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Buying in to quick deals

20 June 05

Views of those who believe solicitors should adopt standard form missives and rapid conclusion, as are becoming popular in significant areas of Scotland

by Peter Nicholson

For the Queen, 1992 was her “annus horribilis”. For those attempting to reform conveyancing practice, it was not a good year either. More senior readers may recall the Law Society of Scotland’s doomed attempt to introduce standard missive conditions for residential property transactions. Yet 13 years later, the concept seems to be catching on. Last month Edinburgh became the third Scottish city to promote a locally-agreed set of standard terms on which it is hoped the great majority (perhaps 80%) of deals can conclude, and interest is reported from several other parts of the country. Why the turnaround?

“The 1992 style was so neutral in an attempt to suit both purchaser and seller that it ended up satisfying no one”, says Professor Stewart Brymer, the immediate past Convener of the Society’s Conveyancing Committee. Others point to uncertainty over whether “core” clauses in the style could validly be varied; and a simple dislike of having anything imposed from on high. Brymer, a partner in Thorntons, Dundee, the firm behind the form of offer now widely used in that city, is firmly of the view that the new style is the way forward: “I have used it myself on a number of occasions and it has worked very well indeed.”

The Dundee approach is to have a standard offer printed for each transaction, to which individual firms have begun developing their own qualifications. The Inverness-based Faculty of Solicitors of the Highlands, which can claim to have pioneered the first successful common scheme, has now registered the third version of its “Standard Conditions of Sale” (Deed of Declaration dated 16 and 21 and registered BCS 22 March 2005), intended to represent the position that parties might expect to reach at the stage of concluding missives. By adopting the registered conditions, the offer letter can be limited to a single page setting out the parties, property, price, entry, particular items included in the sale and the time for acceptance.

“The object of the exercise when we drafted the Highland Standard Clauses was to produce a standard set of conditions which would reflect the interests of both the purchaser and seller fairly so that we would start at the point which one usually reaches after an exchange of two or three missives”, explains Bruce Merchant of South Forrest, who led a workshop on the subject at the Society’s annual conference this year. “If the transaction is entirely straightforward the seller may be able to accept the offer without any qualifications at all.”

The reluctant client

Such a statement may induce nostalgia in those who practised in the 60s and 70s, before missives grew to their present epic proportions. But increasingly common today is the failure to conclude, not through haggling over the small print, but deliberate stalling by one side for ulterior motives such as completing another transaction.

Supporters of standard conditions agree that their adoption will not by itself eliminate this issue. But Ross MacKay of Henderson Boyd Jackson, another Conveyancing Committee member and one of the working party behind the Edinburgh missives, points out that they can still be of use in getting the problem out in the open.

“If a solicitor is deliberately delaying the conclusion of missives, they are already in breach of the Society’s guidelines. If you are seeking to delay, you must disclose the reason why.” Indeed he goes further, asserting that in the broader picture solicitors have a duty to the system as well as their clients. “If the current practice suits one client in 10 but prejudices nine, it isn’t to their overall benefit”, he maintains. “Standard missives can only be to everyone’s benefit. If solicitors are scared of them, you have to ask, why?”

Supporters of standard missives are clear that they are acting in defence of the Scottish house purchase system, especially given the active interest currently being taken by the Executive, whose solutions may not be those preferred by the profession. Marjorie Townsend, Head of Residential Property at Lindsays, Edinburgh, and a longstanding champion of a rapid missives system, maintains that the system becomes “dishonest”  if solicitors will not conclude a purchase until their client’s sale is completed or funding is assured, when the offer makes no mention of any such conditions. She considers that the trend towards late conclusion will result in a system not just akin to English practice, but worse than it.

“The essentials of the Scottish system are that when you put an offer in it means what it says, and the seller takes the property off the market relying on the strength of that offer. That doesn’t happen in England of course – they keep marketing until contracts are exchanged. In Scotland you take it off the market and then you have a period of – it’s getting ridiculous at the moment – sometimes six to eight weeks without a commitment, and that’s uncertainty and worry and financial hardship for sellers. It’s really quite unacceptable. You’ve got the worst aspect of the English system but it’s even worse because you’re not allowed to market your property.”

Having promoted her own firm’s rapid system for some years, with support from a limited number of other Edinburgh firms, she firmly believes that clients themselves are demanding reform. “I think the biggest impetus for change has been disgruntled unhappy clients. The Society must be dealing with hundreds of complaints with regard to missives.” Since writing a number of press articles on the subject, she says, she has had “tons of new business, tons of enquiries about it, people phoning up and saying we like the idea of this”. If a quick deal results with a like-minded firm, “the clients are absolutely over the moon. They love it and it’s a great marketing edge for our firms”.

Designed by committee

Scotland, Bruce Merchant told the conference workshop, is one of the few countries in Europe not to have its own standard conditions of sale. Despite that, Scottish solicitors are notoriously reluctant to give up their own tried and trusted office styles. So how did each of the local initiatives come to win favour? A common factor seems to have been a core of firms taking the lead and making the resulting agreed version freely available to others interested.

In Inverness, four firms put heads together to come up with the initial draft, and then took it to the Highland Faculty, who adopted it. Two further versions have been put in place in the 10 years since, but Bruce Merchant points out that each firm must still be alert to intervening changes in the law. “The last revision by a drafting committee took some months. It was then adopted by the Faculty and made available to all firms in the area.”

The Dundee experience was more akin to that led by Lindsays in Edinburgh, with the Thorntons style of offer coming to be adopted by others. However the newly registered Edinburgh deed was a more ambitious undertaking. Ross MacKay and PSM’s Pauline Peddie, the Edinburgh members on the Conveyancing Committee, were tasked by the Committee with organising something that would command general approval. Having convened a meeting of 15 or 16 practitioners representing a spectrum of the 100-plus Edinburgh firms, all of whom bought into the idea, a working group of five was formed which decided to adopt the Inverness option. (The resulting offer letter is shown in the panel.)

Over four or five months, and “umpteen meetings”, says MacKay, draft clauses emerged which were put to the full group, redrafted, circulated again, sent out for wider comment and finally registered (Deed of Declaration by George Barrie Clark and others, dated 13 and registered BCS 15 April 2005: 05/12836), before being formally launched through a letter to all Edinburgh firms. “We also held an open meeting to which 35 other firms came, and again there was consensus that this was the way forward.”

Within a couple of weeks of the launch, he estimated that 12-15 firms were actively using the style, with others saying they would “as soon as they get organised”. On the acid test of whether it is speeding up the process of conclusion, he believes anecdotally that it is, “tremendously”. “We thought Edinburgh would be a hard nut to crack”, he adds, “so if it takes off here, it can happen anywhere.”

Taking practice forward

It goes without saying that in order to agree a common standard, compromises will be necessary, but proponents of the schemes believe there is nothing to be gained from drafting something loaded in favour of your client if that will inevitably attract a qualification slanted the other way. The Edinburgh working party took the process one step further and decided to “take practice forward” on certain common areas of contention – guarantee paperwork, central heating and, most radically, planning and building consents, which under their scheme only require to be exhibited for “recent” alterations (those completed within 10 years of the date of entry). Presumably based on the likely attitude of the local authority to enforcement, it suggests another reason why locally developed conditions have a better chance of securing general acceptance than any attempt at a Scotland-wide set, for the present at least.

Marjorie Townsend admits to a reservation over the building consent clause; nevertheless she would favour supporting whichever model becomes the standard. “But we would like to claim ownership of the original idea, which has taken many many years to catch on!”

Notably, the form of offer adopting the Edinburgh standard conditions includes a “subject to survey clause”, as has become normal practice in the capital and elsewhere. Townsend is clear that this does not detract from the principle of early conclusion. “When you make an offer subject to survey the matter is resolved within a day, two days at the most; that is not why transactions are falling through. Somewhere along the line the Executive, or someone, tied the two together, but it’s really quite separate.”

She believes that solicitors have an obligation to explain to their clients that missives can be concluded quickly under the Scottish system, and try and negotiate a long entry date if they have a property to sell. “We have to get back to that, or else we have a system where the offer is subject to a sale, to mortgage finance and the seller is allowed to keep marketing, which is what they have in England. That’s the other choice. But I think the public prefer speed and certainty.”

Still work to be done

“And results”, she adds, dismissing the argument that if you make the missive simple and straightforward, solicitors won’t be needed and having complicated missives justifies their fees. “You’re still going to need a lawyer to deal with the excessively complicated security side and to steer the whole thing through. On the estate agency side we need to be a lot more proactive and geared up as well.”

Bruce Merchant is similarly dismissive of such objections. If non-solicitors want to try and use the missives, let them, he asserts. And he is careful to point out that the Highland clauses are “a facility and not a straitjacket”, a phrase echoed by the drafters of the Edinburgh scheme: there will be properties for which the conditions are unsuitable (plots of ground, rural or commercial properties), and there is no restriction on varying or qualifying the terms – in contrast with the Society’s 1992 model.

The freedom to vary does not undermine the scheme, says Merchant, but brings in transparency in that it is easy to see what departures from the scheme are proposed, as only the variations are in the offer itself. And as Ross MacKay points out, at a closing date a seller faced with a choice between a simple offer adopting a common scheme and a complex home-grown one, may for that reason alone be tempted to go with the former. Adopting a common standard could even be a protection against a professional negligence claim, a point made at the conference workshop.

And interest in the concept is spreading. Since his workshop, Bruce Merchant has had requests for further information from solicitors in three other areas of Scotland. Ross MacKay has dealt with enquiries from Perth, Dumfries, Kilmarnock and Ayr. Working parties have been formed in Aberdeen and Glasgow. “We challenged them to look at what others have done and to do something better!” says Merchant.

On speaking terms again

He continues: “It may seem strange to encourage a multiplicity of different standard conditions on a geographical basis. However, I am satisfied that in the first instance this is the best way of getting the concept of standard conditions across. Solicitors are much more likely to use a document of which they have ‘ownership’ if they have been involved in the drafting. At some future time it may well be possible to achieve standardisation throughout Scotland, whether by reconciling the differences in the various styles or simply because some particular style becomes predominant.”

For some, the profession could even rediscover itself. A spinoff from the Edinburgh steering group, says Ross MacKay, is a proposal to form a local conveyancing group, or forum, which in the absence of a local Edinburgh faculty would be the place for allowing debate with a view to reaching a consensus on issues such as the seller’s survey. “As conveyancing systems became automated, we had got out of the habit of face to face meetings. But those in the groups have certainly benefited from the discussions.”