Introducing the new ESPC Unlock initiative
For many years in the Edinburgh property market people have held back from marketing their own property because they are concerned that if they sell they will not be able to find a property they wish to purchase. In a property market like Edinburgh where demand outstrips supply it only makes this problem worse because if people are not willing to market in case they cannot find anything to purchase then less properties will come to the market, particularly higher up the property market such as larger family homes. This has resulted in many people putting in offers for properties that are subject to the sale of their own property.
This is where the new ESPC Unlock initiative will hopefully be the key to solving this problem and thus unlocking the property market by creating an increase in properties coming the market. Lets take a look at how it will work from both the seller’s and buyer’s perspective:
Unlock for the seller
Unlock allows a seller to advertise their home for sale on the ESPC where it will be stated that the property is part of the unlock initiative and therefore any purchaser will be aware that if their offer is accepted for the property the missives will be dependent on the seller then finding their own property to purchase.
This option allows the seller to sell their home and secure a committed buyer whilst also having the security that they can withdraw from the sale if they are unable to find a suitable property to purchase.
Something for sellers to bear in mind is that if they were unable to find a property to purchase and had to ultimately withdraw from the sale then they are likely to still have incurred estate agency/ legal fees and outlays which they would still be liable for as well as potentially being due a sum to the purchaser if such a sum had been part of the missives (this is referred to later in this article).
Unlock for the purchaser
With Unlock properties when you go into their details on the ESPC website it shows they fall under this initiative and so are available to buy subject to the seller being successful in buying a new property. If the seller is not able to find a new home to purchase then they will be able to withdraw from the transaction even though the missives have already been concluded. They are essentially selling subject to purchasing a property to move to.
Something for purchasers to bear in mind is if they have a mortgage then typically mortgage offers are only valid for 6 months. Therefore if the long-stop date in missives in such transactions give the seller 6 months to find a new property to purchase then it is possible the purchasers’ loan papers could of expired by the date of settlement depending on how long the seller takes to find a new property. There is a risk to the purchaser if they conclude the missives and then their mortgage offer expires before the date of entry – for example what if they could not extend their mortgage offer and any new mortgage offer has a higher rate of interest they cannot afford or what if their circumstances change and they can no longer get a mortgage offer. In both such cases they would still be legally bound to purchase the property and would be liable to pay damages to the seller if they could not. In cases which involve a mortgage the long stop date in the missive may therefore need to be less than 6 months.
How the Missive (contracts) would operate in such transaction
It is expected Missives will be concluded in the usual time frame, but with additional conditions in place. The missives in such transactions are likely to contain some of the following special clauses:
- a clause which gives the seller the option to withdraw from the sale if they cannot find a property to purchase within a certain period of time. For example the seller may be given a “long-stop” date of six months to find the right home, this timeframe will vary on a case-by-case basis. Obviously if the seller found a property before the end of the long-stop date then the date of entry can be brought forward and similarly the purchaser and seller could agree to be extend the long-stop date if the seller had not found a suitable property to purchase by that date
- a clause that the seller has to pay a sum to the purchaser if they decide to withdraw from the sale due to the fact they cannot find a property to sell. This sum is likely to be set at a level to cover the legal costs and potentially any mortgage arrangement fees they will have they will incurred with potentially an extra sum for “compensation” due to the purchase no longer progressing
All such special conditions would be discussed at the time of putting in the offer so both parties were clear on the basis the purchase was proceeding from the outset.