Real Estate in Scotland

Having decided to establish a presence and operate in Scotland, a business will need premises from which to do so.

In Scotland, there are two ways to acquire premises: purchase, where the business owns the premises following payment of a purchase price to the previous owner, and lease, where the business has a right to occupy and use the premises for a stated period in return for the periodic payment of rent. Most often, a business will choose to lease its premises.

Businesses usually use a surveyor to source their premises and agree the commercial terms, but a solicitor will deal with the necessary due diligence and take the transaction through to its conclusion.

As the business, whether buying or leasing, will incur quite significant costs in this process, often before a binding contract is in place, parties very often enter into a short exclusivity agreement for a limited period at the outset.

Purchase

There are two legal steps to a purchase. Firstly, a contract setting out the agreed terms is concluded between the seller’s and the purchaser’s solicitors, which is binding on the parties subject to any conditions in the contract. Secondly, completion occurs about three or four weeks later, when the price is paid in exchange for title to the premises, and the purchaser takes entry.

Either as a condition of the contract or prior to an unconditional contract being concluded, a survey of the premises will be undertaken and the purchaser’s solicitor will examine the seller’s title to the property and investigate various local authority requirements.

Following completion, a transfer tax (LBTT) will need to be paid and the purchaser’s title registered in the Land Register.

Leasing

There are also usually the same two steps to a leasing transaction. A contract is concluded, in this case with an agreed draft lease attached, and completion and entry follows. The terms of the lease will vary, but nowadays commercial leases tend to be for 15 years’ duration, perhaps with opportunities for the tenant to terminate early or extend the term at the end. Rent is generally paid four times a year, and will usually increase in some agreed way over the duration of the lease.

The extent of what is being leased needs to be clearly defined, together with any common parts that the tenant will be allowed to use (often requiring the payment of a service charge), as well as the tenant’s repairing and other obligations. Breach of the tenant’s obligations can lead to termination of the lease by the landlord without compensation.

Again, a survey and title due diligence will need to be undertaken, and LBTT paid and the lease registered (if it is for more than 20 years’ duration), after completion.

Rural land & forestry

A specialist type of real estate conveyancing work in Scotland is the purchase, sale or lease of rural land. The forestry market in particular is thriving at present due to attractive tax incentives and Government grants. As in other countries, rural land is subject to legislation which protects public access rights, Community rights and agricultural tenants. Crofting is a type of small-scale farming unique to certain northerly parts of the country, and again, there are special laws in place dealing with the rights of croft tenants.

Planning, environmental and conservation laws exist to protect the countryside and manage its use. Salmon fishing can be purchased and owned separately from land. Rural land used for renewable energy projects is usually held on long leases.

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