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The Combined Standard Clauses (2009 edition)

19 Oct 09

The full commentary on how the differences between the Glasgow and Edinburgh standard housebuying offers were resolved, a shorter version of which appears in the September 2009 Journal

by Paul Carnan

There have been Standard Missives Clauses for Glasgow and separate Standard Missive Clauses for Edinburgh since 2005. They are markedly similar in many respects. For all that, as a matter of practice rather than law, there are certain significant differences between the two styles.

The respective drafters believed that it ought to be possible to agree a common wording. They approached the Professors of Conveyancing and invited them to give their persuasive collective opinion on the areas of clear distinction so that a common missive could be developed for use in both cities.

The working parties of the Royal Faculty of Procurators in Glasgow and the Edinburgh Conveyancers Forum would like to acknowledge the support and assistance which they have received from Professors Brymer, Paisley, Reid and Rennie (“the panel”), without whom the Combined Standard Clauses could not have been conceived.

The panel was asked to opine on the following specific areas of distinction:

1. Definition of “the Property” within the offer letter

The Edinburgh missive states that “the Property means [insert postal address]”, and then goes on to state “together with any garden, garage, parking space and/or outbuildings”. The Glasgow missive repeats this wording and then goes on to state that there is included “all necessary rights of access and all rights exclusive, mutual and others pertaining thereto and the parts, privileges and pertinents thereof”.

The Edinburgh view is that this additional reference to rights and pertinents is unnecessary for the purposes of a standard offer. Reference to necessary rights of access is already covered elsewhere in the existing standard missive clauses for each city. In addition, there is uncertainty as to what exactly “parts, privileges and pertinents” may mean for the average modern property.

The Edinburgh preference therefore is for the more limited wording, while the Glasgow preference is for the more expansive wording, noting that Cusine & Rennie (Missives (2nd ed), para 4.08) suggests the usefulness of, and Halliday (Conveyancing Law & Practice (2nd ed), para 30.44) recommends a reference to "pertinents" as an omnium gatherum provision.

The view of the panel was:

(1) The panel doubted whether “parts, privileges and pertinents” added anything but did not feel strongly that the phrase needs to be excluded (although they would favour shortening it to “all other parts and pertinents”).

(2) In most, if not all, cases the description of a property in an offer (despite increasing sight of titles and the availability of land certificates) may still be prepared without a detailed factual investigation on the part of a client or his/her solicitor as to the extent of the property. In short, there is always a certain level of uncertainty and lack of knowledge when an offer is put in. No solicitor acting for a purchaser regularly visits the site at the time of putting in an offer for residential property, nor is there any obligation on him or her to do so. He or she may have photos of the property. On the other hand, he or she may not. The solicitor is most likely to have a postal address and his client’s description of the property.

The general clauses discussed in the alternative both try to bring in a certain “catch all” provision to deal with the uncertainty and the unexpected. That is why they use the word “any” before the reference to a garage. By necessity, the seller is still likely to know more about the property than the purchaser. It is more likely that he or she will know the true facts.

In the panel’s view, a certain balance should be struck. Although the clause may potentially be too extensive and general, it can always be amended by the seller’s solicitor when he/she prepares the qualified acceptance. In other words, there must be a certain tolerance to deal with the unknown and unexpected at the time of lodging an offer.

With that in mind, and subject to its aftermentioned comments regarding "necessary access", the panel generally favours the Glasgow wording. The standard offer is not a standard missive. The whole point is that revisals can be made in a qualified acceptance. The panel therefore agrees with the tradition of Halliday and Cusine & Rennie.

(3) The panel does not feel that there is any need to talk about access in the description of a property in the offer. If, for the sake of argument, it turned out in terms of the title that there was no access by a public street or by way of a private servitude, then the title would be unmarketable in any event. Similarly, the panel is not in favour of using general words like “necessary rights of access”. Many existing rights of access are not “necessary” at all. They are purely desirable or beneficial or even useful. They may add material value to the property but they are not “necessary”. The word “existing” is probably what was intended. Not only can the word “necessary” allow the seller to refuse to convey a second existing access because it is not “necessary”, but it could also allow a purchaser to demand a wholly new right of access which does not exist because such a new access is “necessary” and the property being sold suffers from a deficit of access rights etc. In any event, this matter is covered elsewhere in the standard missive.

2. Awareness of defects

The Edinburgh missive asks the seller to confirm that they are not aware of the property being affected by wet rot, dry rot etc, as also other specified issues (common repairs, flooding, rent registration and landfill site).

The Glasgow missive has no such provision. The Glasgow view is that such matters are for a purchaser themselves to make specific enquiry about and a selling client should not be expected to make comment on these points.

The Edinburgh view is that with due awareness of the limitations of such a clause (particularly any evidential requirement), it is of merit in at least flagging up these points and hopefully flushing out further information from sellers on occasion.

From discussion, it does appear that such a clause has been in use in the Edinburgh area for some time (certainly prior to the introduction of the standard offer), but has never had widespread acceptance in the Glasgow area. This could possibly be traced to the comments in Cusine & Rennie, Missives (2nd ed), at para 4.82.

The panel was asked to comment on whether or not it is appropriate to have some form of "state of awareness" clause.

The view of the panel was:

(1) Such “awareness” clauses are fairly widely used in practice. However, the panel feels that it is questionable how enforceable they are. Indeed, the qualification will invariably be made along the lines of “So far as the seller is aware (but no warranty is given in this respect) there are no such facts" etc. This therefore makes the argument about such matters somewhat pointless.

(2) It is usually the case that clauses of this type are deleted and a statement added in the qualification to the effect that the purchaser shall be deemed to have relied on his or her own survey – caveat emptor. The panel is concerned as to how one actually pins down “awareness”. If it can be proved that the seller boarded up dry rot then it may be straightforward. On the other hand, if dry rot fruits and there is red seed dust in the property, would every seller know that that was a sign of dry rot?

(3) The panel believes that this is something which the home report should identify. The risk of having such a clause is that it is almost bound to be qualified as aforesaid. However, a purchaser may erroneously think that he or she is absolutely protected should a defect arise. The panel is therefore of the view that it is better to have a clear cut situation where the purchaser knows that he or she has no guarantee as to the state of repair of the property.

The panel can see the argument to the effect that it is best that there is disclosure and full information. However, a selling solicitor, if he is doing his/her job, will always get his/her client out of potential liability. Whether that position is capable of being sustained when a home report has been exhibited is a matter on which the panel has not been asked to comment. Accordingly the panel would prefer to be realistic and let the purchasing client know that this is a matter to be enquired about by him/her at his/her own risk. In any other respect, the purchaser is being given a false sense of reassurance. The purchasing solicitor should make it clear to his/her client that there is no reassurance in the missives in this regard, so that the client will buy into the fact that he/she has a certain degree of responsibility.

The panel accepts that there may well be resistance in Edinburgh to deleting this provision, which has been in use for a long time. As against that, however, the members of the panel have never come across a case where anyone has tried to enforce such a clause, which suggests that it is perhaps of little practical value. The clause may possibly have some deterrent effect inasmuch as it may induce a deluge of confession from the seller. It is certainly more effective in this regard than a casual question from the purchaser when looking round the house; and in practice it is unrealistic to expect purchasers to interrogate sellers on all the matters which the clause covers. In short, the deletion of the clause will remove some of the protection currently afforded to purchasers in Edinburgh, but the panel believes that the effect is likely to be marginal and, as explained above, most of this protection is illusory.

3. Provision of guarantees/specialist reports

In relation to the provision of guarantees/specialist reports, the Glasgow missive provides for delivery of “any guarantees in force” in respect of specialist treatment. The Edinburgh missive also provides for delivery (although places a 20 year time limit in this regard). Edinburgh however goes further by stating that in the event that such documentation is deemed to be “materially prejudicial to the property or the Purchaser’s proposed use of same”, the purchaser then has a right to resile subject to due notice etc.

It has been noted that other standard offers may provide for delivery of valid and/or enforceable guarantees but do not provide for a right to resile. An argument has been made that any guarantee by virtue of being at least in force can never be deemed to be prejudicial. Against that, a view has been expressed that a guarantee for tenement repairs may disclose an unsatisfactory position.

The view of the panel was:

The panel considered that the following would be the most equitable approach in this regard in connection with delivery of specialist documentation and/or linked to a right to withdraw:

(1) There are of course guarantees and guarantees. A specialist guarantee is not like an NHBC guarantee; it is only as strong as the party who actually gives it. There are two situations which can arise. In the first place, a surveyor for the purchaser (or indeed the independent surveyor) may discover some defect which would require specialist treatment. In such a case, it is obviously very important that any existing guarantee and the specification indicating what is guaranteed is made available.

On the other hand, there may be situations where the surveyor picks up no defect but there is still a guarantee for work which has been properly done, say 15 years ago with five years of the guarantee left to run. The panel does not favour a clause which would allow a purchaser simply to pick technical holes in the guarantee and then rescind even although there was no suggestion that the work had not been done properly. The Glasgow clause covers such a situation. If there is a guarantee, for say double glazing or dry rot, then it must be handed over. In the opinion of the panel, this is sufficient.

(2) If it is the former case where the surveyor has picked up a problem and the seller says that there is a guarantee, then the panel believe that the missives require to be tailored to suit that situation with an extra clause to the effect that it will be shown that the guarantee is enforceable and does cover the defect as disclosed by the surveyor.

(3) The panel also believe that it is possible that there might be some limited circumstances where it would be appropriate to allow a right of rescission, but in the present form the clause is far too wide and creates considerable uncertainty. If a right to resile is to be retained, it would need to be much more carefully targeted. In other words, it would be necessary to decide what mischief, precisely, the provision is designed to solve, and then to draft the clause so as to target that mischief alone.

4. Awareness of developments

The Edinburgh missive requests a statement from a seller that they are not aware of “proposals, applications or redevelopment plans”.

The Edinburgh view is that this is beneficial in that it will again provide in certain cases information regarding possible developments which have not yet reached formal planning application stage (or indeed proposals which may not result in a formal neighbour notice being served, due to the technical criteria in that regard).

The Glasgow view is similar to their position concerning "awareness of defects" (section 2 above): such matters are for a purchaser him/herself to make specific enquiry about and a selling client should not be expected to make comment on these points. There does therefore appear to be a difference of opinion regarding the necessity of these awareness provisions as a matter of principle.

The view of the panel was:

(1) While accepting that there can often be benefits of such “awareness” provisions, the panel is of the view that they can be potentially dangerous. Such provisions are widely used in practice but the panel would question whether or not the implications have been fully considered.

(2) The panel is generally not in favour of clauses which result in uncertainty and argument. The Edinburgh general clause is a “catch all” clause. How would one be aware of an application for planning for an adjoining property, however, unless there had been neighbour notification or a notice in the local newspaper?

(3) There is more difficulty with the words “proposals” and “redevelopment plans”. For example, if there have been suggestions that an area of ground in the vicinity of a property being sold is to be used for housing, is that a “proposal” or a “redevelopment plan” in some drawing office? Would the seller require to jeopardise the sale of his/her house by disclosing that there are proposals in this regard? In practice, such clauses tend to be qualified either by deleting them with reference to a property enquiry certificate which is to be delivered in terms of the missives, or by stating that the seller has not received written notification of any such proposal. The latter is a more clear cut situation.

The panel is mindful in this regard of a number of opinions which have been given in professional negligence cases where a purchaser suddenly discovers that there is a development to take place say half a kilometre away from the property across a field in an adjoining field which, because he/she cannot sell his/her house now, he/she feels ought to have been disclosed. The panel is of the view that we must always bear in mind that if standard clauses become “standard” they also become the standard or the benchmark for negligence.

5. Liability for statutory notices

Whilst the Edinburgh and Glasgow clauses were very similar in this connection, there is one substantial point of difference between them, namely the date given for transfer of liability for local authority repair notices from seller to purchaser. In Edinburgh the watershed date is the date of conclusion of the missives whereas the date in Glasgow is the date of entry. It is believed these provisions reflect longstanding practice in each city.

It is believed that the distinction may reflect the situation that in Glasgow many tenemental properties are factored, whereas in Edinburgh few traditional tenements are (with the co-proprietors relying on the local authority to perform such a role). There is little doubt that in Edinburgh the local authority has been active for many, many years in issuing local authority repair notices and orders, particularly as they have the ability to do so in terms of local subordinate legislation.

The Edinburgh position however is also based on the argument that a purchaser is expected to acquire a property “as seen”. In the case of a tenemental property this includes the common fabric of such items as the roof, common passage and so forth. In addition, it has generally also been considered inequitable for a seller to avoid liability for a statutory notice which has been served during his or her period of ownership (the practical issue here, as we presume the professors are aware, is that in terms of the relevant legislation local authorities have power to issue invoices for the actual repair costs on the owners at the time of preparing such invoices and not on the owners on whom the notices were originally served).

In addition, due to the proactivity in Edinburgh of the local authority, there is a substantial practical concern that if the watershed became the date of entry, an unscrupulous buyer would find it relatively easy to approach the local authority to instigate statutory notice procedures in any gap period between conclusion of missives and date of entry. The end result would be that the buyer achieves a property in better condition than that originally inspected and/or surveyed by them.

It should also be noted that there is a growing practice at least in Edinburgh that the local authority takes the opportunity, having served a notice, to actually carry out additional and more extensive repair and improvement works to a tenement that go substantially beyond the strict terms of the original notice. There is in fact growing concern at the “windfall” benefit buyers can obtain in this regard.

The view of the panel was:

That the arguments in favour of Edinburgh's position with regard to this matter were more persuasive, and that the watershed date for the transfer of liability for local authority repair notices from seller to purchaser should be the date of conclusion of missives.

6. Listed building consents

Both the Edinburgh and Glasgow missives adopt the view that local authority documentation for previous alterations is only looked for in respect of work carried out within the period of 20 years preceding the date of entry.

The practice in Edinburgh however is that whilst this time limit is accepted for building control paperwork (that is, building warrants and certificates of completion), in connection with the need for possible listed building consents under the relevant planning legislation no time limit is given. In effect such consents are requested for works carried out since the date of listing of the property in question, which in practice may be well outwith the 20 year period.

The logic for this reflects the terms of the relevant legislation, which does not give any time limit on the local authority for enforcing such consents (or rather lack of same). The Edinburgh concern is also reflected in the fact that a large proportion of the city is within either a conservation area or separately listed.

The view has been expressed however that such concern for listed building consents is illogical, bearing in mind the 20 year period is accepted for other local authority consents which, strictly speaking, are also not limited in time for enforcement.

The question therefore for the professors is whether or not it is appropriate to accept a 20 year cut-off point for such listed building consents in the same manner as other local authority documentation.

It should be noted that the Glasgow missive accepts the 20 year cut-off point for such consents.

The view of the panel was:

That a 20 year cut-off for listed building consents is preferable.

7. Declarations of trusts in dispositions

The panel was not in favour of trust clauses. Put bluntly, trust clauses in dispositions have never really worked. The deed of conveyance containing such a clause is arguably internally inconsistent. There is no clear trust purpose. In any event, it is the view of the panel that the clause is now also not necessary because of the bankruptcy legislation changes (see s 17 of the Bankruptcy and Diligence etc (Scotland) Act 2007). For a full statement of the reasoning against trust clauses in dispositions, see Reid & Gretton, Conveyancing 2004, pp78-85.

If, contrary to the view of the panel, such clauses do work to create a trust, then it appears to the panel to be the case that they seem to jeopardise the protection afforded to a purchaser by the "offside goals rule", and seem also to open the door to a second grant having effect because of the provisions of the Trusts (Scotland) Act 1921, s 2. There may also be possible limiting effects on the Keeper's indemnity.

The view of the panel was:

That the trust clause device in dispositions should be eradicated.

Further guidance

The combination of the Glasgow and Edinburgh standard clauses into a single set of clauses – the Combined Standard Clauses (2009 edition) – common to both regions will greatly enhance the house buying and selling process, creating more certainty in the process, together with reduction in the time taken and costs incurred in concluding missives. Practitioners will have the comfort of knowing that, as long as they adopt the Combined Standard Clauses, they are compliant with current best practice so far as the conveyancing professors are concerned.

It is intended that practitioners will use the Combined Standard Clauses from 1 October this year. From and after that date, a pdf version of the Combined Standard Clauses will be available on the websites of both the Royal Faculty and the Edinburgh Conveyancers’ Forum, and will also be available on the Law Society of Scotland website. There will also be a client guide and a practitioners guide (both of which will be freely available to use/adapt) to support the introduction of the Combined Standard Clauses.

Paul Carnan is a Glasgow member of the joint working party which agreed the terms of the Combined Standard Clauses

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