Property briefing: as debate continues on the house sale and purchase process, a Glasgow solicitor questions the value of the Scottish Standard Clauses and comments on how they are regularly qualified

Let me start with a story. A security guard sees a workman leaving at the end of the day, pushing a wheelbarrow. “What is in there?” he asks. “A box filled with sawdust,” says the workman. Sure enough, that was what was in the box. The same thing happens the following night, and for the next week, until the security man, frustrated that he cannot work out what the man is up to, promises that if he divulges what he is doing with the box and the sawdust he will give the man immunity from prosecution or retribution from the employers. “Well, says the man. It’s simple – I’m stealing wheelbarrows!”

It is my contention that very often we are concerned with minutiae at the expense of seeing the bigger picture. Standard missives are not a goal in themselves. They are part of a bigger picture, and I would argue that while in some respects they make life easier, in others they are an irrelevance and sometimes simply complicate matters.

How did we get here?

I was taught that missives are simply a series of formal letters between the respective solicitors, which form the contract; that there was nothing mystical about these letters and that strictly speaking there was no legal requirement for missives at all: all that was and indeed is needed is the disposition transferring title, delivered at settlement.

Of course, even in those days it would have been risky if not foolish to avoid the missive stage, especially in arm’s length transactions, but for a contract to be formed all that is needed is the three Ps: price, property and parties. Everything else could be implied by law.

Things became more complicated over the years as clients took on the persona of consumers. Solicitors became involved in many areas which are not about conveyancing, i.e. the transfer of title, at all. Recently I was involved in trying to negotiate whether a clothes dryer was or was not to be included in a sale. Such matters take up endless amounts of time and frankly lead to unnecessary stress for everyone. Why did this happen?

Think back to Winston v Patrick 1980 SC 246. Prior to that case, it was commonly thought that any provision of the missives not directly related to the property itself was excepted from supersession, but the court held that warranties of planning permission were in fact superseded by delivery of the disposition. 

The case led to the Contract (Scotland) Act 1997, which reversed the ruling on supersession and allowed parties to agree a date when the prior contract would no longer be enforceable. In most cases, missives cease to be enforceable after two years (Scottish Standard Clauses (2nd ed), clause 24), except clause 6 (statutory notices) and of course clause 18 (registration), which are in general terms governed by prescription.

During the 1980s, as missives for residential properties became ever more protracted, various attempts at streamlining were made. In 1991 the Law Society of Scotland produced a set of standard clauses which it was hoped would form the basis for offers to purchase. The experiment was a disaster. It failed because the profession did not like being told what to do, and because the clauses were poorly drafted and failed to take account of regional differences.

But there were still calls to standardise missives. Why?

  1. Other countries could do it, in Europe and in Queensland, Australia.
  2. Clients could understand the terms in advance and any deviations from the norm could be flagged up.
  3. A cheaper system meant happy clients.
  4. Transactions could settle quickly.
  5. More transparency; for example, suspensive conditions pending a loan survey. Problems would be flagged up from the start.
  6. One practitioner in the Journal in 2005 even stated: “There is less intellectual challenge for lawyers.”   

The Glasgow standard missives were introduced in November 2005; the second edition of the Scottish Standard Clauses saw the light of day on 3 May 2015.

Speed of the deal

One of the main arguments put forward for their use was speed. In 2010 an article in the Journal declared that with the assistance of the Combined Standard Clauses (Edinburgh and Glasgow), “A binding deal was done… for the sale of a property at over £1.2 million in only five hours.” The solicitor involved went on to explain: “Solicitor estate agents are able to be prepared for when an offer is accepted. There is no delay while a third party briefs the solicitor. The solicitor has everything to hand as we have been involved with the property since the day it went onto the market.” I will come back to this comment later, but do we need standard missives for this to happen?

Chain reaction

The problems with standard missives, as I see it, first began during the recession. Concluding missives speedily – if that was ever possible, even with these missives – became an impossibility. Buyers could no longer act on the nod from the lender that they would get a loan; instead came uncertainty and a lack of confidence that buyers would get a loan at all. Solicitors would not and will not conclude missives until an offer of loan arrives on their desk. That remains the case now.

In addition, purchasers were no longer purchase driven. In the past, having seen the property of their dreams, they would often conclude missives knowing that their own property would sell, and even if there was a delay, they could obtain a bridging loan. Gone are these days. Most buyers will not wish to take that chance and will not conclude on a purchase until they have sold their own house.

On top of that, if they do see the house they want, they will offer “subject to sale of their own house”. That is now the norm where I practise – it seems to me that we have moved closer and closer to the English system, one whereby although parties might agree in principle, they do not become legally bound until contracts are exchanged, typically only a few days before completion. Until then they are free to withdraw. In England it was reckoned, at one point, that one in three deals fell through before completion. Are we really miles away from that position now in Scotland? I suggest we are not, and that in several respects the system that has developed is less attractive than the one we have maligned in England. 

An unachievable ideal?

Even with all the problems which arrived with the recession, advocates of standard missives defended them to the death, saying they make it possible to receive a straight acceptance; purchasing clients have to be more “upfront” with non-standard clauses; they therefore ensure frankness by a purchaser who cannot risk concluding missives immediately.

My question is, do we need this nannying in the form of standard missives? Are we not grown-up enough to use our own firm’s missives, or even a template, and in practice is there really such a big difference between the English and Scottish systems when it comes to residential property? Is there not a better way, or at least, how can we make the current system fit for modern practice?

Some research

I undertook a small research project of my own in connection with the use of the Scottish Standard Clauses (2nd ed). I based it on 40 offers my firm received, and compared these to see whether the missives were used in the first place, and if so, whether with or without deviation.

When the Scottish Standard Clauses were initially promulgated, the intention was to have an annual review in order to keep them as up to date as possible vis-à-vis current practice. Following a recent review, it was decided that no new (third) edition was required meantime, though the review committee did suggest that two further conditional clauses (covering loan finance, and sale of the purchaser’s existing property) should be inserted in the standard offer and used as a matter of practice.

My research is limited because most of the offers I looked at are from Glasgow firms, it is limited to Glasgow properties and of course is limited in number. Nevertheless, with these caveats, I can say that of the 40 offers I looked at, all without exception used the Scottish Standard Clauses (2nd ed), except for one firm which used edition 1.

Of the 40 firms, 13 used the clauses and the offer without variation. That is, they used the original offer which has three clauses dealing with price, time limit and survey report, and/or they incorporated the conditional clauses referred to above.

The other 27 firms qualified the offers in various respects, some more radically than others. Does that mean that the standard clauses are no more than a template from which firms can pick and choose, like an à la carte menu?

Looking at the qualifications made:

  • six firms added or made one qualification to the offer;
  • six firms made two qualifications;
  • eight firms made three qualifications;
  • one firm made four qualifications;
  • three firms made six qualifications;
  • three firms made seven or more. 

What was qualified?

1. Almost all the firms inserted what is now a redundant clause providing that in one way or another missives are to be held as delivered notwithstanding non-physical transmission (Park, Petitioner). The review committee pointed out that this clause is no longer necessary given s 4 of the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015. 

2. Six firms put in a clause that any cheque sent in settlement had to be held as undelivered pending instructions to encash same. What has that to do with the clients, and are there not already guidelines produced by the Society governing this? I think so!

3. Two firms inserted what I consider to be a very useful provision that in the event that the property did not have a home report – because it did not require one – the seller would produce an energy efficiency report.

4. Seven firms amended standard condition 6 (statutory notices). This is an interesting amendment. It affects the provision which makes local authority (or other public body) notices or orders calling for repairs or other works the responsibility of the seller, changing the cutoff date from prior to conclusion of the missives to prior to the date of entry”. The original Glasgow standard missives provided for the latter date; when these were combined with Edinburgh’s it was considered that Edinburgh’s position was more persuasive.

The different practice was I think based on the fact that in Glasgow many properties are factored, and in Edinburgh the local authority had been active in issuing repairs notices. In Edinburgh the purchaser was expected to acquire the property “as seen”. It was argued that if the relevant date was date of entry, unscrupulous buyers could have a notice put on the property after conclusion of missives, thereby making the seller liable and giving the purchaser a better property than the one they contracted to buy.

Is that compromise truly in the best interests of the clients, especially in Glasgow? Why should buyers in Glasgow have to accept a position peculiar to Edinburgh? Michael Smith wrote in the Journal in 2009: “There is a tension in conveyancing between the adversarial and the consensual, and there always will be. The philosophy underpinning standard missives is that of the reasonable selling solicitor and the reasonable purchasing solicitor, and the bargain that they may come to over tea and crumpets. The problem is that our clients may not want us to be reasonable.” 

5. Several firms added a clause insisting that a search be obtained in the register of insolvencies. Am I missing something? Is that not part of the standard legal report?

6. Several firms added a clause about evidence that there had been no alienations for less than full market value within five years prior to the date of entry, but that I think shows a lack of understanding about the Land Registration (Scotland) Act 2012 and the changes in principle which that involves, and the insolvency legislation. Both this addition and the one above I think are probably unnecessary.

7. One firm added a suspensive condition that notwithstanding standard condition 15, titles would be exhibited prior to conclusion of missives. I have to disclose that I always add this. One of the arguments for standard missives is the ideal of speedy conclusion. But should certainty be compromised for speed? The purchaser is given 10 working days to satisfy themselves as to title after missives; that period also applies to the coal report (clause 22) and the property enquiry certificate (clause 21). Since a title sheet can be obtained usually without delay and for little cost, surely it must be preferable that title is examined and the purchaser satisfied about, for instance, extent and burdens before they conclude missives for their own sale? The coal report is very often exhibited at the last minute.

This whole situation leads to uncertainty and unhappy clients, particularly if the purchaser is then homeless or the seller left without a sale because the purchaser has resiled – another instance of a chain breaking down. Would it not be good practice for the seller to have actually checked the title and reports – and to have ironed out any problems – early on in the sale, and for the purchaser to have checked them, in the certainty that once missives are concluded these matters will not raise their heads?

As an aside, why are we placing time limits on ourselves? It would be easy in the absence of a solicitor on holiday for a firm to miss a report coming in and lose the opportunity to resile through no fault of the client. This would not happen if the reports were made available from the start. 

8. Several firms added a clause stating that in the event there was a repairs grant, the sellers would have to exhibit confirmation that it did not need to be repaid provided it met certain standard conditions, and if the lender refused to lend the purchaser could resile. This probably reflects problems which have arisen in the west where lenders in the past balked at the conditions inserted by several local authorities. But what it demonstrates is that sometimes the standard missives do not take into account local or regional differences – does one size necessarily fit all, and can there be a substitute for firms taking into account in their own offers standard matters pertinent to their area?

9. At least two firms inserted clauses providing that the seller warrants that the answers given in the property section of the home report are still accurate. This seems eminently sensible to me, and indeed it seems to me that the home report is due for review. Purchasers are sceptical of it, as are sellers. Its worth is often questioned by purchasers (sometimes with justification) when they take entry and find fault, because it is not the equivalent of a scheme 2 survey. That aside, I am at loss to understand why, with certain exceptions for executors and trustees, it is not referred to in the missives and warranted by the seller. Something for the review committee?

10. One firm altered the offer to mention property-specific alterations. That seems to me like good practice. It shows that the purchaser’s solicitor has actually taken time to read the home report and identified what consents are necessary. It is no use concluding missives and then finding there are no such consents. Clause 8 gives the purchaser “an out”, but why cannot these consents be available before missives are concluded?

Several firms removed the words “within 20 years of the date of entry” in condition 8.1, so that any alterations completed prior to entry have to have appropriate local authority documentation regardless of age. This whole question of alterations has produced a situation where solicitors are left arguing about what is a historic alteration and what requires a letter of comfort. In fact, why was 20 years taken as a cut-off point in the standard missives for the production of consents? It seems to me arbitrary with no consideration given to local conditions and knowledge. What is more, the need for listed buildings consent does not expire. On the other hand, maybe 10 years for production is sufficient? But the fact is that what is acceptable to solicitors in certain areas may not be acceptable to others elsewhere. Perhaps before any further arbitrary changes are made, the review committee could actually consult with lenders and local authority bodies once and for all.

11. One firm made it a condition that a timber specialist report be produced. This comes down to making a property “market ready”. Should not the seller be advised before marketing to obtain whatever reports are necessary? I will return to this.

12. Two firms made it a condition that an enviro/contaminated land report be obtained. I am not sure why, given that both properties were in the heart of Glasgow, but perhaps they knew something specific about that area or perhaps they just take a blanket approach. To my mind there is a point to adding something when it is meaningful; it is another to add a clause for the sake of it.

13. One firm added a clause to the effect that as it had not yet money laundered its clients, the whole offer was conditional on them satisfying themselves regarding their clients in all regards. Frankly that is ridiculous. We have a duty to know our clients before we submit an offer, and we are wasting everyone’s time and no doubt breaking guidelines if we do otherwise.

The Author
Debra Clapham, partner, Claphams, Glasgow   In the second part of her article, to be published next month, Debra Clapham responds to the recent article by Professors Rennie and Brymer and offers her own suggestions for improving the sale and purchase process. 
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