Law Society of Scotland Guidance on Home Reports
Lifespan of Reports
(1) Members should intimate to purchasing clients in writing that they should not rely upon reports more than 12 weeks old.
(2) Members should intimate to selling clients the Society’s guidance in relation to purchasing clients so that they might consider the appropriateness of updating reports from time to time.
Making Reports Available to “Interested Parties”
(3) Parties who have formally “noted an interest” through solicitors or licensed conveyancers should be deemed to "have sufficient means to buy the house" and/or be “genuinely interested”
(4) Members should ensure that they ask sellers if there are any persons to whom the seller would not be prepared to sell the house prior to marketing property to avoid any difficulties.
Liability for Information Contained in Property Questionnaire
(5) Members should ensure that they have advised sellers in writing of their obligations in regard to the preparation of the property questionnaire and the importance of accurately and truthfully answering those questions, including clarifying for the client possible liability both in terms of the Property Misdescriptions Act 1991,The Housing (Scotland) Act 2006 and The Housing (Scotland) Act 2006 (Prescribed Documents) Regulations 2008.
(6) Members should make clear to selling clients completing such questionnaires that primary responsibility for the accuracy and truthfulness of those questionnaires rests with the client and that the member’s only obligation in terms of compliance is to ensure that the copy which they offer members of the public who are purchasers is effectively a true copy of that form and therefore “authentic” in terms of the legislation and regulation.
(7) The society take the view that members do not have an obligation to check the information contained in the property questionnaire and may accept the statements therein at face value except in circumstances where they are personally aware that the statement is untrue. (For example in a situation where the member or their firm carried out the remortgage in respect of a substantial extension to the property and the questionnaire states that there are no alterations.)
Who Can Complete the Property Questionnaire?
(8) Ideally the questionnaire should be signed by at least one principal owner acting under authority from any co-proprietors.
(9) In the view of the society “Authorised persons” (for the purposes of the Regulation 5(2)) definitely includes those acting under a Power of Attorney, Deed of Trust, Court Order, Solicitors and Duly Authorised Officers of a Company, but may include others with a similar level of formal authority. Care should be taken in cases where only informal authority is available. In the interests of risk management the Society do not recommend that solicitors sign questionnaires on behalf of clients.
Deferred Payment Arrangements
(10) Terms of business should state or should include a separate covering document in relation to:
(a) The price to be paid for the Home Report
(b) A clear statement of any financial interest the selling agent has in the Home Report provider.
(c) Details of any deferred payment option including any discount for early payment and charges in relation to property where the sale does not proceed or the property is withdrawn
(d) Where a mandate is to be signed for payment a clear statement of the meaning and effect of such a mandate
Withdrawn from the market
(11) In the view of the Society a property is not “sold” until a bargain is concluded. Property marked "under offer" is still technically available for sale (admittedly subject to a change of agent in terms of the Society's Closing Date Gazumping and Gazundering Guidelines). Accordingly for the purposes of Regulation 6 (2) (b) property marked "under offer" should not be deemed "sold" and it should not be deemed "withdrawn from the market" until there is a concluded bargain. On this basis it is the view of the Society that where a property is marked "under offer" and negotiations fall through the existing Home Report could still be used in terms of Regulation 6(2)(b).
Annexation of the Home Report to Offers
(12) While the Society accepts that it is a matter for individual members and their clients the Society does not recommend annexation of the Home Report to offers.
Conflict of interest
(13) In the interests of transparency where firms act for both buyer and seller in terms of the existing conflict rules they should clarify the source of the Home Report and any connection which their firm has with the supplier of the report.
(14) Where the selling solicitor is aware that multiple reports have been purchased by, or on behalf of the seller in an effort to obtain a report that portrays the property in the best light, the firm should not also represent a purchaser (notwithstanding the fact that an exemption under rule 5 of the Conflict of Interest Rules applies) without disclosing the full circumstances due to the clear conflict of interest between the parties.
(15) Where a purchaser is to be advised to seek an additional independent report in cases where the firm already acts for the seller the firm should not represent the purchaser due to the clear conflict of interest between the parties. Exemptions under rule 5 of the Solicitors (Scotland) Practice Rules 1986 rely on the fact that the agent will not advise either party in relation to price. It is difficult to see how an additional independent report could be instructed without a discussion in relation to price.
(September 2008)
