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Freed from chains?

17 June 19

Can English-type chains in property transactions be avoided? Precautions may not be enough, but experience shows that proactive management can prevent them getting out of control

by Richard Loudon

I am going to start by stating the obvious – despite the fact that we are all in business to make a profit, our duty to our clients is to do all we can to make the property purchase and sale process as stress free as possible from their perspective.

For some years now I have not been involved in the day-to-day “at the coal face” conveyancing process, dealing principally with marketing properties for sale, negotiating purchases and then handing the clients over to our extremely efficient team of solicitors once the deals have been agreed.

A few weeks ago I became involved in a transaction because our clients’ purchaser had agreed a deal subject to sale. Despite being advised by us at the outset that our clients would only run with their offer if their purchaser sold to a cash or first time buyer, it then transpired that the party two down the chain from us also intended to accept an offer subject to sale. By that point the parties in the chain were located all over Scotland and I enjoyed my first experience of a multi-level English type chain. Most recent statistics indicate that 34% of deals in England fall through, and agents in England are now trying to put in place processes to manage chains, involving deposits and even arranging meetings between clients asking them to personally “shake hands on the deal”, to try to build in some moral responsibility to proceed.

Open communications

I decided that the best thing to do was to make sure that all solicitors and agents involved in the chain, which by this stage involved six parties, should be made aware of the precise details of the chain. I emailed all the solicitors and agents setting out who all the parties were, their property addresses, who they were selling to, who they were buying from and which estate agents and solicitors were acting. All solicitors and agents were copied into this email and I asked them all to copy in their respective clients. 

As a result of this, there was then openness between all the professionals and pressure was brought to bear on the solicitor/agent at the bottom of the chain to make abundantly clear to their client that if they thought about accepting an offer subject to sale, the whole chain would break down as the developer at the top of the chain frankly had had enough and wanted to sell to another party. 

Fortunately the party at the bottom of the chain found a first time buyer, and continued pressure was brought to bear on all parties to progress missives as swiftly as possible so that the chain could then fall into place.

It helped that my clients were also proactive. They were regularly speaking to the people that they were buying from and also the people that they were selling to. They urged each of them to speak personally to their respective buyers and sellers to keep the dialogue open so that everybody knew what was going on. I even suggested that they set up a WhatsApp group, which actually may not be such a daft idea!

The good news is that the chain all fell into place, all missives were concluded and the transactions settled as planned.

The day after settlement, the paralegal in our team who was dealing with the transactions received an email from one of the solicitors based on the west coast, saying: “I would like to thank you and your firm for the work you did in getting this chain of transactions to completion. It has been much appreciated by us and most especially by our clients who have been on the phone this morning to say how pleased they are with the ease of settlement. If all chains were managed like your firm managed this one I think our jobs would be a lot easier!”

I would urge all solicitors dealing with residential conveyancing in Scotland to be aware now of the risk of getting into an English type chain situation that gets out of control. We do all we can to persuade our clients that they really should sell before they buy to make themselves into credible buyers. Clients can alternatively arrange a fallback bridging loan so that they can commit to a purchase before a sale or use a non-refundable deposit clause, which we have now used on dozens of occasions, to avoid the need for chains. 

If, however, there is no alternative but to accept an offer subject to sale, the open and proactive management of the chain by engaging all parties can certainly help.

Weakest link

Another situation also worthy of comment is that recently one of our associates came to me to say that he was struggling to be able to conclude missives in a chain where he was acting for one of my wife’s family members. The problem seemed to be that one of the firms at the bottom of the chain, who are notorious for being hopelessly slow, seemed to be doing nothing. Apparently they would not even look at the qualified acceptance until they had their offer of loan in their possession, which frankly is ridiculous. 

I phoned up the partner of this law firm to find out that they had had the qualified acceptance for over three weeks and hadn’t even looked at it yet. They hadn’t looked at the alterations documentation, hadn’t sent it off to the surveyor for approval and as a result five sets of clients were sitting waiting for them to take action. 

As a result of my call, a week later, we had concluded missives in every step of the chain. 

I would urge all solicitors in a chain to jointly bring pressure to bear on the weakest link, as such inefficient and probably underresourced firms give the profession a bad name because clients are now criticising us for the length of time it takes to get to a concluded contract.

Stop the rot!

Some of you reading this will think that I don’t know really what it is like dealing with such firms on a day-to-day basis, and that trying to put in place an efficient chain management system is “living in cloud cuckoo land”. Many of you will not remember the days before standard clauses. Every firm of solicitors had its own clauses – about 40 in number, and we had to wade through every clause with every client, taking specific instructions and producing a qualified acceptance that was pages long. As a result I sat down with four other solicitors for many evenings 14 years ago and drafted the Edinburgh Standard Clauses, which have now evolved into the Scottish Standard Clauses. 

Many solicitors told us then that standard clauses would not work and that firms would not adopt them. How wrong they were: I can’t imagine how tortuous the process would be nowadays if it were not for the Standard Clauses. The moral of that story is that if we don’t all start to manage chains efficiently and proactively now, they will get out of control, clients will think that putting an offer in doesn’t really mean anything and Scotland will have a 34% fall through rate in no time at all. Effective and proactive chain management can stop the rot!  

Richard Loudon, senior property partner, Simpson & Marwick

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