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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
Advantages and disadvantages of formal tender
+ Leads to direct contract for sale/quick exchange/confidential/ high level of public accountability - No opportunity to bid further/legally binding
26
Advantages and disadvantages of auction
+ Short timescale to sell/good for unusual property/ good when unsure on value - Expensive to market/lack of confidentiality/can’t choose purchaser
27
Types of agency
Sole agent Joint agent – to a more joint agent sharing fee Multiple agency – several agents for any successful gets a fee
28
Sole selling rights
Agent gets fee even if don’t introduce buyer to client
29
Timeline of sales instruction
``` 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
CPSE
Commercial property standard enquiries Pre-contractual enquiries e.g. environmental title statutory SDLT Undertaken by vendor’s solicitors
31
Cooling off period
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
Timeline for property acquisition
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
Important item on heads of terms
Subject to contract
34
VAT
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
TOGC
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
Capital gains tax
Tax and profit when you sell something that’s increased in value
37
Capital allowances
Tax relief on capital expenditure for construction or purchase of commercial property or business assets (e.g. plant and machinery)
38
Privity of contract
Contract only between parties included within it i.e. exclude any third-parties benefiting from the contract
39
Off market transaction
Buyer approach vendor to buy without going to market Very confidential
40
Advantages and disadvantages of an off market transaction
+ 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
Items included in heads of terms (sale)
Subject to contract ``` Vendor details Purchasers details Property address Description Tenure/ Tenancy Purchase price Funding Deposit VAT Timescales AML checks Conditions ```
42
Unconditional offer
Not subject to any conditions Buy as it is
43
Conditional offer
Subject to planning/ ground investigations etc
44
How to determine the difference in a conditional and unconditional offer
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
Leasing v letting
Leasing – acting on behalf of the tenant to acquire space Letting - acting on behalf of landlord to let out space
46
Process for leasing
``` Define approach Market research and analysis Shortlist options and viewings Decision-making Negotiation ```
47
Process for letting
``` Define approach Marketing strategy Branding and marketing Take enquiries and undertake viewings Negotiation ```
48
Lease
Formal arrangement providing an occupier with an estate in the relevant land i.e. exclusive occupation L&T act protection
49
Four requirements that constitutes a lease
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
License
Passes no interest in land and provides only a right to enter/use the property No L&T act protection
51
Differences between a lease and license Case law ?
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
Heads of Terms
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
RICS leasing doc
RICS Code for Leasing Business Premises Professional Statement 2020
54
Purpose of Code
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
Application of code
Both landlords and tenants Replaces non- RICS code from 2007 Applies to new leases, lease renewals and lease extensions
56
Mandatory provisions
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
Result of code
Assists parties in understanding lease and their commitments Greater transparency of terms and collaboration Draft HOTs template provides consistency
58
L&T Act
Landlord and Tenant Act 1954 Part II Security of Tenure for all commercial leases
59
When do you get protection from Act?
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
Section 24
Business tenancy under act only ends when party serves a notice (Unless leave with full VP on lease expiry)
61
Section 25
Landlords notice to grant or oppose a new lease Served between 6 and 12 months before date specified in notice
62
Section 26
Tenants notice to request a new lease To be served within 6-12 months from date specified for new lease
63
Section 27
Tenant notice to leave premises Only to be served after contractual end date ie if holding over 3 months notice
64
Section 30
Ground for refusal of a new lease a-g Persistent delay in paying rent Redevelopment Landlord wants to occupy
65
Contracting out
Section 38A Reasons to contract out: Landlord may want to reoccupy/ redevelop in the near future Landlord wants more flexibility
66
Contracting out declarations
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
Security measures to protect the investment from taking on the tenant
``` Rent deposit Rental guarantee (eg parent company) ```
68
What do you request from a tenant to confirm their covenant/ financial performance before letting?
Bank, accountant and 2 trade refs Pervious landlord reference 3 years audited accounts
69
Lease terms affecting value
``` Lease length Break clauses Alienation Repairing obligations User clauses Rent review pattern L&T Act Protection ```
70
Items in heads of terms (L&L)
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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