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MT APC > Estate Agency (Purchase and sale; Leasing/letting) > Flashcards

Estate Agency (Purchase and sale; Leasing/letting) Flashcards

1
Q

What professional statement did the RICS release for global agency practices?

A

RICS Global Real Estate Agency and Brokerage, 2016

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2
Q

What RICS professional statement sets out mandatory standards for those involved in agency and real estate management work?

A

RICS UK Commercial Estate Agency, 2016

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3
Q

What does the RICS UK Commercial Estate Agency, 2016 contain?

A

12 core principles which agents must observe

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4
Q

Give an example of some of the principles contained within RICS UK Commercial Estate Agency, 2016.

A
  • Act in an honest, fair, transparent and professional manner
  • Ensure clients are provided with terms of business that are fair and clear, with details of the firm’s complaints handling procedure
  • All advertising and marketing materials must be honest and truthful
  • Give realistic assessments of selling prices / rents / financial costs having regard to market evidence and using best professional judgement
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5
Q

What is the key estate agency legislation?

A

Estate Agents Act 1979

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6
Q

When does the Estate Agents Act 1979 apply?

A
  • Disposal or acquisition of an interest in land
  • Freehold property
  • Leasehold property with a capital value
  • Land as well as buildings
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7
Q

What are the SEVEN key points which the Estate Agents Act 1979 promotes (CHOALK)?

A
  1. Clarity as to the terms of the agency (Section 18)
  2. Honesty and accuracy
  3. Agreement and liability for costs
  4. Openness regarding personal interest (Section 21)
  5. Absence of discrimination
  6. Legal obligation to tell client about offers received
  7. Keep clients’ money separate
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8
Q

What are the 2 different types of exclusivity (sole rights) that can be agreed (2), and the agency bases (3)?

A

• Sole Selling rights: fee will be owed regardless of whether the agent introduced the buyer
This is the typical arrangement, most fair for the work you put in as an agent.
Additionally, a fee is due after rights period ends if the purchaser/tenant was originally introduced by the agent.

• Sole Agency rights: fee will only be owed if the agent introduced the buyer (during contract period only)

  • Sole: exclusive rights appointed to one agent
  • Joint: two agents are appointed to act together and the fee is split on a pre-agreed basis
  • Multiple: more than one agent is appointed but only the agent who finds the buyer is paid a fee

Defined in EEA 1979.

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9
Q

What must you do according to Section 18 of the Estate Agents Act 1979?

A
  • Specify all costs/fees in advance, in writing in the terms of business
  • Itemise all payments - no global budget is allowed
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10
Q

What must you do according to Section 21 of the Estate Agents Act 1979?

A
  • Disclose any personal interests - a “connected person” is someone who benefit financially from the transaction such as a relation or business associate
  • Any personal interest should be declared on the terms of engagement as a minimum and if appropriate not continue to act
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11
Q

What must you do according to the Estate Agents Act 1979 when you receive offers?

A
  • Must report all offers received to the client, promptly and in writing
  • Not able to misrepresent interest/offers - you can only tell the truth regarding offers received
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12
Q

Who polices the Estate Agents Act 1979?

A

Trading Standards Office

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13
Q

What are the penalties for non-compliance with the Estate Agents Act 1979?

A
  • Negative licensing - the right to be an estate agent can be taken away and not granted
  • Prohibition order to prevent the agent practicing
  • Warning order gives an agent a written warning not to undertake the action again
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14
Q

What does the Estate Agents (Undesirable Practices) (No 2) Order 1991 dictate?

A

Estate agents must inform their clients at the time same time as they are informed about their terms of business, as to any service to be offered to prospective purchasers unless offered free of charge

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15
Q

What do the Estate Agents (Provision of Information) Regulations 1991 dictate?

A

Related to the information that should be provided in writing to the client:
• Service to be provided
• Renumeration

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16
Q

What is the ‘cooling off’ period?

A

Period of up to 14 days is allowed for clients to change their mind and not instruct an agent in accordance with the Consumer Rights Act 2015

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17
Q

What will the newly proposed Registration of Overseas Entities Bill require? What is the aim of the Bill?

A
  • Will require overseas companies to provide details of their ultimate owners, which will be placed on a public register
  • Prevent money laundering and make the UK a world leader on corporate transparency
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18
Q

What are Unexplained Wealth Orders (UWOs)?

A

Can be applied to the owner of any property asset over £50,000 where the Government has reasonable grounds for suspecting criminal funds have been used

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19
Q

Who do the Consumer Protection from Unfair Trading Regulations (CPRs) 2008 relate to?

A

Business to Consumer activities

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20
Q

Who do the Business Protection from Unfair Trading Regulations (BPRs) 2008 relate to?

A

Business to Business activities

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21
Q

Who is owed a duty of care under the CPRs / BPRs?

A

Potential buyers and vendors, potential clients, viewers and actual buyers

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22
Q

What agency practices do the CPRs / BPRs? relate to?

A
  • Lettings
  • Sales
  • Online agency
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23
Q

What must agents do to ensure compliance with the CPRs / BPRs?

A
  • Declare everything known about a property - good and bad
  • Not exert undue pressure on potential buyers
  • Undertake full due diligence for all new instructions
  • Pass any information discovered during the agency process onto all interested parties
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24
Q

Who polices the CPRs / BPRs?

A

Trading Standards Office

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25
Q

What is the penalty for breaching the CPRs / BPRs?

A
  • Unlimited fine and/or a prohibition order

* Compensation paid to the complainant of up to £25,000

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26
Q

Can you disclaim outside of the CPRs / BPRs?

A

No

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27
Q

What does the Misrepresentation Act 1967 relate to?

A

Misrepresentation or a false statement of fact made by a party during pre-contractural enquiries, which has the effect of inducing the party to purchase

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28
Q

What is the penalty for breaching the Misrepresentation Act 1967?

A

Vendor and/or agent can be sued for damages and/or the contract rescinded

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29
Q

How can a vendor / agent protect themselves from the Misrepresentation Act 1967?

A
  • Check that the advice, information or opinion provided is reliable
  • Exclusion / disclaimer clauses if fair and reasonable
30
Q

What does your firm’s disclaimer say regarding the Misrepresentation Act 1967?

A
  • Particulars are not to be considered a formal offer
  • Should not be relied upon as statements or representations of fact
  • Whilst every care is taken in their preparation no liability can be accepted for their accuracy
  • Purchasers must satisfy themselves by personal inspection or otherwise as to the correctness of the particulars
31
Q

What THREE tests did the case of Hedley Byrne & Co Ltd v Heller & Partners (1964) establish to decide an agent’s liability for negligent statements?

A
  1. Foreseeability - the damage is reasonably foreseeable
  2. Proximity - the relationship can be characterised in law as being sufficiently proximate
  3. Fairness - it is regarded as fair, just and reasonable for such a duty of care to arise
32
Q

What kind of offence is a breach of the Misrepresentation Act 1967?

A

Civil offence - actionable in tort - a wrong at common law and a form of negligence

33
Q

What did a government report published in July 2019 propose for all property agents?

A
  • Proposed all property agents be regulated by an independent regulator, who would take responsibility for redress schemes and client money protection schemes
  • Mandatory qualifications for agents
  • Code of practice encouraging transparency of charges, disclosing conflicts of interest and administration of service charges
34
Q

What legislation governs marketing signage?

A

Town & Country Planning (Control of Advertisement) (England) Regulations 2007

35
Q

What is the maximum size a non-residential marketing board can be before planning permission is required according to the Town & Country Planning (Control of Advertisement) (England) Regulations 2007?

A
  • 2.0 sqm (flat)

* 2.3 sqm (v board)

36
Q

What is the maximum size a residential marketing board can be before planning permission is required according to the Town & Country Planning (Control of Advertisement) (England) Regulations 2007?

A
  • 0.5 sqm (flat)

* 0.6 sqm (v board)

37
Q

What are the requirements of marketing boardings according to the Town & Country Planning (Control of Advertisement) (England) Regulations 2007?

A
  • Only one board per building
  • Maximum size contracts
  • Must not project more than 1m from the face of the building
  • Must not be above 4.6m from the ground
  • Must be in a safe condition
  • Must have owner’s approval
38
Q

What marketing signage requires planning permission according to the Town & Country Planning (Control of Advertisement) (England) Regulations 2007?

A
  • Illuminated boards
  • Remote boards
  • Boards erected on listed buildings and in conservation areas
  • More restrictive requirements by some local authorities e.g. Westminster
39
Q

How soon must marketing boards be removed after the completion of a transaction according to the Town & Country Planning (Control of Advertisement) (England) Regulations 2007?

A

Within 14 days after the completion of the transaction

40
Q

Who polices the Town & Country Planning (Control of Advertisement) (England) Regulations 2007?

A
  • Local Planning Authority

* Can remove boards, issue fines and order costs

41
Q

What other relevant legislation should you be aware of when conducting agency work?

A
  • Bribery Act 2010
  • Energy Act 2011
  • Land Registration Act 2002
  • Proceeds of Crime Act 2002
  • Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, 2017
42
Q

Give an example of some occupiers who cannot register for VAT?

A
  • Financial institutions
  • Charities
  • Medical practitioners
43
Q

Why may a landlord elect a property to charge VAT?

A

To be able to recover VAT on costs expended

44
Q

What happens when a landlord elects a property to charge VAT?

A

Rent and any service charge is subject to VAT. This will have implications for occupiers who cannot be VAT registered

45
Q

What are transfer of going concern (TOGC) purchases?

A
  • Not treated as a supply of goods or services for VAT purposes
  • If property is registered for VAT and the rent is subject to VAT, it may be possible not to charge VAT on the sale
46
Q

What are capital allowances?

A
  • Allow capital expenditure for the construction or purchase of commercial property or business assets to be offset against taxable profits
  • Can generate substantial tax savings / relief on the value of plant and machinery fixtures (e.g. air conditioning and lifts)
47
Q

What does the Land Registration Act 2002 aim to do?

A
  • Provides framework for electronic property conveyancing, by allowing documents to be executed electronically
  • Aiming to achieve comprehensive registration of all property and land by 2030
48
Q

What properties must be registered with the Land Registry according to the Land Registration Act 2002?

A
  • All freeholds
  • New leases for terms over 7 years
  • Existing leases sold or assigned with at least 7 years left to run
49
Q

How many years of use must a claimant of adverse possession be able to prove under the Land Registration Act 2002?

A

10 years

50
Q

All freehold transactions must be registered with a compliant plan with what SEVEN details, according to the Land Registration Act 2002?

A
  1. Drawn to a metric scale
  2. Have a scale measurement bar
  3. Have scale noted on the plan
  4. Include a 1:1250 scale location map (for urban areas)
  5. Full address including post code
  6. A full north point
  7. Demise in red outlined on the inside edge of the property
51
Q

What did the Land Registration Act 2002 say with regards to chancel repairs liability?

A

Gave churches 10 years to register chancel repair liability against a property in their parish, which ended in October 2013

52
Q

What document could you help solicitors to complete to aid a sale/leasing process through to completion?

A

Commercial property standard enquiries (CPSEs)

53
Q

Who are the CPSEs produced by?

A

British Property Federation (BPF)

54
Q

What are the advantages of CPSEs?

A

Help speed up commercial property transactions for lawyers by creating a standard set of enquiries

55
Q

When undertaking instructions abroad, what legislation did you have to comply with?

A

Given that my firm is registered in the UK and I operate from the UK, I had to ensure that I was in compliance with UK legislation including the Estate Agents Act 1979, Consumer Protection from Unfair Trading Regulations 2008 and the Misrepresentation Act 1967

56
Q

What are some of the topics typically covered in CPSEs?

A
  • Environmental reports
  • Planning and building regulations
  • Adverse rights affecting the property
  • Disputes
  • Insurance policies
57
Q

Why is it important to include the date on marketing particulars?

A

Requirement in the UK Commercial real estate agency professional statement, 2016 for sale or leasing particulars to be clearly dated

58
Q

What level of liability would you typically offer with an agency instruction?

A

My firm’s standard Terms of Business include a limit on liability of £5m. This can be increased or decreased depending on the nature of the instruction

59
Q

What is a ready, willing and able purchaser, where would the clause need to be included, and what 3 things would it create a liability for/to whom?

A

A prospective purchaser who is in a position to sign a binding contract; one who is prepared, legally capable and financially able to purchase a property.

Would need to be included in agency contract and then if a seller pulls out, would then be liable for;

  • Abortive fee
  • Marketing expenses
  • Time spent measuring etc.
60
Q

What does average consumer mean in relation to CPR?

A

Average consumer – a reasonably well informed person.

61
Q

What does material information mean in relation to CPR?

A

‘Material information’ means information that the consumer needs to make an informed transactional decision and generally any information required to be given by law.

62
Q

Do you need to inform your client if you offer a service to a prospective tenant?

A

Yes. Under Estate Agents (Undesirable Practices) (No 2) 1991.

63
Q

Tell me about a factor which drives property markets (3).

A

Economy, politics, interest rates

64
Q

Can you tell me of some potential conflicts that might arise before taking on an agency instruction?

A
  • Marketing another unit nearby for another client (i.e. if there were 2 next door, it is likely you would have a ‘preference’)
65
Q

How do C/BPRs and the Misrepresentation Act differ?

A

C/BPRs - a criminal offence - you deliberately (willingly) misled the interested parties at some point in the marketing process (i.e. telling a lie about something you were sure of) - therefore cannot use disclaimer

Misrepresentation Act - a civil offence - only applies to pre-contractual enquiries (i.e. CPSEs) - you have stated everything you know about the property honestly in the marketing process, but you declare that you KNOW the property is for instance structurally stable in the CPSEs, when you should really state ‘to the best of my knowledge’ it is stable, but the onus is on you (the buyer) to undertake your own enquiries in this matter, as I cannot exhaustively know everything about a property - therefore can use disclaimer

66
Q

How do EEA 1979 S21 ‘connected person’ and a conflict of interest differ?

A

S21 relates specifically to when you or someone you know could financially benefit from the agency transaction.

A conflict of interest encompasses this, but extends to any potential reason you may not be able to act within a clients interests i.e. if you were marketing a nearby unit you don’t stand to directly financially gain from this transaction, but it does mean you have competing interests.

67
Q

Who is responsible for the initial production of an EPC?

A

For an agency instruction it would be the vendor as they must ensure this is instructed prior to marketing.

68
Q

Who are connected parties under the Estate Agent Act?

A

Employer/principle, Employee/agent, Associate, spouse, relative, business associate or their spouses.

69
Q

What fees can be charged for agency services?

A

Flat fee, Fee plus incentive, Retainer, Staged Payments, Abortive Fees, Joint Agency Fees

70
Q

What must an estate agent do if he intends to offer additional services?

A

Inform the client in writing.

71
Q

What is a generic fees for agency work across the sector?

A

Although these vary with company and instruction, a general tone would be 1% of the sale price and 10-15%
the annual rent for lettings.

MT APC (37 decks)

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