As well as full ownership, it is possible to own property jointly with other parties, although this is not common where the parties are unconnected. In addition, interests under leases can be acquired and disposed of in the same way as freehold interests, subject to any limitations set out in the lease agreement.
A real estate owner can also grant non-exclusive rights to third parties to use the property, for example rights of access across the land. These rights are generally known as servitudes and are binding on the successors in title to the person who granted the original right, provided they are correctly drafted in the title document and registered. (It is also possible to acquire such rights through the principle of prescription if they have been used without objection for a number of years.)
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Yes. The UK has recently toughened its rules on foreign investment, in line with other major economies. There are two important and recent pieces of legislation which affect foreign investment.
The Economic Crime (Transparency and Enforcement) Act 2022 applies to all UK property. In broad, and simplified, terms, the Act prevents an overseas entity from:
unless it has first become a registered overseas entity and complied with updating requirements under the Act. All overseas entities which already owned UK property were required to become registered overseas entities by 31 January 2023. To become a registered overseas entity, the overseas entity must file information about itself, its managing officers and its beneficial owners (among other things) on the Register of Overseas Entities at Companies House. Failure to comply with the Act is a criminal offence punishable by significant fines or, in some cases, imprisonment.
Additionally, the National Security and Investment Act 2021 applies to transactions entered into from 12 November 2020. The Act introduces a mandatory and a voluntary notification regime for transactions which could affect national security, which relate to the acquisition of shares or assets and where a sensitive sector is involved (for example, defence). The legislation could also cover the acquisition of land which is, or is proximate to, a sensitive site, such as a government building or site of national critical infrastructure. However, little guidance has been given on the definitions of "proximate" or "sensitive". The regime will also cover foreign- to- foreign transactions with a UK element (such as an acquisition by one foreign investor of a data storage company in another country, if that company performs services which may impact on national security in the UK). Government approval would be required prior to completion of affected transactions and without it, the transaction would be void.
Overseas entities are required to record information about themselves and their beneficial owners in the Register of Overseas Entities before acquiring or disposing of UK property interests. The Register became operational in the Autumn of 2022.
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‘Community bodies’ representing local communities in Scotland have a statutory right to apply to the Scottish Ministers to register an interest to buy real estate. The process is subject to rigorous scrutiny by the Scottish Ministers, and applicants must be able to show that the acquisition is in the public interest and that the real estate will be used for the benefit of the local community for ‘sustainable’ purposes (such as provision of facilities for educational, sports, and other recreational activities). If successful the community body then has a right to buy the real estate at market value when the owner decides to sell. This statutory right (which was introduced under Part 2 of the Land Reform (Scotland) Act 2003) originally applied to rural areas only, but was extended to urban areas on 15 April 2016.
An additional community right to buy was brought into force on 27 June 2018. The ‘Right to Buy Abandoned, Neglected or Detrimental Land’ allows a community body to apply to the Scottish Ministers for consent to purchase (at market value) land deemed by the Scottish Ministers to be ‘eligible’. This right to buy is not a pre-emptive right, and can potentially be used even when the owner of the land in question does not wish to sell. Land will be ‘eligible’ for the Right to Buy Abandoned, Neglected or Detrimental Land if, in the opinion of the Scottish Ministers, it is ‘wholly or mainly abandoned or neglected’ or ‘the use or management of the land is such that it results in or causes harm, directly or indirectly, to the environmental wellbeing of a relevant community’. When a community body applies to exercise this right to buy, the Scottish Ministers must carry out a full assessment of the application and consult with various parties (including the landowner) before deciding whether to allow the purchase to proceed. Before issuing consent, the Scottish Ministers must be satisfied that the community body's plans for the land are in the public interest, and compatible with furthering the achievement of sustainable development in relation to the land.
On 26 April 2020, a further right to buy, called the ‘Right to Buy Land to Further Sustainable Development’ was brought into effect. This allows community bodies to apply to the Scottish Ministers for consent to purchase (at market value) land in their community to ‘further sustainable development’. (Official guidance describes ‘sustainable development’ as ‘an integrated long-term approach to economic, social and environmental issues’.) The Land Reform (Scotland) Act 2016 sets out four ‘sustainable development’ conditions on which the Scottish Ministers must be satisfied before giving consent to a community body wishing to exercise this right to buy. These are:
Once an application is made by a community body for consent to exercise this right to buy, the Scottish Ministers must carry out a full assessment of the application and consult with various parties (including the landowner) before deciding whether to issue consent for the purchase to proceed.
Tenants under certain types of agricultural tenancies can apply to register an interest over the agricultural land allowing them to buy that land if it becomes available for sale.
The owner of real estate is free to grant pre-emption rights to any third party. The seller would then need to offer that third party the option of buying the property ahead of any other potential buyer.
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Contracts for the sale and purchase of real estate are governed primarily by case law. The execution of contracts is governed by the Requirements of Writing (Scotland) Act 1995 but contracts are not generally in a standard form.
There is legislation applicable to the registration of the buyer's title, namely the Land Registration etc. (Scotland) Act 2012. If the acquisition of the property also involves the transfer of a business carried out on the premises, then statutory provisions dealing with employees and VAT also need to be considered.
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Not as such. However, contracts for the sale of commercial property tend to be drafted in a different way from contracts for the sale of residential property. Commercial property contracts are necessarily more complex. For example, a contract for the sale of an investment property will deal with:
Contracts for the sale/purchase of commercial property are therefore tailored to the specific requirements of the parties concerned.
Contracts for the sale of commercial property tend to be drafted in a different way from contracts for the sale of residential property. Residential contracts are moving towards a standardised approach which streamlines the process and provides for similar terms and conditions.
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By registration. It is absolutely essential that the disposition (the deed transferring the title to real estate) is registered in the Land Register of Scotland to ensure the buyer has legally transferred the title.
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Yes. Until 1979 all land transfers were registered in a public deeds register called the General Register of Sasines. Since then, land transfers have been registered in the Land Register of Scotland. Members of the public can access all information relating to real estate recorded in this way, including the identity of the current owner, the price paid for the property and any obligations affecting the property.
Yes. It is essential that transfers of title are registered in the Land Register of Scotland as title will only pass to the buyer once the relevant deed has been registered.
Yes. The parties may sometimes agree to take out title insurance in relation to a particular matter revealed by the title investigations, for example a lack of required access rights.
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Before the conclusion of the sale and purchase contract, due diligence is carried out by the buyer. The contract is then concluded and there is normally an interval before completion of the sale, at which time title to the land is transferred. The disposition is then registered in the Land Register by the buyer's lawyers./p>
During the course of the due diligence investigations the buyer's lawyers and the seller's lawyers will negotiate the contract for the sale and purchase. Sometimes the parties enter into a contract which is made conditional on the results of the due diligence investigations. There will usually be an interval between the conclusion of the contract and the date when the land is transferred. The contract sets out the documents that are required for completion, including the disposition (the document transferring title).
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Yes. A buyer will generally rely on their own due diligence investigations, title examination, searches and survey.
The buyer's lawyers will review the title information provided by the seller's lawyers. They will also carry out a standard set of searches (for example with the local authority). Any issues identified will then be raised with the seller's lawyers. There is no standard list of enquiries and the responses given have no contractual effect unless expressly stated to be seller warranties in the sale and purchase contract.
The parties will usually not enter into the contract until all due diligence investigations have been satisfactorily completed. In law, there is no automatic exclusivity for the buyer during this period. However, sometimes, but by no means always, parties will agree to enter into an exclusivity agreement for a set period of time.
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Consent is required from any bank or financial institution that has a charge over the property and it is a standard condition of any sale that debts relating to the property are repaid and the charge released at completion.
In the case of residential properties, the seller must obtain the consent of a spouse/civil partner of any occupier of the property if they are using that property as the matrimonial/family residence.
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The contract must be in writing and normally takes the form of ‘missives’ or formal letters between the lawyers acting for the buyer and the seller. These formal letters constitute a formal offer to buy or sell the property (as appropriate) on the client's behalf.
The recipient of the offer will then issue a formal acceptance of its terms and at this stage the missives become legally binding on both buyer and seller. The offer will already have been negotiated in draft form and agreed in principle prior to this.
The contract must contain all the relevant terms of sale which the parties have agreed. Beyond this, there are no formal requirements regarding the structure of the contract.
The contract will set out:
If the sale is to be conditional on, for example, planning consent for a change in use or for works being carried out, this will also be provided for in the contract. If completion of the sale is some time in the future, or if the sale is of an investment property, the contract will also usually contain provisions regarding how the property will be managed between the conclusion of the missives and completion, as well as concerning the apportionment of income from the property between the buyer and seller.
Contracts also invariably contain provisions relating to insurance and what happens if the property is damaged or destroyed before completion. Where matters such as these are not contained in the contract, common law applies.
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Statute does not impose any direct warranties on the seller. In practice it is unusual for the seller to give any warranties in relation to the state and condition of the building and the buyer normally needs to satisfy itself through its own enquiries. The buyer may seek to obtain warranties from the seller where information is not evident from the buyer's own enquiries but should be within the seller's knowledge. The sort of warranties normally sought relate to statutory compliance and, in the case of investment properties, confirmation of the issues relating to the leases affecting the property.
The contract will state how long the warranties and other provisions are to remain in force. The standard period is normally two years, but this time limit does not usually apply to any claims or court actions raised within that time.
The only standard warranty normally obtained from a seller in every case is that the buyer will, upon registering the title in the Land Register, obtain a good and marketable title to the property ‘without exclusion or limitation of warranty’, ie the state guarantee of the title is not limited.
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Specific buyer remedies are not usually provided for.
At common law the buyer would be required to establish that they had suffered, or will suffer, losses as a result of the seller's misrepresentation. The buyer is obliged to take all reasonable steps to mitigate such losses.
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As part of the buyer's pre-contractual due diligence they will normally require the seller's lawyers to produce local authority searches and a planning/zoning history for the property. This will include confirmation that:
In addition, depending on the use of the property, it may also be necessary to confirm compliance with further statutory regulations, for example compliance with fire safety requirements and other health and safety issues. It is the responsibility of the buyer to seek verification of these issues before the conclusion of the contract.
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The basic principle in existing environmental legislation is that the ‘polluter’ pays, ie the person causing the pollution is primarily responsible for its clean-up.
If that person cannot be found or pursued, however, then the legislation does allow the local authority to pursue current owners and/or occupiers of a property. Buyers will therefore need to take careful note of any environmental issues identified in the survey.
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As part of the pre-contract due diligence, a seller will show the buyer a local authority property enquiry certificate. This discloses the current planning/zoning status of the property and gives brief details of any planning consents issued.
The seller may also be required to provide a planning history of the site and copies of all planning consents issued. If the buyer is planning to change the use of the property, they will need to consider the local plan which sets out the local authority's policies for each area. Receiving consent to a change of use can be made a condition of the purchase contract.
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Where a proposed development is substantial and requires planning consent, the local planning authority will usually require the developer to enter into a Section 75 (Planning) Obligation. Under this agreement, the developer is required to comply with obligations that the planning authority may impose in exchange for giving planning permission for a development. These may, for example, include payment or a requirement to carry out certain works outside the development site. The Section 75 (Planning) Obligation is registered against the title to the property.
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Local authorities and certain other statutory bodies have compulsory purchase powers where the acquisition of land is necessary for public works, for example, road construction. Compensation is payable to the landowner based on the value of the land.
Compulsory purchase of real estate and the negotiation of compensation can be time-consuming. The majority of compensation claims are concluded through negotiation between the acquiring authority and the real estate owner but they can sometimes be determined by the independent Lands Tribunal for Scotland.
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When an existing interest in real estate is acquired, Land and Buildings Transaction Tax (LBTT) is payable if the price paid for the asset (including any non-monetary value given) is more than £150,000 in relation to non-residential real estate or £145,000 in relation to residential real estate. LBTT operates under the basis of a progressive system (with different bands of the consideration being subject to LBTT at a different rate). For non-residential real estate LBTT is charged at 1% on any part of the consideration between £150,001 and £250,000, and at 5% on any part of the consideration above £250,000. Higher rates can apply in relation to residential property.
VAT does not automatically apply to the purchase of land, although in a few cases (for example newly built properties) the seller must impose VAT. For many commercial property transactions the seller will impose VAT in order to recover any VAT that has been paid in relation to the property. In the sale of investment properties, the transaction may be treated as the ‘transfer of a going concern’, which does not attract VAT, although the pre-conditions for obtaining this relief are somewhat complex.
Where VAT is chargeable on the price, LBTT will be charged on the whole sum inclusive of VAT.
A fee is payable to the Land Register of Scotland for registering the disposition (ie document of transfer) in favour of the buyer. The fee payable is calculated on a sliding scale depending on the price paid. The Scottish system does not use notaries and all legal work is carried out by solicitors. Rates for this vary depending on the complexity of the transaction. Most real estate is sold through property agents, who will also charge commission for their services, normally conditional upon completion of the sale.
The seller invariably pays the selling agent's commission, their own legal costs and any expenses incurred in the sale, for example fees for searches. The buyer pays for his legal costs, site surveys, VAT, LBTT and Land Register fees. Transaction costs will generally be higher for the buyer than the seller, although this may in turn affect the purchase price.
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Generally, stamp duty at a rate of 0.5% (of the consideration given for the shares) is payable if the company is a UK company. No stamp duty is normally payable on the sale and purchase of shares in non-UK companies, unless it is a non-UK company that has a share register in the UK.
There is no legal requirement as to who pays stamp duty but, in practice, it is almost always payable by the buyer.
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What are the categories of property right that can be acquired? Are there any interests in real estate other than exclusive ownership?
As well as full ownership, it is possible to own property jointly with other parties, although this is not common where the parties are unconnected. In addition, interests under leases can be acquired and disposed of in the same way as freehold interests, subject to any limitations set out in the lease agreement.
A real estate owner can also grant non-exclusive rights to third parties to use the property, for example rights of access across the land. These rights are generally known as servitudes and are binding on the successors in title to the person who granted the original right, provided they are correctly drafted in the title document and registered. (It is also possible to acquire such rights through the principle of prescription if they have been used without objection for a number of years.)
Last modified 13 Mar 2025