Scottish conveyancing Costs To Rise Even Higher

Uncertainty over whether Scotland could retain the pound after independence and a move by Scottish lawyers to introduce separate scottish conveyancing solicitors for purchasers and lenders could make home buying in Scotland more expensive.

In March, lawyers in Scotland voted on whether purchasers and lenders in Scotland should have separate legal representation in property transactions.

The current system whereby both are represented by the same solicitor will face a second vote in September, and a vote in favour potentially means rising conveyancing costs in Scotland.

The move is seen as a necessity to reduce conflicts of interest for property solicitors in Scotland and reduce the potential for fraud. President of the Law Society of Scotland Austin Lafferty said in March:

"In recent months the 'sep rep' movement has grown and increasing numbers of solicitors, although by no means all, are in favour of removing the exemption; meaning lenders would have to appoint their own solicitors, which immediately removes the risk to the buyer's solicitors.

"While there would be clear benefits to introducing this change, as might be expected there are some potential downsides to having separate representation, such as the possibility of increased costs and paperwork."

Mr Lafferty said that the issue of separate representation for buyers and lenders in Scotland was "a crucial debate to have" and added "it will be for our members to decide what they want to see happen".

But not only could the "sep rep" debate increase conveyancing costs in Scotland, the ongoing discussion as to whether Scotland would be allowed to keep the pound if it left the UK might also hit Scotland's property market.

The vote on Scottish independence is due to take place in September 2014 and the prospect of a yes vote has raised concern that independence might result in a hike in mortgage rates for Scotland's homebuyers.

Added to this is the issue of whether Scotland could continue to remain part of the UK monetary union if it opts for independence and how independence might affect Scotland's property market.

In May, the Scottish Office published a report which states that independence for Scotland would potentially lead to increased mortgage rates from Scotland's banks.

The Scottish Office, which is part of the UK government, says that independence might well weaken the Scottish economy, affecting the ability of mortgage lenders to raise funds, thereby pushing up the cost of mortgages in Scotland.

This two-pronged attack on Scotland's property market, with both mortgages and conveyancing in the firing line, reflects the ongoing issue of confidence in banks; with investors potentially being unwilling to expose their savings to a risky market for lenders, and the cost of raising funds for mortgage lending becoming more expensive for lenders.

Following the March vote to separate legal representation for property buyers and mortgage lenders in Scotland, Austin Lafferty said that the Law Society of Scotland would be discussing the move with the Council of Mortgage Lenders:

"Solicitors provide conveyancing services for communities the length and breadth of Scotland and we are fully aware of the potential for increased costs for buyers and increased paperwork for solicitors," said Mr Lafferty.

"However, these costs are not the borrowers': they are costs associated with lenders satisfying themselves on their own lending risk and it will be for the lenders to decide on whether they are prepared to pass on these costs to their customers.

Mr Lafferty said that the recession had resulted in a greatly reduced property market, with the risk on loans "largely borne by solicitors, as banks and building societies have increased the number of claims on the legal profession's indemnity insurance where things have gone wrong".

Mr Lafferty added that if a mortgage client defaulted on payment or if the property were repossessed, "negative equity means there is a loss to the lender".

Scotland's stance that independence need not necessarily mean losing its sterling economy has, however, attracted pessimism in the pro-union camp.

Former New Labour chancellor Alistair Darling, who is leading the Better Together campaign for Scotland to remain in the United Kingdom, likens Scotland expecting to retain the pound after independence to demanding that staff at the Bank of England continue to work for an independent Scotland.

Writing in The Huffington Post, Mr Darling says:

"after a break up, you can argue over the division of your CD collection, but you can't demand that your ex continues to share a bank account with you."

Current uncertainty over the effects of independence and changes to conveyancing in Scotland may well have the knock-on effect of uncertainty in the property market in Scotland.

But it would appear that both mortgages and conveyancing in Scotland may well get more expensive in the years ahead.