Estate Agency (Leasing and Letting + Purchase and Sale) Flashcards
What is an informal tender?
Also known as best bids. Used when there is a good level of interest in a property.
Best bids procedure is not legally binding - so either party can withdraw at any point.
All bids should be opened in front of the client or an independant witness/line manager.
The agent writes to all interested parties to submit their best and final offer or best bid or best and final bid in accordance with a perscribed timescale.
What is included in an informal tender letter?
Date and time of receipt of written offer.
Name and address of the applicants solicitor.
Confirmation of finace arrangements.
Detail of any condition attached to the offer.
Confirmation that offers of a variable nature will not be considered (i.e escalator bid - offering more than the highest offer recieved).
Vendor reserves the right not to accept the highest or any offer made (must have this statement or it could become a binding tender).
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What is a formal tender?
A method of sale where there is only a single round of bidding - there is no chance for a second bid - applicant bid blindly in a perscribed from w.out knowing other parties bids.
Used by statutory bodies to give control and transparency over the marketing process.
It provides a high level of public accountability.
Vender can state they are under no obligation to accept the highest bid.
Full marketing material includes a comprehensive legal pack which is provided in advance of the tender process + a clear letter sent to all potential purchasors setting out the information required with the offers.
Cannot change offer or increase offer after bid deadline.
Usually no immediate exchange of contract but the client can use the blind process to decide the identity of the purchasor and then proceed to contract in accordance with terms/conditions previously stated in the marketing particulars. Which can speed up the marketing process.
What is the difference between informal tender and formal tender?
Formal tender provides a single chance to purchase - informal there can be multiple rounds of bidding.
High level of accountability withformal tender.
Informal tender can be used in private treaty negotiations to obtain best offers from applicants.
Informal tender will not lead to a direct sale - whereas formal tender it is possible to directly lead to a contract of sale.
Formal tender the highest bid is accepted (unless the vendor reserves the right to refuse any or all offers) - Infomral tender the vendor usually state that they are under no obligation to accpet the highest offer recieved.
What is privat treaty?
Private treaty is the most common method of sale in the UK. Parties are free to negotiate in their own time and without commintment in the open market.
What are the advantages and disadvantages of private treaty?
Advantages: flexible, parties control the process, no obligation to sell, confidential.
Disadvantages: potential for gazumoing or gazundering, late decisions not to buy, associated abortive costs.
What is auctioneering?
Sale of a property at an auction.
What are the advantages and disadvantages of auctioneering?
Advantages:
Achieve a short timetable for disposal.
Certainty of sale if reserve figure is met.
Good for hard to value properties/unusal ones.
Used for high interest property.
Disadvantages:
Cost of promotion and publicity.
Lack of confidentiality over the price achieved.
Cannot choose purchasor.
intensive nature of short marketing period.
What is the acutioneering procedure?
TOE agreed in advance. Conflict of interest checks to be undertaken.
Money laundering checks prior to accepting.
Clarity regarding the Auctioneers rights to refuse bids, to gegulate bidding increments, to accept proxy, telephone, internet bids and to sign the contract on behalf of the vendor.
Full due dilligence completed prior to offering.
All relevant documentation must be available for inspection in advance.
Auctioneer to publish General Conditions of Sale + Memo of Sale and any notices to bidders. RICS provides guidance in guidance note.
A reserve price needs to be agreed with the vendor.
Contracts exchanged at the fall of gavel.
Auction particulars on the catalogue must be prepared with the requirements of the CPR 2008 and Misrepresentation Act 1967.
Insurance required by purchasor at point of exchange.
What action are required by a purchasor before the sale day?
View the property and consider a structural survey.
Take proper legal advice and complete due dilligence exercise.
Read the Notice to Prospective Buyers.
Arrange a depost of 10% + Insurance.
Provide ID for money laundering.
What factors would affect the value of an investment?
Lease terms, covenant strenght, rent payable, guarantor/rent deposit, term, property, property condition, location, UK economy.
What are the types of Agency?
Sole Agency - one agent
Joint Agency - two or more sharing a fee on a pre-agreed basis.
Multiple Agency - any number of agents but only the succesful agent gets a fee.
What happens if there is a failure to compelte a transaction?
The vendor can serve a Notice to Completre on the proposed purchasor giving them a deadline to complete. Legal costs are to be paid by purchasor.
If deadline has passed the vendor can recind contract and remarket. Any deporsit can be retained by the vendor.
Vendor may be able to sue for damages to claim for any loss in value following the sale of the property at a lower price.
What are sole selling rights?
A typical clause which means a renumeration will be payable if contracts are exchanged in a period when sole selling rights exist. Even if purchasor is not found by the agent but by another party including the client.
Fee is also due after expiry of rights if the property was sold to a purchasor who what introduced by the agent during the period of sole selling rights.
What are sole agency rights?
Sole agency rights can be agreed which means a fee is only due if the agent inroduced the purchasor within the term of instruction agreement. Not ideal for agents as they will only get a fee if they introduce the party.
Timeline of sales instruction?
Recieve instructions.
Check competence + conflict.
Issue agency agreement.
Recieve signed TOE.
Complete money laundering checks.
Gather info - inspection details, lease, legal title, planning documents etc.
Due dilligence.
VAT Check.
Inspect + Measure.
Confirm position on fixtures and fittings.
Undertake valuation.
Prepare marketing reports with recommendations.
Written approval for marketing particulars.
Undertake marketing campaign.
Negotiate sale + HoTs.
Liase with lawyers w/ commercial standard enquries.
Assist with any queries during legal formalities.
Invoice.
What key things will be in the agency TOE?
14 day cooling off period (rules of conduct + Estate agency Act 1979 - S.18 + S.21).
Agency basis (sole/joint).
Agency rights (Sole selling or sole agency).
Proposed fee.
Marketing costs and disbursements.
confirmation of no conflicts.
Money Laundering requirement.
Timescale for payment.
Complaints handling procedure.
Must be signed and returned before it can commence.
Property acquisition actions?
CCC.
Objectives.
TOE.
Agree search parameters.
Techniques to find property.
Measurement of land and valuation.
Check planning.
Due Dilligence.
Rent + Service charge checks.
Covenant approval info.
Negotiate.
Conditional Contracts.
Ways to purchase?
Special Purchase Vehicle (SPV) - a company formed specifically to buy a property to reduce the payment of SDLT.
Offshore unit trust such as JPUTs (Jersey Property Unit Trusts)
Real Estate Investment Trusts (REIT) - a company tax resident in the UK which is listed on a stock exchange and has at least 75% of its business in property investment.
Joint venture between two parties.
Code for Leasing Business Premsies?
A mandatory professional statement to improve quality and fairness of negotiations on lease terms and promote the use of new set of comprehensive HoTs to make legal drafting more efficient.
Structure:
1 Intro
2 Mandatroy Requirements
3 Lease Negotiation Practice
4 Appendicies.
