What Is the Difference Between an Estate Agent and a Solicitor / Estate Agent in Scotland?

In Scotland, estate agency firms can be either law firms or non-law firm estate agents. So what is the difference between a solicitor/estate agent and a regular estate agent? And what difference does this make to you if you are a property buyer or property seller in Scotland? Quite a lot as it happens…!

What Is a Solicitor/Estate Agent and Why are So Many Scottish Estate Agents Solicitors?

In Scotland, a lot of estate agency firms are also solicitor firms. A solicitor firm is defined, for the time being, as being a company that is registered with and regulated by the Law Society of Scotland. A degree of de-regulation of the Scottish legal market will take place in the next few years and it is likely that in a few years there will be other regulatory bodies that law firms can affiliate themselves with. However, for the time being the Law Society of Scotland is the only one.

Many of these firms are, first and foremost, law firms and do a wide spectrum of legal work as well as doing estate agency work on their clients’ behalves. Many refer to themselves as ‘Joe Bloggs, Solicitors and Estate Agents’. Several others have evolved into such multi-disciplinary firms whose main income comes from legal services, much of which doesn’t come from residential property, so they don’t even advertise their estate agency services in their firm names, describing themselves merely as ‘Jane Smith, Solicitors’ or indeed just ‘Jane Smith & Company’.

In some geographical areas of Scotland, the vast majority of estate agency firms are, at their hearts, law firms. In Edinburgh, for example, about 90% of property that is sold is sold through firms that are law firms. Much the same can be said for the Aberdeen area. Traditionally, property in Scotland was marketed and sold by solicitor firms. Non-solicitor estate agency firms in recent decades have made huge inroads into that marketplace. However, in some areas the dominance of Solicitors Property Centres (SPCs) has protected solicitors from the commercial threat of those estate agency firms: http://www.mov8realestate.com/blog/item/89-what-are-solicitors-property-centres-and-property-portals?-where-should-you-advertise-and-how-should-you-look-for-a-property-in-scotland?.html

What Are Non-Solicitor Estate Agents?

Traditional estate agency firms focus solely on marketing and selling property and don’t do the legal work (conveyancing – see below) themselves. Many of them are brand names within large ‘corporate’ estate agency chains that evolved in England. Others are branches or franchises of large international estate agency companies or franchise operations. There are of course many independent branches and chains of branches too.

Although there is a trade body (The National Association of Estate Agents), there is no compulsory, regulatory trade body for estate agents. That’s not to say that estate agents are any less good than solicitor/estate agents and I have no doubt that I’d be getting strongly-worded letters if I made such a suggestion. It’s just to say that they operate in an area where any code of conduct is largely voluntary.

In some geographic areas of Scotland. estate agents, rather than solicitor/estate agents, rule the roost and dominate the market. In Glasgow, for example, more property is sold by estate agents than solicitor/estate agents. In certain price demographics too, such as at the most expensive end of the market, estate agents are in the ascendancy.

What’s the Difference for the Property Seller or Buyer?

So how does this affect the property seller or buyer? Well, both buyers and sellers will potentially have a very different experience of the selling or buying process depending on whether they buy their property from, or market their property through, a solicitor/estate agent or an estate agent.

As I said, solicitor/estate agents are bound by not only by the law of Scotland, as of course are estate agents, but also by the rules and guidelines of the Law Society of Scotland. Failure to stick to these rules and guidelines can lead to disciplinary action against the law firm in question. In extreme cases, this can lead to the solicitor losing their right to practice law at all in Scotland.

Sometimes these Law Society rules and guidelines prevent the solicitor/estate agent from doing things that an estate agent can do. The reasons for this are well-meaning and are generally intended to make the process of buying a property in Scotland from a solicitor/estate agent fairer for the buyer than where they are buying the property from an estate agent. They can, however, have a knock-on effect upon property sellers that is not always entirely positive and which can come as quite a surprise to the property seller who has engaged a solicitor/estate agent rather than an estate agent. See: http://www.mov8realestate.com/blog/item/78-gauzumping-in-scotland-what-you-need-to-know.html

Comments

6 responses to “What Is the Difference Between an Estate Agent and a Solicitor / Estate Agent in Scotland?”

  1. John avatar
    John

    Hi Robert,

    All estate agents are registered with the property ombudsmen which is an independent panel. Estate Agent/ Solicitors as you state are regulated by the Law Society of Scotland (Solicitors)

    Scottish solicitor estate agents are a law to themselves and do what they want at will. Its quite unbelievable until you experience it for your self.

  2. John avatar
    John

    Hi Robert,

    All estate agents are registered with the property ombudsmen which is an independent panel. Estate Agent/ Solicitors as you state are regulated by the Law Society of Scotland (Solicitors)

    Scottish solicitor estate agents are a law to themselves and do what they want at will. Its quite unbelievable until you experience it for your self.

  3. Robert Carroll avatar
    Robert Carroll

    I’m not sure that it’s accurate to say that solicitors in Scotland are a law to themselves and that they do what they want at will. Solicitors in Scotland are regulated by: the law of the land (the same law that applies to non-solicitor estate agents), the Law Society of Scotland and, if you don’t like self-regulation, the Scottish Legal Complaints Council, an independent ombudsman set up by the Government because they didn’t feel that self-regulation was sufficient. Interested to hear what your experience was that led you to feel that they were a law unto themselves?

  4. Stephanie avatar
    Stephanie

    Hi Robert, I would be inclined to agree with John. I’m currently selling a property in Edinburgh through a solicitor/estate agent and was advised that while the sale completes on 10 April, I wouldn’t receive any funds until 18 April because funds are paid by cheque!!! In 2017.
    When pressed they agreed to arrange CHAPS payment which may or may not arrive with me in completion date. It could be 10th or it may be 11th. So blasé.
    So in essence my property is ‘sold’, the new ‘buyer’ is living in the property, yet I haven’t been paid!

    1. Jamie McBride avatar

      Thank you for your comments Stephanie. First, I’m afraid that this isn’t a quick reply even though it’s quite a simple question on the face of it!

      It does indeed seem bizarre that conveyancing transactions are still settled by cheque in this day and age. There is, however, a bit of method to the madness particularly in situations where there is a ‘chain’. The first thing to note is that, if your purchaser is funding their purchase through the sale of another property, the way that you are paid depends on the way that their own purchaser is paying them. If the purchaser of YOUR property has been paid by cheque, your buyer’s solicitor won’t have cleared funds for a few days after that cheque has been banked to allow them to then pay you. So they simply won’t be able to pay by CHAPS or electronic transfer as they don’t have any cleared funds yet.

      Perhaps more importantly, cheque settlement allows for the funds to be sent to the seller’s solicitor in advance of settlement, along with the other, necessary pre-settlement documents. The cheque can then be ‘held as undelivered’. The solicitors in the transaction are therefore the ones who know that they have, or do not have, the funds to allow them to settle without reference to their Cashroom.

      In all but the smallest of conveyancing firms, there will be a ‘Cashroom’. Cashrooms are essential in conveyancing firms because the Law Society of Scotland’s (and indeed England’s) rules require that funds (particularly owing to the size of the sums involved in conveyancing and therefore the potential and temptation to commit fraud with those funds) are paid into specific Client Accounts and held separate from the firm’s own funds. Funds can’t be sent by a buyer straight to the seller, for a variety of reasons, not least to impose further controls to ensure that financial fraud and/or money laundering are not taking place.

      The solicitor firm’s Client Account is subject to extreme scrutiny and controls from the Law Society and, because of that, by the firm itself which, if it gets this wrong, may be prevented from carrying-out legal work by its regulator (the Law Society). Add in the fact that the rules and regulations around Anti-Money Laundering and Risk Assessment are becoming ever more stringent and also that funds cannot be released unless the firm, and its Cashroom, is satisfied that they have absolutely everything in order in this regard, and this means that the AML/Risk Assessment and Cashroom Controls add a huge amount of work and therefore time to processes, with not only the solicitor but also the Cashroom having to be completely satisfied that everything is in order.

      Cheque settlement can allow for things to happen slightly more smoothly on the day of settlement, particularly when there is a ‘chain’. Why? The solicitor firm doesn’t have to be in possession of cleared funds to be able to settle the transaction, simply possession of a valid-looking solicitor firm cheque, written from that firm’s Client Account. With the solicitor already being in possession of the funds, held as undelivered, this means that they can settle the sale just as soon as they can confirm that (a) the settlement papers, sent by the buyer’s solicitor, are in order and (b) that the buyer’s solicitor actually has the client’s funds in their Client Bank Account (this can be from the mortgage lender, the client’s own deposit and/or funds from the buyer’s own property sale). If the buyer’s own sale hasn’t gone through for whatever reason, or if the mortgage funds haven’t come through by the proposed date of settlement, the buyer’s solicitor won’t be able to confirm settlement and the cheque will have to continue to be held as undelivered.

      If that solicitor, by contrast, is settling by CHAPS or bank transfer to your solicitor, there are several further steps, and people, added to the process. And, simply, this slows things down and can cause buyers to be waiting around for their keys. We routinely have buyers sitting in our reception for hours because their own solicitor hasn’t properly informed them, or the buyer hasn’t understood (or doesn’t want to understand!), the timescales that are involved in settling by CHAPS in particular.

      When the solicitor is satisfied that they actually have the funds to allow them to settle, they will at that point on the date of settlement, have to instruct their Cashroom to set up the CHAPS payment. Someone else in the firm will usually have to authorise that CHAPS payment, once it has been keyed into the banking system, to add an anti-fraud measure and prevent the Cashroom simply sending the funds to themselves, if they were so minded! This adds a further two people into the process before the solicitor is then able to confirm that the funds have been sent to the seller’s solicitor. The seller’s solicitor will thereafter also have to get confirmation from their own Cashroom that the funds have been received. Only then can they say that the sale has settled and allow keys to their client’s property to be released to the buyer. Add in several transactions in a chain and, if you are the poor soul who is at the end of the chain, you are waiting for this process to happen several times throughout the day and will likely be waiting for several hours before you can finally get confirmation that you are able to move into your new property that day.

      If, on the other hand, everyone was settling by cheque, the chain goes like this: Solicitor 1 confirms to Solicitor 2 that they have got funds to allow them to settle, Solicitor 2 confirms they have a valid cheque and the right paperwork and Transaction 1 is ‘settled’; Solicitor 2 confirms to Solicitor 3 that they have got the funds (cheque) to allow them to settle and Solicitor 3 confirms that they have a valid cheque and the right paperwork from that buyer’s solicitor and Transaction 2 is therefore ‘settled’; Solicitor 3 confirms that they have funds to settle and Solicitor 4 confirms that they have a valid cheque and the right paperwork from that buyer’s solicitor to allow them to settle, so Transaction 3 is now settled. This can all happen in just three phone calls with only the solicitors needing to be involved. The only downside is that the final seller in the chain cannot get their money for a few days, if they are not making an onward purchase, because that final cheque still has to clear.

      The long and short is that it is an imperfect system and one that probably requires overhauling, though that is something that is beyond our own control as a law firm. Cheque settlement has its strengths in that it allows for a much smoother settlement on the actual Date of Entry, allowing for the buyer to get their keys sooner. If you are a seller and a buyer, this is probably desirable. If you aren’t, it’s a huge frustration, though your buyer is likely to be happier! CHAPS settlement can make things less smooth, particularly for the buyer, on the Date of Entry/Date of Settlement, but it has advantages for the seller in that they will get their money more quickly. So it’s swings and roundabouts to some extent and neither solution is likely to be ideal for both seller and buyer.

      As to the timing of payment to you if your solicitor IS being paid by CHAPS, our own Terms of Business provide for payment by the end of the working day following settlement. Why not a guarantee of payment the same day that we receive the funds? Again, this comes down to Cashroom processes having to be followed stringently before funds can be paid-out to anyone because of Anti-Money Laundering regulations and Law Society of Scotland rules, failure to follow which will have very serious consequences for any law firm. Also, as outlined above, the person who does the checks and ‘keys’ the electronic payment can’t be the same person who authorises that payment (with further checks required by the person authorising, to prevent fraudulent payment if the Cashroom were not acting legally). It’s not as simple a process as it might seem to make a CHAPS or electronic banking payment to a client. Furthermore, taking all the examples above, transactions can settle very late in the day. For a Friday settlement, our main priority has to be to get the seller’s mortgage paid-off that same day, if at all possible, to avoid a further two or three days of interest becoming payable on the mortgage. This can save the client a few, or quite a lot, of pounds depending on the size of the mortgage, of course! Depending on the time of the month, there can be 10 or 40 transactions settling on one day, with the end of the month traditionally being far busier than the beginning and middle of a month. This means that, on some days of the month you scarcely need any staff in your Cashroom and, on the busiest days, you would need five to allow for all of these transactions to be checked and processed, then 36 hours in the day to allow the person authorising payments to actually be able to do so. By saying that we would endeavour to pay by the end of the working day following settlement, it provides a more realistic timescale in which to make these payments in a legal and compliant way.

      I hope that this helps to answer some of your queries and clarify why this frustrating and imperfect system, for now, operates the way that it does!

      Best wishes,

      Jamie

  5. Stephanie avatar
    Stephanie

    Jamie

    Thank you so much for taking the time to post such a detailed explanation. I’m very grateful to you. I now understand and will be ever-so-slightly less strident when I speak with my solicitor on Monday!

    Have a lovely weekend and thanks again
    Stephanie

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