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RICS > Agency > Flashcards

Agency Flashcards

1
Q

RICS doc

A

RICS UK Commercial Real Estate Agency Professional Statement 2016

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2
Q

Purpose of Agency RICS doc

A

Sets out framework to ensure agents are working to the highest ethical and professional standards

Focuses on need for ethical practice and transparency in the commercial property market

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3
Q

How many core principles for agents to observe? Name some

A

12

Act in a fair honest and transparent manner

Ensure client provided with terms of business

Avoid conflicts

Truthful and honest marketing

Hold PII cover

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4
Q

Main piece of legislation

A

Estate Agents Act 1979

CRIMINAL

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5
Q

Purpose of Estate Agents Act

A

Ensures agents act in the best interest of the client and both buyers and sellers are treated honestly fairly and promptly

Applicable- sale or purchase of freehold or leasehold property (with a CV)

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6
Q

Main principles to know re: estate agents act

A

Section 18 – undertake terms of business

Section 21 – Disclosure of a personal interest

Legal obligation to tell client about ALL offers received

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7
Q

Agency Regulations

A

Consumer Protection Regulations

CRIMINAL

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8
Q

Purpose of CPRs

A

Relates to business to customer relationship

Extend duty owed to not just the clients but potential clients/viewers/buyers to give accurate and/or necessary material information and not make any misdescriptions in the material

ACCURACY AND TRANSPARENCY OF MARKET INFO

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9
Q

When are CPRs applicable?

A

Lettings and sales

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10
Q

Unfair practices under CPR

A

Giving false or misleading information

Hiding or failing to provide information

Exerting undue pressure on consumers

Failing to show professional diligence

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11
Q

Civil Agency Legislation

A

Misrepresentation Act 1967

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12
Q

Purpose of Misrepresentation Act

A

Prevent misrepresentation or false statement of fact being made

Agent has a duty of care to ensure all information is correct

Exclusion/disclaimer clauses at bottom of marketing – protects agents and must include date

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13
Q

Size of non-residential board that needs planning consent

A

Flat board – 2 m²

V board – 2.3 m²

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14
Q

Maximum size of residential board

A

Flat board – 0.5 m²

V board – 0.6 m²

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15
Q

Cost of non-residential board

A

£125-£135 plus VAT

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16
Q

When must a board be removed?

A

14 days after completion of transaction

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17
Q

Four methods of sale

A

Private treaty

Informal tender

Formal tender

Auction

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18
Q

Private treaty

A

Parties are free to negotiate in their own time and without commitment in the open market

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19
Q

Informal tender

A

Best bids process

Agent invites all parties in writing to submit their best of final bid in accordance with the prescribed timescale

Not legally binding until the contract is exchanged

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20
Q

Formal tender

A

Sealed bids process

Provides a high level of public accountability

Applicants bid blindly in a prescribed form

Legal pack often provided

No opportunity to change or increase the bid once submitted

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21
Q

Auction

A

Method of sale for unusual property

Sold in an auction room on a prescribed date/time

Contracts exchanged as soon gavel hits the table

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22
Q

Important line when dealing with formal or informal tender

A

Vendor is under no obligation to accept the highest, best or any bid

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23
Q

Advantages and disadvantages of private treaty

A

+ Flexibility/parties control process/vendor is not obliged to sell/confidential

  • Potential for gazumping/late decision is not to buy
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24
Q

Advantages and disadvantages of informal tender

A

+ Not legally binding/ability to negotiate further/ good negotiating mechanism to invite interested parties/ confidential

  • Longer to exchange/purchaser may drop out
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25
Q

Advantages and disadvantages of formal tender

A

+ Leads to direct contract for sale/quick exchange/confidential/ high level of public accountability

  • No opportunity to bid further/legally binding
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26
Q

Advantages and disadvantages of auction

A

+ Short timescale to sell/good for unusual property/ good when unsure on value

  • Expensive to market/lack of confidentiality/can’t choose purchaser
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27
Q

Types of agency

A

Sole agent

Joint agent – to a more joint agent sharing fee

Multiple agency – several agents for any successful gets a fee

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28
Q

Sole selling rights

A

Agent gets fee even if don’t introduce buyer to client

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29
Q

Timeline of sales instruction

A 
CIT
AML
Info from client and due diligence
Check VAT position
Inspect/measure
Marketing strategy and market appraisal
Create marketing particulars
Undertake marketing campaign
Negotiate sale/HOT/instruct lawyers
Liaise with vendors lawyers re:CPSE
Assist with queries and issue invoice upon completion of transaction
30
Q

CPSE

A

Commercial property standard enquiries

Pre-contractual enquiries e.g. environmental title statutory SDLT

Undertaken by vendor’s solicitors

31
Q

Cooling off period

A

14 day period allowed for clients who change their mind and don’t want to instruct agents following signing terms in accordance with CPR

32
Q

Timeline for property acquisition

A

CIT
AML
Understand clients objectives and search parameters
Find properties
Measure and undertake market appraisal of property
Undertake due diligence
Negotiation and instruction of solicitors
Conditional contract created

Subject to contract

33
Q

Important item on heads of terms

A

Subject to contract

34
Q

VAT

A

20%

Usually, sale or lease of property is exempt from VAT

Can be applied to new property if less than three years old, or where landlord is elected for VAT to be charged

35
Q

TOGC

A

Transfer of going concern

If property being sold is capable of being run as a property rental business and buyer intends to carry on same type of business, transaction made classed TOGC and VAT not payable

36
Q

Capital gains tax

A

Tax and profit when you sell something that’s increased in value

37
Q

Capital allowances

A

Tax relief on capital expenditure for construction or purchase of commercial property or business assets (e.g. plant and machinery)

38
Q

Privity of contract

A

Contract only between parties included within it i.e. exclude any third-parties benefiting from the contract

39
Q

Off market transaction

A

Buyer approach vendor to buy without going to market

Very confidential

40
Q

Advantages and disadvantages of an off market transaction

A

+ Freedom in negotiations as no competition/can undertake due diligence without too much risk that cost to undertake is a waste of time

  • Need to be sure offering the right amount/getting best price if not openly marketed
41
Q

Items included in heads of terms (sale)

A

Subject to contract

Vendor details
Purchasers details
Property address
Description
Tenure/ Tenancy
Purchase price
Funding
Deposit
VAT
Timescales
AML checks
Conditions
42
Q

Unconditional offer

A

Not subject to any conditions

Buy as it is

43
Q

Conditional offer

A

Subject to planning/ ground investigations etc

44
Q

How to determine the difference in a conditional and unconditional offer

A

Is the uplift in value from unconditional to conditional worth the added risk of the conditions?

If no then go with unconditional

If yes then go with conditional

45
Q

Leasing v letting

A

Leasing – acting on behalf of the tenant to acquire space

Letting - acting on behalf of landlord to let out space

46
Q

Process for leasing

A 
Define approach
Market research and analysis
Shortlist options and viewings
Decision-making
Negotiation
47
Q

Process for letting

A 
Define approach
Marketing strategy
Branding and marketing
Take enquiries and undertake viewings
Negotiation
48
Q

Lease

A

Formal arrangement providing an occupier with an estate in the relevant land i.e. exclusive occupation

L&T act protection

49
Q

Four requirements that constitutes a lease

A

Exclusive occupation

Payment of rent

Duration of the specified term

If more than three years, terms must be in writing, signed and registered as a deed

50
Q

License

A

Passes no interest in land and provides only a right to enter/use the property

No L&T act protection

51
Q

Differences between a lease and license

Case law ?

A

Lease - exclusive possession
Licence - personal right to use

Lease - can be assigned
Licence - can’t as personal right

Lease - cannot be terminated until expiry
Licence - terminate at any time

Street v Mountford (1985)

52
Q

Heads of Terms

A

Summary of an agreement between two parties, used to instruct lawyers to produce actual lease/ contract

(Fall away once lease and formal contract signed)

53
Q

RICS leasing doc

A

RICS Code for Leasing Business Premises Professional Statement 2020

54
Q

Purpose of Code

A

Improve quality and fairness of negotiation of lease terms and promotes use of new set of comprehensive HOTs to made legal drafting of leases more efficient

55
Q

Application of code

A

Both landlords and tenants

Replaces non- RICS code from 2007

Applies to new leases, lease renewals and lease extensions

56
Q

Mandatory provisions

A

Negotiations must be approached in constructive and collaborative manner

Party not represented by RICS member must be informed of the code and advised to get representation

Agreement must be written in HOTs and SUBJECT TO CONTRACT

Negotiations must be fair and balanced - have regard to both sides

57
Q

Result of code

A

Assists parties in understanding lease and their commitments

Greater transparency of terms and collaboration

Draft HOTs template provides consistency

58
Q

L&T Act

A

Landlord and Tenant Act 1954 Part II

Security of Tenure for all commercial leases

59
Q

When do you get protection from Act?

A

Section 23

Must be a business tenancy satisfying 6 basic principles

Must be a tenancy
Premises must be used for business
Must occupy at least part by tenant
Occupancy for more than 6 months
Must not be an exempt or exclusive tenancy
Must have competent landlord

Automatically protected if satisfied

60
Q

Section 24

A

Business tenancy under act only ends when party serves a notice

(Unless leave with full VP on lease expiry)

61
Q

Section 25

A

Landlords notice to grant or oppose a new lease

Served between 6 and 12 months before date specified in notice

62
Q

Section 26

A

Tenants notice to request a new lease

To be served within 6-12 months from date specified for new lease

63
Q

Section 27

A

Tenant notice to leave premises

Only to be served after contractual end date ie if holding over

3 months notice

64
Q

Section 30

A

Ground for refusal of a new lease

a-g

Persistent delay in paying rent
Redevelopment
Landlord wants to occupy

65
Q

Contracting out

A

Section 38A

Reasons to contract out:
Landlord may want to reoccupy/ redevelop in the near future
Landlord wants more flexibility

66
Q

Contracting out declarations

A

Simple declaration
Served by Landlord/ must have 14 days or more until lease commencement

Statutory declaration
Served by solicitor to tenant, outlining what going to lose from contracting out
Quicker and if less that 14 days to go

67
Q

Security measures to protect the investment from taking on the tenant

A 
Rent deposit
Rental guarantee (eg parent company)
68
Q

What do you request from a tenant to confirm their covenant/ financial performance before letting?

A

Bank, accountant and 2 trade refs
Pervious landlord reference
3 years audited accounts

69
Q

Lease terms affecting value

A 
Lease length
Break clauses
Alienation
Repairing obligations
User clauses
Rent review pattern
L&T Act Protection
70
Q

Items in heads of terms (L&L)

A

SUBJECT TO CONTRACT

Landlord details
Tenant details
Demise
Lease term
Break
Rent
Incentives
Service charge
VAT
Business Rates
Alienation
Alterations
Use
Agreement for lease (sign at earliest opportunity)
Signage
Timescale
AML
Conditions

RICS (19 decks)

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