Buying a property from family — or sometimes from a landlord — at less than the open-market value is more common than people realise. These transactions are called concessionary purchases, and most buyers we speak to are unaware they're even an option, or how all the moving parts (mortgage, legal, tax) fit together.

This guide explains what a concessionary purchase is, how lenders treat it, and the legal and tax points to watch for under Scottish property law.

What is a concessionary purchase?

A concessionary purchase is a property transaction where the buyer acquires a home for less than its full market value, usually because the seller is offering a financial concession or gift. The most common case in Scotland is a parent selling a home to their child at a discounted price to help them onto the property ladder.

The gap between the market value and the price paid is called gifted equity, and it's the key concept that makes the whole arrangement work.

How gifted equity works

Imagine a property valued at £200,000 but sold to a family member for £150,000. The £50,000 difference is treated as gifted equity.

Mortgage lenders assess the transaction against both the purchase price and the market value, which has two important effects:

• The gifted equity can act as your deposit. If the lender normally requires a 10% deposit on the £150,000 purchase (£15,000), the gifted equity often fulfils or reduces that requirement entirely.
• Your loan-to-value (LTV) is calculated against the market value, not just the price. This typically gives you a lower LTV than you'd otherwise have — which means access to better rates and lower lender risk.

Lender requirements

Lenders are generally open to concessionary purchases, especially when they involve close family members, but they need everything fully disclosed and properly documented.

The seller will usually need to sign a gifted deposit declaration confirming that:

• The discount is a genuine gift, not a loan
• There's no expectation of repayment
• The seller retains no continuing interest in the property

This protects both the buyer and the lender and keeps the transaction transparent. Your broker will tell you exactly what each lender needs — see also our guide on what documents you'll need for a mortgage.

The legal side in Scotland

Scottish conveyancing is governed by different principles than in England and Wales. For a concessionary purchase, two documents matter most:

• The missives — the formal letters between solicitors that form the contract of sale
• The Disposition — the deed that transfers legal ownership

Both must accurately reflect the true nature of the transaction, including the concessionary price. The buyer's solicitor has a duty of disclosure — they're required to tell the lender about any non-standard aspects of the sale.

Tax implications

A few different tax rules can come into play. None of them are usually deal-breakers, but you'll want to understand which apply to your situation.

Land and Buildings Transaction Tax (LBTT)

LBTT in Scotland is calculated on the actual price paid, not the market value. So in our £150,000 / £200,000 example, LBTT applies to the £150,000.

Inheritance tax

If the seller dies within seven years of making the gift, the gifted equity may be considered part of their estate for inheritance tax purposes under UK-wide rules. This is something to flag with the seller's tax adviser before the transaction completes.

Capital gains tax

Capital gains tax may apply to the seller — calculated against the property's market value, not the discounted price — particularly if the property isn't the seller's primary residence.

Is a concessionary purchase right for you?

A concessionary purchase can be a genuinely powerful tool when family members want to help each other onto the property ladder. But because it touches mortgage, legal and tax considerations all at once, it's not a transaction to navigate alone.

We'd recommend speaking to:

• A mortgage broker — to identify lenders who accept concessionary purchases and structure the deposit/LTV correctly
• A solicitor experienced in Scottish conveyancing — to make sure missives and the Disposition reflect the true transaction
• A tax adviser — particularly if the seller has owned the property as a second home or is concerned about inheritance tax

The bottom line

When handled correctly, a concessionary purchase can make home ownership accessible in a way that wouldn't otherwise be possible. If you're considering one — either as buyer or seller — get in touch with the team and we can talk you through the mortgage side and connect you with the right legal and tax advisers.