Factor Arrears at Auction | Scotland Property Auction
Yes — you can sell a flat in Scotland while you still owe your property factor money, and you do not have to clear the arrears before you go to market. What you cannot do is keep it quiet: the buyer's solicitor writes to your factor as a matter of routine, the debt comes back in black and white, and it is settled out of your sale proceeds on the day of entry. The only real question is whether that debt is discovered late, mid-missives, where it collapses a sale — or disclosed up front at auction, where it is priced in and the sale still completes.
- Factor arrears do not stop a sale. They are almost always paid from the price at settlement, not out of your pocket beforehand.
- Selling does not wipe the debt. Under section 12(1) of the Tenements (Scotland) Act 2004, an owner who is liable for common costs does not stop being liable just because they sell up.
- A Notice of Potential Liability for Costs registered against your title at least 14 days before the buyer takes ownership makes the buyer severally liable for the debt too — which is exactly why buyers refuse to settle until it is paid.
- Common repairs ordered by the council are treated differently: a new owner can inherit that liability with no notice registered at all.
- The Scottish Standard Clauses (Edition 6) put the seller on the hook for every common repair instructed or authorised on or before the date of entry — including the big roof job that has been agreed but not yet invoiced.
- Auction handles this better than the open market because the factor's position is disclosed in the legal pack before bidding, so nobody renegotiates after the hammer falls.
I get this call most often about Glasgow and Edinburgh tenements, but it comes from modern estates with amenity factors too. The owner is two or three years behind, the factor has started chasing, there may be a sheriff court action brewing, and they have convinced themselves the flat is unsellable until they find a few thousand pounds they do not have. It is almost never true. Let me explain what actually happens.
- 14 daysnotice before ownership transfers
- 3 yearsbefore a notice expires
- £80to register a notice at RoS
- 28 daystypical auction completion
Can I sell my flat in Scotland if I owe the factor money?
You can. There is no rule in Scots law that prevents an owner in arrears from marketing or selling a property, and the factor cannot block the transaction. A factor is not a lender; they hold no standard security over your flat simply because you owe them for stair cleaning and a gutter repair.
What the factor can do is make the debt visible and make it follow the property. That is a very different thing from stopping the sale, and it changes the tactics rather than the outcome. In practice the debt is listed on the factor's final account, the buyer's solicitor insists it is cleared, and your solicitor pays it from the price at settlement before the balance reaches you. You never have to find the cash separately.
The sellers who get hurt are not the ones with arrears. They are the ones who do not mention the arrears until a purchaser's solicitor finds them in week five of a fragile open-market deal. That is where sales die. If the words below are unfamiliar, our Scottish property terms glossary translates the jargon into plain English.
What happens to the debt when the flat changes hands?
Three separate things happen, and it helps to keep them apart.
First, apportionment. Under Clause 7 of the Scottish Standard Clauses (Edition 6) — the standard contract terms used in most Scottish residential sales — common charges are split between seller and buyer at the date of entry, with the seller responsible for all common repairs and improvements carried out, instructed or authorised on or before that date. The factor usually performs the apportionment themselves.
Second, disclosure. The same clause requires the seller to provide full details of the factoring and block insurance arrangements, and the seller's solicitor notifies the factor of the change of ownership. Solicitors do this with a standard Letter to Factors. Whatever the factor writes back — arrears, float held, planned works, disputes — goes to the buyer.
Third, and this is the one people miss, a warranty. The Standard Clauses have the seller warrant that there are no major repairs or improvements currently proposed, instructed, authorised or completed but not yet paid for. So if the owners voted in March to replace the roof and the invoices land in November, that is the seller's problem, not the buyer's — even though no bill exists on the day of sale.
| Type of factoring liability | Who pays in practice | Will it hold up a settlement? |
|---|---|---|
| Ordinary management fees in arrears | Seller, from the price at settlement | Rarely — it is simply deducted |
| Completed common repair, invoiced, unpaid | Seller | Sometimes, if the sum is large or disputed |
| Major works agreed but not yet invoiced | Seller, under the Standard Clauses warranty | Often — buyers ask for a retention |
| Debt secured by a registered Notice of Potential Liability for Costs | Seller, or the buyer becomes severally liable | Almost always, until discharged or paid |
| Council-instigated common repairs (statutory notices) | Seller before conclusion of missives; buyer after | Often — see our guide below |
| Float or deposit you paid the factor | Returned to you in the final account | No — it usually works in your favour |
Council-served common repairs are a separate animal with their own rules and their own retention mechanism. If that is your situation, read statutory notices at auction in Scotland alongside this guide.
What is a Notice of Potential Liability for Costs?
This is the piece of the puzzle almost nobody explains properly, and it is the reason a factor's debt behaves unlike an ordinary unsecured debt.
A Notice of Potential Liability for Costs — solicitors say "NOPLC" — is a short deed registered against a flat's title at Registers of Scotland. It records that maintenance or work has been done, or is to be done, and that whoever next owns the flat may be liable for the unpaid costs. Under section 12 of the Tenements (Scotland) Act 2004, once a notice is registered, a new owner becomes severally liable alongside the former owner for those costs.
The mechanics matter, so here they are plainly:
- Who can register one: the owner of the flat, the owner of any other flat in the tenement, or the manager of the tenement — which in most cases means your property factor.
- What it costs: £80 to register at Registers of Scotland, under the standard fee for other deeds. A single notice carries one fee regardless of how many search sheets it touches.
- How long it lasts: three years, then it expires — though it can be renewed.
- How it goes away: by discharge, once the liability has been settled and the person who registered it consents.
- What it does not do: it does not stop you selling, it does not force immediate payment, and it is not a court decree. It secures the debt against the flat rather than against you personally.
The practical effect is blunt. A purchaser's solicitor who finds a live notice on the title sheet will not let their client settle while it is there, because their client would be walking into someone else's repair bill. So the notice quietly forces the debt to be paid out of the sale price. That is precisely what it was designed to do — protect the neighbours who did pay.
| Registration step | Fee | Who normally pays |
|---|---|---|
| Registering a Notice of Potential Liability for Costs | £80 | The factor or a neighbouring owner |
| Discharging an unexpired notice once paid | £80 | Negotiated — often the seller |
| Advance notice protecting the buyer's deed | £20 | Buyer's solicitor, standard on every sale |
| Registering a document in the Register of Inhibitions | £25 | The creditor pursuing the debt |
Which factoring debts follow the flat even with no notice registered?
Here is the exception that catches buyers and sellers out, and I have seen it wreck a settlement at four o'clock on a Friday.
Section 12(3) says a new owner is only liable for costs relating to maintenance or work other than local authority work if a notice was registered in time. Read it the other way round and the meaning is stark: where the work was carried out by a local authority under statutory powers, the 14-day notice requirement does not apply. A buyer can inherit that liability with nothing registered against the title to warn them.
That is why a flat in a tenement where the council has stepped in to do emergency common repairs needs far more careful handling than a flat that simply owes the factor eighteen months of management fees. The two look similar on a statement. Legally they are miles apart.
Two further points worth holding on to. Section 12(1) confirms that selling does not release you — a former owner stays liable for costs they incurred. And section 12(5) gives a new owner who pays your old debt the right to recover that money from you. Walking away from a factored flat and hoping the debt walks away with it is not a plan; it is a delayed invoice.
What will the factor tell my buyer about me?
More than most sellers expect, and this is where the open market starts to wobble.
Every firm acting as a property factor in Scotland must be registered under the Property Factors (Scotland) Act 2011 and must comply with the statutory Code of Conduct, the current version of which came into force on 16 August 2021. Section 4 of that Code deals with debt recovery and requires a factor to have a clear written debt recovery procedure, applied consistently and reasonably, and to set out how disputed debts are handled.
When your solicitor sends the standard letter, the factor typically returns: the current balance on your account, any float or deposit they hold, the block insurance position, works completed or instructed but not yet billed, any works proposed, and whether recovery action has begun. It is an honest snapshot, and it is not written with your sale in mind.
On the open market that letter often arrives after a survey, after an offer, after four weeks of goodwill — and it becomes a renegotiation. At auction it is gathered before the lot goes live, sits in the auction legal pack, and every bidder prices it in before they lift a hand.
Why do factored flats collapse on the open market but sell at auction?
Because the two routes handle bad news at opposite ends of the process.
- Arrears and the factor's letter are disclosed before bidding opens
- Binding contract on the fall of the hammer — no renegotiation window
- Cash and bridging buyers are unbothered by lender caution over common repairs
- Completion in around 28 days, so the debt stops growing
- Competitive bidding, not a one-to-one haggle over a repair bill
- The factor's letter usually lands weeks after the offer
- Buyer's solicitor reopens price or demands a retention
- Lenders get nervous about large unquantified common works
- Missives can take months and arrears accrue throughout
- One nervous buyer walking away restarts the whole marketing cycle
None of that makes auction magic. It makes it honest and it makes it fast, which is what a debt problem actually needs. If you want the mechanics of the sale itself, how to sell your house at auction walks through it step by step.
What does it cost me to sell with arrears outstanding?
Almost always less than people fear, because nothing is paid up front. The arrears, the discharge of any notice, and the legal costs come off the price at settlement. You do not need savings to start.
| Cost | When it is paid | Out of your pocket? |
|---|---|---|
| Outstanding factoring balance | At settlement | No — deducted from the price |
| Discharge of a Notice of Potential Liability for Costs | At or before settlement | No — usually handled by solicitors |
| Your share of instructed but uninvoiced common works | Retained at settlement or apportioned | No, but it reduces net proceeds |
| Conveyancing fees | At settlement | No |
| Home Report | Before marketing, usually | Sometimes — ask, it is often deferred |
| Seller commission at auction | Varies by auctioneer and model | Frequently nil to the seller |
If the flat is a traditional tenement with mutual roof and close obligations, selling tenement flats at auction covers the building-specific ground this guide does not.
Should I dispute the debt before I sell?
If you genuinely believe the charges are wrong, yes — but start now, not in the week of settlement.
A homeowner who thinks their factor has breached the Code of Conduct, and who cannot resolve it with the factor directly, can apply to the Housing and Property Chamber of the First-tier Tribunal for Scotland for a determination. That is a real remedy. What it is not is fast, and a live tribunal application sitting unresolved over a sale creates more uncertainty than it removes.
My honest advice, and I say this having watched both versions play out: if the disputed sum is a few hundred pounds, settle it and move on with the sale. If it is several thousand and you have grounds, raise it formally, tell your solicitor, and let the auction disclose the dispute openly rather than pretending it is not there. Bidders can handle a disclosed dispute. They cannot handle a surprise.
How do I actually sell a factored flat at auction?
The sequence is straightforward and most of it runs in parallel:
- Get a realistic valuation. Tell us about the arrears at this stage, not later — it affects the reserve, not whether we take the lot.
- Instruct a solicitor and the Home Report. Your solicitor sends the standard letter to your factor immediately.
- Check the title sheet. A copy from Registers of Scotland shows whether any Notice of Potential Liability for Costs has been registered against your flat, and when it expires.
- Build the legal pack. Factor's letter, title, Home Report, any statutory notices, any live dispute. Everything in, nothing buried.
- Set a reserve you can live with. Account for the arrears coming off the top so the net figure is one that actually solves your problem.
- Go to auction. On the fall of the hammer the contract binds, and a traditional auction typically completes in around 28 days.
- Settle. Your solicitor pays the factor, arranges any discharge, redeems the mortgage, and the balance is yours.
If you are weighing this up against simply staying put and repaying the factor over time, that can be the right answer — particularly if the arrears are modest and your income is stable. Selling is the right answer when the debt is growing faster than you can clear it, when a major common repair is coming that you cannot fund, or when the flat has already been on the market and fallen through over exactly this issue.
The short version
Factor arrears feel like a wall. They are a line item. The debt gets disclosed, it gets priced, it gets paid out of the sale, and you walk away clear — provided you handle it in the open, early, with the paperwork in front of the buyer rather than behind them. The law in Scotland is built to make that debt stick to the flat until somebody settles it. Use that. Let the sale settle it for you.
This guide explains general Scots property law and practice and is not legal advice on your own circumstances. Your solicitor should confirm the position on your title before you commit to a sale.
Source: Tenements (Scotland) Act 2004, section 12 — legislation.gov.uk
Founder & Director of Scotland Property Auction, with 10+ years helping Scottish homeowners sell fast at auction.
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