Professor Stewart Brymer WS, Brymer Legal Limited Dundee and Edinburgh and the University of Dundee
Introduction
When I started out in practice in 1979, offers for residential property were short and varied in style from firm to firm. Furthermore, the de plano acceptance was still commonly used and, heaven forbid, solicitors regularly concluded bargains without requiring (or being required) to satisfy themselves as to title and a range of other matters. There was broad acceptance of what a valid and marketable title meant and what contracting parties’ options were with regard thereto. Only rarely did this result in a prospective purchaser withdrawing from a deal citing problems with the marketability of the seller’s title. Times change however and, somewhere along the way, we all became more cautious (or less trusting) and, as a result, required that prospective purchasers satisfy themselves on all matters ranging from title to the central heating system prior to conclusion of the bargain for the purchase of a heritable property. This, in turn, led to delay and one of the oft-quoted virtues of the Scottish system, namely the speed of concluding a bargain, being called into question. Delay coupled with a desire on the part of the seller to have little or no obligations to the purchaser other than to continue searches and deliver a signed disposition of the property also led to the ever-increasing length of the standard offer with clauses being incorporated as a result of a mixture of academic and judicial commentary on the one hand and fear. A perfect example was the debate which ensued as a result of the decision in Winston v Patrick 1980 SC 246. After a few articles had been written on the subject, a perfect storm was created resulting in solicitors having lengthy debates over what the period of time should be during which missives should remain in full force and effect often to the detriment of other, more important, provisions of the contract.
Changes
Over the course of the next 20 years or so, there was a move towards standard conditions of sale with a number of local initiatives being developed very successfully – the first one being in Tayside as a result of the vision of Professor A J McDonald with whom I was privileged to undertake my apprenticeship. Professor McDonald was a pioneer in the drafting of focused offers and standard form dispositions. This pioneering work is now widely followed in practice. Perhaps the most significant development however was the introduction of the Combined Standard Clauses. Few, if any, practitioners thought that solicitors in Edinburgh and Glasgow would ever agree on a set of Standard Conditions , but agree they did and the third version of the CSCs will be introduced soon. These Conditions work well and have been adopted in other areas of Scotland. The fact of the matter is that with Standard Conditions and developments in IT (and the advent of digital signatures later this year) it has never been easier to conclude missives quickly. The situation in practice is different however due to the legacy of the crash in property values etc. and the delays encountered by a reluctance on the part of some lenders to lend. The combined effect of these issues has introduced a significant degree of caution into the whole process and that caution has manifested itself in an unwillingness to conclude missives until often the proverbial eleventh hour. Unfortunately, some solicitors have not helped make matters any better.
Home Report
In 2008, the Home Report was introduced to mixed reviews. The property market was on its knees and the introduction of a major change by way of legislation came at a bad time. Confidence was low and there was little appetite for change. However, the Home Report has made a difference with prospective purchasers now having much more information about properties in which they are interested than ever was the case before. Prior to the introduction of the Home Report, over 90% of prospective purchasers relied on a valuation survey. To those people, the Home Report is a distinct improvement. Unfortunately, however, those purchasers who used to instruct a Scheme 2 Report, are now less well-served by the Home Report and there are those who believe that that the purchaser should instruct his/her own survey to be absolutely sure that the property is as described in the Home Report. Nevertheless, the Home Report has helped fix a more realistic value of a property at an earlier stage in proceedings. This is especially the case with regard to “Offers Over” figures. In the end of the day, the old truism is correct in that the market always decides.
There was an issue with multiple surveys which, despite protestations to the contrary, was not solved by offering subject to survey. The Government’s stated objective was to provide more information to prospective purchasers at an earlier stage in proceedings. This has been achieved. On the negative side, however, improvements can be made to the Home Report. The Property Questionnaire was designed to ensure that the seller disclosed more relevant information than might be contained within the sales particulars or the Home Report. The information contained therein is very useful but it is suggested that there is no reason why that information cannot be linked to the Missives. The Questionnaire is signed by the seller so why can the information not be warranted? It is accepted, however, that some sellers may have difficulty warranting the position in the Questionnaire eg executors or lenders exercising a power of sale. Furthermore, the absence of a register of Home Reports can result in a number of surveys being undertaken prior to the best one being promoted. This was pointed out to the Government prior to the legislation being enacted but they were of the view that such a register was not required. It is suggested that that was the wrong decision. Such information, properly collated, in an appropriate database would be very useful. There are also other technical points in the Home Report which require updating so that it can be more useful to prospective purchasers. A review has been undertaken and it is hoped that changes will be made.
Where are we now?
The Law Society has recently set up a working party to review the whole practice of residential conveyancing with a view to ensuring that we have a system fit for the 21st century. The remit of the working party is wide-ranging and it will look at practical issues which will hopefully benefit those who buy and sell residential property. Nothing is ruled in or out. National Conditions of Sale are a distinct possibility – albeit with important regional variations being catered for in agreed schedules to the said Conditions. That change, coupled with an improved Home Report, will hopefully improve matters.
Will a purchaser notice any real improvement however in the event of a claim having to be made against the seller either under the missives or the Home Report? I suspect not. For example, any claim for say a defect in the central heating system or in the case of water damage caused by a sink with a drainage pipe held together with gaffer tape, may not be possible depending on whether the amount claimed falls within the de minimis provision in the missives. It is accepted that the object of such a de minimis provision is to avoid there being a plethora of claims against the seller for a range of minor matters. What about the purchaser however who has relied on the property as viewed? Equally, the Home Report may provide no solution as it is likely to be argued that the purchaser should have instructed a specialist engineer or plumber to check out such matters in addition to relying on the Home Report.
The fact of the matter, however, is that purchasers rely on the Home Report and the missives adjusted with the seller’s solicitor and ought to be entitled to assume that they will have a degree more protection than is usually the case. Should the seller be allowed to walk away from a problem even if it can be proved that the defect in question had been covered up in some way? Indeed, given that the stated aim of the Home Report was to improve the quality of Scotland’s housing stock, and given that it already contains an Energy Performance Certificate, why should it not be possible to extend its scope to central heating checks and electrical and plumbing systems checks? Prevention is always better than the cure.
Those who defend the current system will quote the principle of caveat emptor. That is understandable. Our current system has been built on that principle and it is a valid argument that if a purchaser wants to be absolutely certain about the central heating system and the plumbing, then he/she should instruct separate investigative reports prior to concluding the bargain. What would this do to the timescale of negotiating missives however? Is that really in the best interests of all concerned? Perhaps it would be better if legislation was introduced to provide for certain minimum standards to be met in the sale of a residential property – a form of qualified caveat emptor. Another possibility would be to have some form of early dispute resolution whereby issues such as the claims mentioned above can be referred to someone on an agreed panel of experts who, as a condition of his/her appointment must give a decision within 48 hours. It might also be possible for the Conditions of Sale to provide that the seller’s solicitor should retain an agreed sum of money for, say, 7/14 days during which time the purchaser would require the test any appliances and systems with a view to intimating any claim under the retention within the said period. Why should the purchaser suffer if an item is stated to be in good working order and it later transpires that it is not?
Conclusion
It is suggested that it is time to redress the balance somewhat between the parties to the contract for the sale and purchase of residential property. Why should the purchaser assume all the risk? In my opinion, the purchaser should be better protected. Why should the seller not be prepared to warrant statements contained within the Property Questionnaire and in the Missives generally? He/she is receiving payment for the property that is being sold and if it transpires that that property or part thereof is defective in some way, why should the purchaser not have a limited period of time within which to intimate a claim? Indeed, it can be argued that if you buy a second-hand car from a garage, you have more protection than if you buy a second-hand residential property. In what way is that fair?
If we are serious about a review of the residential property system then let’s look at other ways in which we can improve the offer/acceptance stage by seeking to equalise matters somewhat between the contracting parties. Such an approach is long overdue. If we do nothing, we may well have the English system – if it is not already here! If we are happy that that is the direction of travel we wish to follow, then we can change our working practices to allow purchasers time to undertake all necessary checks without fear of losing the property in which they are interested. That means fairly significant structural change but perhaps we should just accept that the current system is in need of an overhaul? At present we have somewhat of a poor mixture of competing principles and practice that is not serving those who should be protected.
In conclusion, I believe that the Scottish system is worth saving in order that its perceived uniqueness can be retained. To achieve that, however, we may do well to remember that if you treat others fairly you are likely to be treated fairly yourself. It is time to redress the balance.
© Greens Property Law Bulletin