A letter of obligation is a written personal undertaking given by the seller’s solicitor to the buyer’s solicitor at settlement of a Scottish property transaction. It usually promises to deliver a discharge of the seller’s standard security once the loan is repaid, and to deal with anything adverse appearing on the registers for a short period after settlement. It bridges the gap between payment of the price and registration of the buyer’s title.
Letters of obligation are a distinctive feature of Scottish conveyancing, with no direct equivalent in English law. Since advance notices were introduced in 2014, they are used less widely, but they still matter in many commercial deals. This guide explains what a letter of obligation covers, when it is used, how it fits with advance notices, and what buyers should check.
In brief
- A letter of obligation is given by the seller’s solicitor personally, not by the seller.
- The Law Society of Scotland’s “classic” letter of obligation covers clearing the records from the search date until 14 days after settlement and delivering a discharge of any standard security.
- Since 8 December 2014, advance notices protect the buyer’s disposition and the lender’s standard security for 35 days, so a letter of obligation is no longer needed in most transactions for that purpose.
- Letters of obligation are still common for delivering discharges of the seller’s security and in some lease transactions.
- Obligations about Companies House searches and floating charges should only be given on the seller’s behalf, not personally.
Why letters of obligation exist
In Scotland the binding contract for the sale is formed when the missives are concluded, but the buyer does not become owner when the price is paid. Ownership passes only when the disposition is registered in the Land Register. At settlement, the buyer’s solicitor hands over the price and receives the keys, the title deeds and the signed disposition, but there is a gap before registration. During that gap, something could appear on the registers, such as a new standard security, an inhibition against the seller or the seller’s insolvency.
The seller may also still have a mortgage over the property, which is repaid from the sale price on the day of settlement. The lender’s formal discharge of its standard security may not be signed for days or weeks. The buyer and the buyer’s lender need comfort that it will be delivered and registered.
A letter of obligation provides that comfort, without the buyer having to bear the burden of the risk alone. Because it is a personal undertaking by the seller’s solicitor’s firm, the buyer can enforce it against the firm, which is regulated and insured.
What does a classic letter of obligation cover?
The Law Society of Scotland’s guidance describes a “classic” letter of obligation as one in which the solicitor undertakes to:
- clear the record of any deed, decree or diligence recorded in the Property or Personal Registers between the date of the last search and a date 14 days after settlement, which would cause the buyer’s title to be challenged; and
- deliver a discharge of any outstanding standard security, where appropriate.
To be classic, four conditions must be met: searches were carried out immediately before the date of entry, proper enquiry was made of the client about securities, the solicitor is not aware of any other security, and the solicitor holds enough funds to repay the secured loans. A classic letter of obligation is covered by the profession’s Master Policy insurance on favourable terms. Obligations outside the solicitor’s control, often called non-classic obligations, should not be given, and practitioners must keep the scope of the document within what they can actually deliver.
How advance notices changed the position
The Land Registration etc. (Scotland) Act 2012 introduced advance notices from 8 December 2014. An advance notice is entered in the Application Record before settlement. It protects the buyer’s disposition, and any standard security granted by the buyer, for 35 days against competing deeds and against inhibitions registered after the notice.
Because advance notices now do much of the work that letters of obligation used to do, the Law Society’s guidance says a letter of obligation is no longer appropriate in the vast majority of transactions for that purpose. However, letters of obligation are still used where:
- the seller’s existing standard security is being repaid at settlement, and the buyer needs an undertaking to deliver the discharge;
- a lease is being granted that is not a long lease, so an advance notice is not available;
- the missives specifically require one, for example in a complex commercial transaction.
Missives are silent in many cases, and since the designated day there has been no professional duty to grant a letter of obligation where the missives do not provide for one. Buyers’ solicitors should therefore make sure the offer or a qualified acceptance deals with it clearly.
Company sellers, floating charges and the Charges Register
Where the seller is a company, the buyer also needs comfort about the Companies House Charges Register and the company’s solvency. A floating charge granted by the seller could attach to the property if it crystallises before the buyer’s title is registered. The buyer will usually require:
- a letter of non-crystallisation from each floating charge holder, confirming the charge has not attached and releasing the property;
- up to date company searches;
- an undertaking that no further charges or insolvency events will be registered in a short period after settlement.
The Law Society’s guidance is clear that obligations relating to the Charges Register and company searches should only be given on the seller’s behalf, never as a personal obligation of the solicitor, because they are outside the solicitor’s control. A buyer relying on such an undertaking is relying on the seller’s covenant, not the firm’s. Our guide to buying distressed commercial property covers sales by administrators, receivers and lenders, where these points become more important.
What buyers should check
| Check | Why it matters |
|---|---|
| Do the missives (the contract) require a letter of obligation, and on what agreed terms? | Without a contractual obligation, the seller’s solicitor may not grant one |
| Is an advance notice in place for the disposition and any new standard security? | Provides the main protection during registration |
| Is the draft letter of obligation in classic form? | Classic letters have the benefit of Master Policy cover |
| Which securities are being discharged, and is there enough money to repay them? | The discharge must actually be deliverable |
| Is the seller a company with floating charges? | Letters of non-crystallisation and company searches are needed |
| Is the buyer’s lender satisfied? | Lenders have their own requirements and may delay funds if not |
Our commercial property purchase solicitors handle searches, advance notices, letters of obligation and registration for buyers across Scotland, and our commercial property sale team acts for sellers. For the tax side, see our guide to commercial property LBTT.
Frequently asked questions
Who gives a letter of obligation?
The seller’s solicitor’s firm gives it to the buyer’s solicitor at settlement. It is a personal obligation of the firm, not of the seller.
Is a letter of obligation legally binding?
Yes. It is a binding obligation under Scots law and can be enforced against the firm through the court if it is not implemented. Breach can also have regulatory consequences for the solicitor.
How long does a letter of obligation last?
A classic letter of obligation covers the records up to 14 days after settlement. The obligation to deliver a discharge continues until the discharge is delivered.
Do I still need a letter of obligation if there is an advance notice?
Usually not for protecting the buyer’s title, but you may still need one for delivery of a discharge of the seller’s standard security.
Are letters of obligation used in residential conveyancing too?
Yes. The same rules apply to residential and commercial property in Scotland, although commercial transactions more often involve company sellers and floating charges. In both cases the buyer’s solicitor should ensure the terms are agreed before settlement so there is no delay or extra fee at the last minute.
Speak to a commercial property solicitor
Whether you are buying or selling commercial property, we handle searches, advance notices, letters of obligation and registration across Scotland. Call us on 0141 471 9166 or book a free consultation.
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About the author
Scott Stevenson, Associate Director, Complete Clarity Solicitors
Scott Stevenson is an Associate Director at Complete Clarity Solicitors in Glasgow, the firm behind Business Lawyer Scotland. He studied at the University of Strathclyde and helps business owners and commercial clients work through practical legal problems. Colleagues value his calm, logical approach under pressure. Before law, Scott played football professionally from the age of 17, and he is now also a FIFA licensed football agent.
This guide reflects Scots law and Law Society of Scotland guidance as at November 2026. It is general information, not legal advice for your circumstances.