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Recent changes to the PSG offer to sell

18 September 17

Property briefing: the Property Standardisation Group has revised its offers to sell to take account of community empowerment rights, and in light of advice received on the environmental clauses

by Property Standardisation Group

As part of the continuous process of keeping the precedents up to date, we have added a new clause to the offer to sell to cater for asset transfer requests, which were introduced by Part 5 of the Community Empowerment (Scotland) Act 2015.

Community transfer bodies (defined in the Act) may make asset transfer requests to relevant authorities of any land owned or leased by that authority.

“Relevant authority” (defined in sched 3 to the Act) includes local authorities, Scottish ministers, Scottish Enterprise, Highlands & Islands Enterprise, local health boards, national park authorities and others.

If a relevant authority receives an asset transfer request, it must not sell, lease or otherwise dispose of the land to which the request relates to anyone other than the community transfer body. However, if the land in question has already been advertised or exposed for sale, or negotiations for the sale are already underway, the prohibition against selling or letting to a third party does not apply.

The relevant authority must agree to the transfer request unless there are reasonable grounds for refusing it.

Therefore, whenever buying from a relevant authority, the purchaser will need confirmation that no asset transfer requests have been received in respect of the property.

We have added wording to this effect in the offer to sell, which can be omitted if the seller is not a relevant authority.

There is optional wording allowing the purchaser to resile from the missives if an asset transfer request is received by the seller before completion, where the purchaser is concerned that community interest in the land could affect its proposals for the property. 

Environmental liability

We also asked our environmental colleagues to review the relevant clauses in the offer, which were drafted some time ago, to ensure that they remain fit for purpose. Environmental law remains a specialist area, so it is important that those using the offer take specialist advice if any issues are either known or suspected to be particularly relevant in the transaction. The clause in the PSG offer to sell is intended for use where the parties have carried out appropriate due diligence and have agreed that (i) contaminated land liability is to transfer to the purchaser, (ii) bespoke drafting is not required to deal with liabilities arising from site specific circumstances, and (iii) there are no known environmental issues outwith the scope of the contaminated land regime that need to be addressed separately.

We have limited the drafting in the offer to deal with liability under the UK’s contaminated land regime (contained within Part IIA of the Environmental Protection Act 1990) only. The environmental clauses will apply only where a competent authority has taken action under the contaminated land regime against one or both of the parties in relation to harm (or a potential for harm) being caused by hazardous substances on or attributable to the property. Neither subclause covers environmental claims by third parties, nor does it cover liabilities which may be incurred under other environmental legislation/regimes.

Clause 13.2 of the offer to sell – vacant possession (clause 15.2 of the offer to sell – investment), sets out how the parties have agreed to allocate liability under the contaminated land regime transferring liability, to the extent allowed under the regime, from the seller to the purchaser at completion.

Clause 13.3/15.3 of these respective offers represents one of the tests for exclusion of liability included within the contaminated land regime (sold with information). It seeks to exclude the seller from liability where, even though it has caused or knowingly permitted contamination, it is selling the land in circumstances where it is reasonable that the purchaser should bear the liability for remediation of the land. The conditions which must be met for this exclusion to apply are set out in the clause, and if satisfied the seller should be excluded from liability under the regime to the extent that is possible. The full application of clause 13.3/15.3 is however subject to the following limitations:

  • the seller and purchaser must be in the same liability group under the contaminated land regime;
  • the exclusion of liability will not apply if it would result in there being no person responsible for remediation of the land; and
  • the extent of liability transferred will ultimately depend on the sufficiency of the information held or deemed to be held. If insufficient information is available, that could result in a partial transfer of liability only.

The PSG has removed the environmental indemnity from the offer. The indemnity was originally included in the drafting as an additional protection for the seller in case the statutory bodies did not give effect to the agreement on liabilities contained in the missives. The indemnity was a commercial protection agreed between the parties and not part of the statutory mechanism by which liability for environmental damage can be apportioned. Our environmental specialists advise us that an indemnity is not required for the purposes of the transfer of Part IIA liability, to which this clause is now limited.

The Part IIA statutory guidance states that regulators should give effect to an agreement on liabilities (such as that contained in the offer), even though they are not a party to the agreement, except in certain circumstances, such as if the agreement on liabilities is a deliberate avoidance technique (for example transferring liability to a man of straw).

For more information, please see the guidance notes for the offer to sell, available on the PSG website www.psglegal.co.uk, where you will find contact details for the PSG.

Update: PSG residential precedents

There is a suite of residential precedents available on the PSG website, produced in collaboration with the Law Society of Scotland’s Property Law Committee.

This includes:

  • Dispositions (various versions to cater for registered land, first registration and creating new title conditions), which were approved by Registers of Scotland.
  • Affidavit regarding possession and use of property, which contains optional clauses for access, drainage, boundaries, possession, car parking and water supply.
  • Discharges and deeds of restriction.
  • Various style letters, including letter to factor and letter to client regarding LBTT.

We will shortly be adding land registration checklists, powers of attorney and a declaration of solvency to this suite of documents. See www.psglegal.co.uk

Update: PSG versions of Model Commercial Leases

Following the publication of the first of the kilted Model Commercial Leases (lease of an office forming part of a building), announced in Journal, December 2016, 34, we are pleased to advise that the remaining leases in the suite of office leases have been kilted and are now available on the PSG website under the heading “Leases”.

These are:

  • Lease of whole building;
  • Lease of building on an estate;
  • Lease of part of a building on an estate.

We will deal with the suite of retail leases next.

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