As they are all part of the United Kingdom, there will not be any differences between transacting with property in Scotland or in England and Wales, right? Wrong!

Different systems of property law operate in each jurisdiction and, while some legal concepts are similar, there are plenty of distinctions to navigate and to catch out the unwary.

(Note that references in this article to England/English should be read as references to England and Wales/English and Welsh.)

Types of ownership of land

In England, the two commonly encountered types of ownership are freehold and leasehold:

• freehold is where the property is owned outright and is not time-limited.
• leasehold is where there is an exclusive right to occupy the property for a set period of time. The term of a leasehold interest can vary from the very short (for example, a matter of weeks) to the very long (for example, 999 years). 

In Scotland, the equivalent to “freehold” would be “heritable” interest. This is by far the most common way of “owning” property in Scotland. In addition, Scotland also has a concept of leasehold ownership. While it is possible in Scotland to occupy property under a long lease, legislation has been passed (Long Leases (Scotland) Act 2012) which converted certain ultra-long leases (with an initial term of more than 175 years and an annual rent of £100 or less) into heritable title (outright ownership). 

Finding out who owns the land

In Scotland, title deeds have had to be publicly recorded since 1617, when the General Register of Sasines was introduced. While it is not a plan-based register of land, it is possible to search it by name of party or property address and find out who owns a piece of “unregistered” land. 

Scotland’s plan-based Land Register was introduced in 1981, thus, compared with the English Land Registry, which was introduced in 1925, it is relatively new. Only around one-third of Scotland’s land mass is currently on the Land Register, with most other titles in Scotland being recorded publicly in the General Register of Sasines. 

Since the Land Registry has been around for longer in England, a much higher proportion of land is registered (around 87%), but if you do come across unregistered land, finding out who owns it can prove harder to establish.

Due diligence process

In Scotland, it is usual for a seller to provide all conveyancing searches, whereas in England it is standard for buyers to obtain these searches themselves.

In England, the commercial property standard enquiries (CPSEs) were introduced to make the information gathering exercise more effective and efficient, and these are a standard feature of almost all commercial land transactions. Scotland does have an equivalent questionnaire, but it is less widely used.

Treatment of positive and restrictive covenants

In England, only restrictive covenants (ie those which restrict the landowner from taking a particular action on the land) are generally enforceable against successive owners of the land. Positive covenants (for example, to maintain or to pay any sum of money) do not run with the land and so, as discussed below, further action must be taken to ensure successors are bound.

In Scotland, the equivalent of a restrictive covenant would be a “real burden”. Real burdens bind successive owners of the land, but, unlike in England, real burdens can be both restrictive and positive (such as obligations to maintain, insure and pay towards maintenance obligations).

South of the border, it is generally not possible to create covenants or rights over land where the burdened and benefited land are owned by the same entity.

In Scotland, this is possible. For example, a developer of a housing estate or business park in Scotland would typically register a “deed of conditions” over the whole development before any parts are sold off. This deed can create positive and restrictive obligations and servitude rights, and provides consistency across the whole development. The subsequent transfers of each plot need only refer to the deed of conditions to activate such conditions.

Restricting disposals

It is possible to register a restriction against title to land in England to restrict the owner’s ability to dispose of the property unless a certain action has been taken.

Restrictions can, and often are, used as a means of ensuring the enforceability of positive covenants. Where a party wants a successor in title to be bound by a positive covenant, it often insists that on any disposal the covenanting party procures a deed of covenant from its successor to observe and perform the relevant obligation. To ensure compliance, a restriction is then placed on title preventing the original covenanting party from registering any transfer of the land unless and until it provides some form of evidence that the deed of covenant has been provided. There is nothing similar to restrictions on title in Scotland.

It is also possible to register unilateral notices and agreed notices against title to English properties. These are useful for noting arrangements such as option agreements, conditional sale contracts and agreements for lease on the title to help protect their priority against future purchasers.

Again, there is nothing similar in Scotland. In order to prevent a Scottish owner from subverting a contract that it has already entered into to sell its land to party A, by selling the land to party B, it is necessary to require the owner to grant a standard security over the land to party A securing its contractual obligations.

This security is registered against the title, but would invariably rank behind any standard security which had already been granted to a funder. It is therefore not a perfect solution, but it does ensure that the property cannot be sold without the knowledge of party A.

“Exchanging” or “concluding” contracts

In both jurisdictions, it is usual that, until a valid contract is concluded, either party may withdraw from the transaction without penalty. In both jurisdictions, contracts for the sale of land must be in writing.

In England, each party would normally sign its own original copy, which would be exchanged on a completion call between solicitors using Law Society protocols. 

In Scotland, contracts for the sale of property are most commonly formed by a formal offer by the solicitor for one party and an acceptance or concluding letter issued by the other party’s solicitor (known as “missives”). This means that there is no need for either of the contracting parties to sign any paperwork at this stage, even though they will be legally bound by the contract.

In England, it is usual for land contracts to incorporate the Standard Commercial Property Conditions, although these are frequently varied by the parties. In Scotland, the Property Standardisation Group has developed what has become widely regarded as the industry standard offer to sell land, which deals with many of the same points as the English Standard Commercial Property Conditions, but which can be tailored to the transaction before it is issued formally by solicitors. 

Differing commercial terms

Commercial terms and expectations north and south of the border differ. For example, it is common in England for a buyer to pay a deposit of 10% of the price when contracts are exchanged. In Scotland, usually no money is paid until the deal completes.

The common law rule that the risk of damage to the property passes to the buyer on exchange of contracts or conclusion of missives applies in both jurisdictions. While this is usually accepted in England, it is almost always contracted out of in Scotland, meaning that the risk of damage to or destruction of the property remains with the seller until completion. The buyer of Scottish property, therefore, normally gets the chance to terminate the contract if the property is significantly damaged or destroyed between contract conclusion and completion. 

Some similarities

While the above highlights some of the differences between the jurisdictions, it is also important to recognise that there are shared concepts, for example:

• non-devolved taxes such as VAT and capital gains tax apply equally across the UK;
• the Electronic Communications Code applies across the UK to make it easier for network operators to install and maintain telecommunications apparatus on public and private land; and
• the proposed Registration of Overseas Entities Bill will establish a public register of overseas entities that have beneficial ownership of land situated in the UK. 

Final word

The differences between the jurisdictions are deeply rooted in the common law, and as such it can be dangerous to assume that what you know about land in one jurisdiction would have an equivalence in the other.

The best approach is, therefore, to take advice from someone who is dual qualified, as they will be able to translate the terminology and concepts from a position of understanding of both jurisdictions.

Lyndsey O’Connor is counsel (dual qualified) in the real estate team at Dentons.

In the remainder of this series we will explore the differences and similarities north and south of the border in commercial leasing, real estate financing and dispute resolution.

This article first appeared in Estates Gazette egi.co.uk on October 29, 2019.