Will I still be charged legal fees if my sale falls through?

If my sale falls through, will I still be charged legal fees?

Buyers and sellers want clarity on what costs are payable, refundable, and liability if their sale and/or purchase collapse.

When an offer is accepted on your sale property, the transaction may feel secure. However, many clients are surprised to learn that even if a sale falls through, legal fees may still be payable. Understanding how costs work under Scottish law can help you plan ahead, manage your expectations and avoid unexpected costs.

When does a sale become legally binding?

To understand this further, it is important to touch upon when a sale becomes legally binding. In Scotland, a property transaction becomes legally binding when missives are concluded. Missives are the formal letters exchanged between solicitors setting out the terms of the sale. Until missives are concluded, either party can withdraw without breaching contract.

When an offer is accepted, the Seller will instruct a solicitor and obtain a quote for legal fees and outlays for the sale transaction.

What are outlays?

Outlays are third-party costs which the Seller’s solicitor pays on behalf of the Seller. Typically, in a sale transaction in Scotland you can expect the following outlays;

• Register of Scotland dues for the discharge of existing mortgage (if appliable)
• Register of Scotland dues for an advance notice which is effectively us pre-warning the Registers that the title will be transferred to the Purchaser and protects the Purchasers position
• Searches for the sale property

If the solicitor firm has already incurred the charges for the outlays at the time of the transaction falling through, the Seller will be liable for these and they are non-refundable.

When does the solicitor firm incur these charges and how would I know?

The solicitor firm incurs these charges when the searches are ordered or the application to the Registers is lodged. Generally, searches are ordered at the very early stages of a sale transaction. The costs of the searches vary depending on the search provider the solicitor firm uses, but these are generally around £230-£300.

In regards to the Register of Scotland charges, the first point which relates to discharging the existing mortgage is not lodged until the transaction completes, therefore, if the transaction falls through, the Seller will not be liable. However, there are instances whereby Sellers pay off their mortgage during the course of their ownership and do not have the security on the title discharged. This is more common than you may think. In this instance, the solicitor firm will discharge the security during the conveyancing process, therefore, it may result in the Seller being liable for this. This fee is either £60 or £80 dependant upon the Lender and their discharge process.

Regarding the Registers of Scotland charge for the advance notice, an advance notice is generally lodged the week before the date the transaction is completing, otherwise known as the Date of Entry. Therefore, it is quite rare for a Seller to be liable for this if the transaction falls through. The cost of an Advance Notice is £20.

What about Legal Fees?

This does depend upon a few factors:

• How much work has been done/how far along the transaction is
• Solicitor firm’s terms of business

What about Estate Agency Fees?

This is dependent on the estate agency, but generally speaking, when a sale falls through, the Seller will instruct the same estate agent to remarket the property and it would depend upon the agency and their fees and policies.

Final thoughts

If your sale transaction falls through prior to missives concluding, you have no remedy to recover funds from the purchaser. Whether legal fees are payable depends upon the solicitor firms policies and at which stage the transaction fell through. Regarding outlays due to the solicitor firm, this depends as to whether the solicitor firm have already incurred the charges. However, it is likely you will incur the charges relative to the searches (£230-£300) ordered for the property given these are ordered very early on in the transaction journey.

The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.