A horror story for English homebuyers
A young couple in England bought their forever home, and upon opening the door for the first time, they were shocked to discover catastrophic damage to their new home. This was caused by a burst pipe in the attic, resulting in the ceiling collapsing and flooding throughout the property.
The worried couple contacted their solicitor, but were faced with a year long battle with their insurers and the seller over who was to be responsible for the repairs. The property was vacant, with the seller being located abroad, meaning it was impossible to confirm what date the damage occurred – was it before the contracts exchanged or after? Was it when the seller was liable for the property or when the purchaser was responsible?
As well as the cost of the repairs, estimated at over £100,000, the new owners were still responsible for their monthly mortgage payments, the cost of alternative accommodation as well as utility costs, council tax, insurance and all other outlays that home owners typically pay for, all while being unable to live in their new home. After nine long months of negotiations, and neither seller nor buyer willing to accept liability, both insurers eventually agreed to split the cost of repairs equally.
Could this happen in Scotland?
The home buying system in England differs greatly from the Scottish system. So, if this scenario took place in Scotland, what would the outcome look like? Could this even happen in Scotland?
When buying a residential property in Scotland, both seller and buyer will each instruct a conveyancing solicitor, who will prepare the contract between the parties. This states the terms of the transaction – to include the property being transferred, price and entry date. Typically, solicitors use the Scottish Standard Clauses (“SSC”) where applicable. The Standard Clauses are a standardised contract that is prepared in a way that is fair to both seller and purchaser. From there, the solicitors for each party will issue missives (formal letters) that amend points within the Standard Clauses, creating a bespoke contract for every property transaction.
Condition 20 of the Scottish Standard Clauses (SSC 20) covers the important aspect – risk. The general principle is that the risk of the property being damaged or destroyed lies with the seller until the date of entry. In short, the purchaser must find the property in the same condition as at the time of tendering the offer. Of course, fair wear and tear is excepted. Here lies one of the key differences between the Scottish and English systems. In England, once the contracts are exchanged (the point at which the contract is legally binding) the purchaser becomes liable for the property. As the English property was vacant during the sale, there was no way to tell if the damage occurred before or after the contracts were exchanged.
Does that then mean that if a Scottish purchaser opened the door to the scenes the English buyers encountered, would the seller be liable for the repairs? Well yes...and no.
Consider if a Scottish buyer completes a purchase of a vacant property. They get the keys to the property, but also are out of the country on the date of entry, therefore do not attend the property until, say, 3 – 4 days after the date of entry. There is a burst pipe and considerable damage. A similar issue can therefore occur – when did the pipe cause the damage? Was this before the date of entry? Or after? Is the seller responsible or is it the purchaser’s responsibility?
Of course, the English story is a very extreme example. What if it is fairly minor damage – a stain on the carpet, a missing spindle in the staircase banister or a broken window? Let’s consider SSC 20 again. When buying a second hand property, general ongoing maintenance is expected, but the issue for buyers is this – “Was it like that when I first offered to buy the property?” If the first offer was made very shortly after a viewing, then it’s likely the condition at that viewing will be the starting point. While fair wear and tear is excepted, proving the state of the property from the viewing to completion can be challenging. Ultimately this will become an issue of proof.
Is it possible to mitigate the risks?
Yes, both sellers and buyers can mitigate the risk of disputes after settlement. When selling a property, it is crucial that the proprietor keeps the property adequately insured at all times and ensures damage is prevented. Should your property be vacant, it is advisable that regular checks are made during the course of the transaction to safeguard against unexpected damage.
As a buyer, it is important to ensure that a good inspection of the property is carried out when initially viewing. Once an offer is accepted, the purchaser is not permitted to visit the property until such time as the missives are concluded (the contract is legally binding). However, once the contract is legally binding, the purchaser can attend the property up to two times prior to the completion date for the purposes of taking measurements etc. This offers the buyer a chance to inspect the property, ensuring no significant changes have occurred to the property prior to the completion date.
While no transaction is ever free from risk, particularly from the unexpected, it is important to do your homework before offering and take advice from your solicitor, who will be able to guide you through the stages of your transaction.
