Settlement

What is settlement?

The term “settlement” refers to the stage of the conveyancing process where ownership of the property is transferred from the seller to the buyer.

Settlement occurs on an agreed date as specified in the standard clauses of the contractual agreement known as the “missives.” The date of settlement usually the same day as the “date of entry,” but it doesn’t have to be.

Here’s what generally happens during settlement:

  1. Prior to the settlement date, both parties’ solicitors will prepare all the necessary legal documents. This will include the Disposition, which is the legal document transferring ownership of the property.
  2. On the day of settlement, the buyer’s solicitor will transfer the agreed purchase price to the seller’s solicitor. This is often done through a secure electronic funds transfer system.
  3. Once the funds have been received by the seller’s solicitor, the keys to the property are released to the buyer. This often occurs through the estate agent or directly between the buyer and seller.
  4. The Disposition will be registered at the Registers of Scotland, thereby completing the transfer of ownership from the seller to the buyer.
  5. The buyer’s solicitor may also carry out last-minute searches to ensure no adverse entries have been made against the property.
  6. Both parties are notified that the sale has been successfully completed. The buyer can now get the keys and move into the property.

If the purchase has been made using Scottish Standard Clauses there are five conditions that need to be met before your solicitor will make payment to the seller. These are that the price will be payable in exchange for :

  1. A good and marketable title
  2. A validly executed Disposition in favour of the Purchaser or their nominee(s);
  3. Vacant possession of the property
  4. If applicable, the Letter of Undertaking provided for in Clause 17.6
  5. all keys held by the Seller for the Property (to include keys for all lockable external doors and garages) as also any code for any operational alarm system
Scottish Standard clauses (v4) Section 18

Importance of timing

The timing of the settlement is crucial. It’s common for buyers to align the settlement date with the completion of their existing property sale, mortgage arrangements, or other financial obligations. Delays in settlement might result in financial penalties.

Role of Solicitors

In Scotland, it’s standard practice for both the buyer and the seller to have their own solicitors to handle the legal aspects of the sale. Solicitors play a critical role in ensuring a smooth settlement, including confirming the transfer of funds and ensuring that all legal obligations are met by both parties.

Conclusion

Settlement is a pivotal moment in the process of buying a residential property in Scotland. It is the culmination of negotiations, legal processes, and financial planning, resulting in the formal transfer of property ownership. Being well-informed about what settlement entails can help first-time buyers navigate this final, crucial stage of the property purchase process.

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