Updated guidance on letters of obligation

This is the first update since the relevant sections of the Land Registration etc (Scotland) Act 2012 came into force in December 2014. Developed by the Society’s Property Law Committee and approved by its Rules, Waivers and Guidance Sub-Committee, the new guidance has also been reviewed by Lockton, the Master Policy Broker. 

Advance notices are essential in property transactions as they safeguard the buyer's disposition during the time lag between transaction settlement and the registration of the buyer’s title. However, the updated guidance clarifies that in certain circumstances it may still be appropriate for solicitors to issue letters of obligation. This could occur in cases where granting an advance notice is incompetent, such as when the transaction involves granting a long lease or a deed of servitude over land recorded in the General Register of Sasines, or when it is impracticable, for example, when time constraints prevent the registration of an advance notice before settlement.

Additionally, the guidance now contains links to Property Standardisation Group (PSG) template letters of obligation, which refer to “letters of undertaking.” It also addresses situations concerning insolvency practitioners, indicating that solicitors acting on their behalf are generally unlikely to issue a letter of obligation. Therefore, in such instances, reliance on advance notice becomes increasingly critical for ensuring protection during property transactions.