Michael Sheridan: Wrangling the timeous beasties of our time

It was a routine house sale transaction. The Home Report survey had reported a minor alteration to the seller's property and advised that any necessary local authority permission should be produced.

Michael Sheridan is Secretary of the Scottish Law Agents Society

It was a marginal question as to whether such permission was necessary and, as no permission had been obtained, it was agreed with the purchasing solicitors that the sellers would provide an indemnity policy against any costs arising from its absence.

This was in preference to the time and expense of obtaining a retrospective local authority permission. The policy was duly instructed, obtained and exhibited. There was, however, no concluded contract in place (missives) and, about two days prior to settlement, the purchasing solicitor intimated that he had now discussed the issue with his client, who was not content to rely upon the indemnity policy.

By that time, as the purchaser and their solicitor could easily surmise, the seller was committed to the purchase of a new family home depending upon receiving the sale price which, however, was now under threat.

The purchasers indicated that a reduction of £1000 from the previously agreed price would solve the problem. This proposal was agreed and the sale and purchase transactions proceeded to settlement. Was that a routine transaction? Was it a mugging or, in foreign parlance, gazundering? Sadly, it was probably all of these things and a few more besides.

The key to this conundrum is the absence of a concluded contract or missives. Previously, the formation of such a contract would have been routine. The indemnity would have been written into the contract and the purchasing solicitor would not have had the option of agreeing to the indemnity without his client’s knowledge and consent (if that truly is what had happened). Both parties would know the terms of the transaction in advance and there would be little scope for the whisking of £1000 from the table at the last moment. The timeous formation of a contract or missives was previously the hallmark of Scottish conveyancing practice and its absence was the hallmark of conveyancing practice south of theBorder. Nowadays, the latter practice appears to prevail also in Scotland.

There are at least two factors at work. Following the operation since 2010 of Section 60A of the Solicitors (Scotland) Act 1980, almost all of the largest and many middle-sized and other Scottish firms have come into the ownership of English and other foreign law firms. As former Lord President Gill remarked in a speech in 2016, it is difficult to imagine that “such firms will see the survival of Scots law (practice?) as an urgent priority”. In the second place, the Scottish mortgage lending industry has virtually disappeared and the current mortgage lending fraternity see no urgency in committing loan funds sufficiently in advance of purchase settlement dates as to enable the timeous conclusion of contracts or missives in line with customary Scottish practice.

These and related developments may appear to be inexorable and the only avenue for those who grieve over the loss of timeous missives is to abandon hope and plough on. However hopeless may be the task, nevertheless, the Scottish Law Agents Society continues to address these issues and to seek at least an improvement upon present conditions if not a complete solution to all problems.

The timeous conclusion of missives operates in the interests not only of individual purchasers and sellers but also in the public interest in the avoidance of dispute and the stability of the market.

The latter objective is achieved by the avoidance of the gazundering of house prices, which tends to accelerate a falling market, and gazumping, which tends to accelerate a rising market. Because of that public interest, there may be some onus upon the legislature to consider measures which might militate against the extinction of customary Scottish practice – amend section 60A in relation to domestic practice?

Also, the Law Society of Scotland might consider the clarification of practice rules which oblige solicitors to withdraw from clients who give instructions which are not in good faith. And in recent years, there has been substantial standardisation of the content of house purchase and sale missives and there may be potential for these missives to incorporate conditions which promote the timeous conclusion of contracts – by incorporating financial penalties?

Michael Sheridan is Secretary of the Scottish Law Agents Society