Purchasing property, be it as a first-time buyer or as an investment opportunity, is a big step and you may come across things you have never done before. Not only that but property markets up and down the United Kingdom can be very varied; in particular, there are some noticeable differences between the UK property market compared to Scottish.
In 2021, data showed that 93.3% of properties in the Scottish private rental sector were owned by landlords that lived in Scotland but there was a trend that more were coming from England and further afield. This decline in Scottish based landlords was confirmed when data was updated in 2022 and the figure had already dropped to 93.1%.
The Scottish property market is booming right now, having seen an increase of 8% in property prices in June 2022 vs June 2021, making it an investment opportunity you don’t want to miss out on. As such, it is important to arm yourself with the key differences when investing in Scottish or English properties.
1. Freehold vs Leasehold
When purchasing property in England, one of your first questions may be to ask whether it is freehold or leasehold. If a property is leasehold, it means you own the property itself but not the land it’s built on. This essentially means you have rented the land and must pay a ground rent to the landlord. In England (and Wales) most flats and maisonettes are leasehold. It is rare for houses to be leasehold but there are some examples of this in the Northwest.
However, there is no such thing as leasehold across the border because all properties are freehold in Scotland which means you own the property and land it is on.
2. “Offers over” system
When selling a property in England, there tends to be a fixed price that buyers can straight away make an offer on; the seller then decides whether to accept or decline. In contrast, Scotland has a system known as “offers over” where estate agents invite interest into the property, setting a closing date which is when potential buyers would submit a blind bid.
The “offers over” price is usually slightly under the valuation price of the property, as well as the amount the buyer would be willing to accept, but it is designed to generate interest and offers.
Fixed price selling does occur in Scotland but is far less common than the “offers over” system.
In England, gazumping is a common occurrence as property law in the country states that an agreement with the seller is not legally binding until contracts are signed. This means that you can have an offer accepted only for it to be rejected further down the line as the result of a sneaky, last-minute offer that betters your own.
Whilst it isn’t illegal to gazump someone in Scotland, it is not common practice and very unlikely to happen. This is mainly because once an offer is accepted on a Scottish property, the home is taken off the market.
4. Surveys and home reports
Before a property goes on the market in Scotland, it must have a home report detailing the property’s energy efficiency as well as a property questionnaire, a single survey, and a valuation. There are a few exceptions, for example new builds won’t require a home report, but it is applicable to most homes in Scotland.
In England however, the only information required before a home hits the market is an energy performance certificate. Once an offer has been accepted, a buyer can choose to have a survey carried out which is at a cost to them rather than being with the seller, as in Scotland.
One advantage of the home report is that it is a good way of boosting buyer confidence and avoiding time and money wastage. Leaving any surveys to be carried out until after an offer is accepted, could be frustrating if there is then found to be a serious structural issue.
Also read: Stamp Duty Calculator: How much & When To pay?
In England, when buying a property, you will be subject to Stamp Duty which is essentially a property transaction tax however, in 2012 Stamp Duty was replaced in Scotland by Landing and Buildings Transaction Tax (LBTT).
Applicable to property in Scotland over £145,000, the LBBT rates are as follows:
|Property price||LBBT rates|
|£0 – £145,000||0%|
|£145,000 to £250,000||2%|
|£250,000 to £325,000||5%|
|£325,000 to £750,000||10%|
Stamp duty is payable on all properties in England over £125,000. The rates are:
|Property price||Stamp Duty rates|
|£0 – £125,000||0%|
|£125,000 – £250,000||2%|
|£250,000 – £925,000||5%|
|£925,000 – £1.5m||10%|
When buying a residential property for investment purposes, both Scotland and England impose a tax which is 4% in Scotland, known as Additional Dwelling Supplement (ADS), or 3% in England (Additional Homes SDLT).
6. Legally bound
There is a point of difference as to when a property purchase becomes legally binding in England and Scotland. In England, it is at the point of contracts exchanging between sellers. Until both sides have made the exchange, either the buyer or seller can pull out with no legal implication. It can take as little as six weeks for contracts to be exchanged, however in more complicated scenarios with long, volatile chains it can be months before this point is reached.
In Scotland, rather than one contract, there is a series of letters exchanged known as missives. Once all missives are finalised, the sale is legally binding. This process can be as quick as 2 weeks.
There are many property investors who have invested in northern parts of England such as Leeds that are no further extending their reach to Scotland. UK property in general has investment appeal and with average rents in Scotland starting at £840, it is easy to see why people are looking that way to start or expand portfolios. The housing market in Scotland and England are both affordable with good returns as well as there being readily available lending.
For those looking to invest in Scotland, investment specialists Dwell Leeds, would highly recommend a property with an existing tenant to begin with as it can limit hassle for those that don’t reside in Scotland. It also provides landlords with rental income from the outset but also means avoiding any potential refurbishment requirements and safety certificates whilst sitting on an empty property.
With both countries forming part of Great Britain, it might not be immediately obvious that there are different laws and working ways when it comes to purchasing property in Scotland and England.
There’s no need to feel overwhelmed when buying property as this article equips you with essential purchasing knowledge for both countries- now you can simply reap the rental rewards!
Also read: 8 Tips for Protecting Your Real Estate Investment