, where it appears that section 190 or 231 of the Companies Act 2006 may apply, evidence of compliance should be submitted with the application for waiver – or, where the applicant has concluded that the relevant section does not apply, that conclusion and the reasons for it should be confirmed by the applicant – and the applicant may be asked to produce evidence in support of that conclusion. 

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