What is a property transfer in Scotland?
A property transfer is the legal process of changing the ownership of heritable property (ie land or buildings) from one person or entity to another.
In Scotland, this is accomplished through a formal legal document known as a disposition. This document, signed by the person transferring the property, is then registered in the Land Register of Scotland, which formally records the new owner. A lawyer is almost always needed to manage this process.
For more information on the registration process, read Land registration in Scotland.
What is the process for selling property?
When a property is sold, the transfer of ownership is handled through a legal process called 'conveyancing'. This involves a binding contract between the buyer and seller, and both sides must use a lawyer.
Acceptance of the offer
A lawyer must be involved in the process of accepting an offer for the sale and purchase of a property. After an offer has been accepted, a period of negotiation typically ensues between the lawyer representing the buyer and the lawyer representing the seller. While this is ongoing, the agreement is not yet legally binding, and either party can withdraw from the agreement.
Concluding the missives
Once an offer is accepted, lawyers for the buyer and seller negotiate the contract details through a series of formal letters called missives. When all terms are agreed, the 'missives are concluded', and the contract becomes legally binding. Neither party can withdraw after this stage without incurring financial penalties.
Completion
Completion takes place on the ‘date of entry’ to the property. In other words, when the transfer officially happens. The buyer pays the agreed purchase price to the seller's lawyer. In return, the seller's lawyer provides the signed disposition and the keys to the property. The buyer's lawyer then registers the disposition to finalise the change of ownership.
For more information about the conveyancing process, Ask a lawyer.
What is the process for transferring property without a sale?
Property can also be transferred without a sale, for example, as a gift or inheritance. Although no money is exchanged for the purchase, this is still a formal legal process that requires a lawyer to draft and register a disposition to update the ownership details on the Land Register.
Transferring property as a gift
Homeowners may decide to gift a property to someone (eg a family member, such as a parent, transferring ownership of their property to their child) while they are still alive. Often this is done to minimise any inheritance tax that would otherwise be due.
Changing property deeds for marriage or separation
Homeowners often decide to add their spouse's or civil partner's name to their property deeds when they get married or form a civil partnership, making them joint owners.
Conversely, a property may need to be transferred into one person's sole name following a divorce or separation, often as part of a financial settlement. In either case, a lawyer is required to draft the disposition and update the Land Register.
Transferring property after a death
If a property is inherited from someone who has died, the transfer is handled as part of the estate administration process. This usually requires applying for a 'grant of confirmation'. Confirmation gives the executor the legal authority to manage the estate, including transferring the property to the correct beneficiary. For more information, read Confirmation in Scotland.
What taxes apply to property transfers in Scotland?
When property is transferred in Scotland, several taxes might apply. The specific tax the parties will pay depends on the specific circumstances and whether the transfer is a sale, a gift, or an inheritance. The main taxes to be aware of are:
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land and buildings transaction tax (LBTT) - this is a tax applied to residential and non-residential property and land transactions. It's usually paid by the buyer and may also apply to some gifts if a mortgage is transferred. An additional dwelling supplement (ADS) may be due if the new owner already has another property
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capital gains tax (CGT) - this is paid by the person selling or gifting the property on the profit (or 'gain') they make. Homeowners don't usually pay CGT when they sell their main home, but it's common when selling or gifting a buy-to-let, second home, or inherited property
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inheritance tax (IHT) - this is most relevant if the homeowner is gifting a property, as it might still be counted as part of their estate for tax purposes if they die within seven years of the transfer
Purchases by overseas entities and the Register of Overseas Entities
The Register of Overseas Entities was introduced in 2022 by the Economic Crime (Transparency and Enforcement) Act 2022. It requires any overseas entity (ie a company or organisation run from outside the UK) that wants to buy, sell, or transfer land in the UK to register with Companies House on the Register of Overseas Entities.
Such overseas entities must provide information about their 'registrable beneficial owners' or their 'managing officers'.
Who is a beneficial owner?
Beneficial owners are individuals or other entities (like companies or trusts) that have significant influence or control. For a company, this usually means someone who:
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holds at least 25% of the shares or voting rights
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can appoint or remove a majority of the board of directors
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otherwise exercises significant control
If the beneficial owners cannot be identified, the entity must provide details of its managing officers (eg directors or company secretaries).
Who needs to register, and what are the update rules?
This requirement also applies retroactively. Entities that purchased land in Scotland on or after 8 December 2014 are required to register.
Any entity that sold land after 28 February 2022 must also register, even if it no longer holds the property.
Entities must also update the Register annually with information about any changes to registrable beneficial owners. This must be done within 14 days following the anniversary of the entity’s initial registration. An update must be submitted even if no changes have occurred.
For more information, read the government’s guidance on registering an overseas entity.
Do not hesitate to Ask a lawyer if you have any questions or concerns about transferring ownership of property in Scotland.
