General Agency / Purchase & Sale / Leasing & Letting Flashcards
What is the leading Professional Standard for Property Agency?
RICS Professional Standard: Property agency and management principles, 2024
What are the 12 core principles of property agency?
(Name 4)
- Act in honest, fair, transparent and professional manner
- Any client money is held separately and is covered by adequate insurance
- All communications with clients are fair, decent, clear and timely and transparent
- All advertising and marketing material is honest and truthful
What is the key Estate Agency legislation?
The Estate Agency Act 1979
Where would the Estate Agency Act 1979 apply?
4 areas:
1. Disposal or acquisition of a property
2. Freehold property
3. Leasehold property with capital value
4. Land as well as buildings
What are the 7 key points of the Estate Agency Act 1979?
- Clarity in terms (Section 18)
- Honesty & Accuracy
- Agreement and liability costs
- Conflicts of Interest (Section 21)
- Absence of discrimination
- Legal obligation to tell the client about offer received
- Keep clients money separate
What does Section 18 of the Estate Agency Act 1979 cover?
That an agent must specify all costs and fess in advance and in writing to the client``
What does Section 21 of the Estate Agency Act 1979 cover?
That an agent must disclose ‘personal interests’ or if there is a ‘connected person’ acting within an instruction.
What does the Consumer Protection from Unfair Trading Regulations 2008 cover?
What type of transaction does it cover?
That businesses must act with professional integrity and not distort information provided to a consumer
Business to consumer transactions
What are the penalties for breaches of the Unfair Trading Regulations 2008?
Unlimited fine and / or up to 2 years in prison
What is a cooling off period? How long does it last?
Period of up to 14 days is allowed for clients who change their minds and do not want to instruct the agent in accordance with current consumer protection regulation
What does the Misrepresentation Act 1967 cover?
Who is responsible for any misrepresentation?
Relate to a misrepresentation or false statement made by a party during pre-contractual enquires which then encourages the party to purchase
Vendor and agent can be sued for damages
Agent has a duty of care to check that their advice and information is truthful
What are the 3 types of Misrepresentation?
- Fraudulent
- Negligent
- Innocent
What is the leasing Case Law regarding Misrepresentation?
What does it relate to?
Wat did it establish?
Hedley Byrne & Co Ltd vs Heller & Partners.
Negligent Misstatements.
Established - that a duty of care can exist in statements even without a contract - if a party gives advice knowing it will be relied upon they owe a duty of care.
What entities would be exempt from paying or charging VAT?
Charities and medical practitioners
What are the 4 Methods of Sale?
- Private Treaty
- Informal Tender
- Formal Tender
- Auction
What is the basic process of a Private Treaty Method of Sale?
Parties are free to negotiate without commitment in the open market
What is the basic process of a Informal Tender Method of Sale?
- Used when there is a good level of Interest.
- Marketing process followed by ‘best bids’.
- ‘Vendor holds the right to not accept the highest or any offer’
What is the basic process of ‘Formal Tender’ Method of Sale?
‘Sealed Bids’
- Tender pack goes out to prospective purchasers setting out info required for a bid.
- Parties bids blind
- offers are open in front of an expert witness
What is the basic process of a Auction Method of Sale?
- Commonly the method of last resort
- T of E agreed in advance
- ML Checks must be done
- Conflict of Interest checks done before accepting instruction
- Contracts exchange at the fall of the gavel
- Reserve price is set by the vendor in advance
Give the advantages and disadvantages of a Private Treaty Method of Sale?
Advantages:
- Flexible
- Confidential
- Vendor has no obligation to sell
Disadvantages:
- Purchaser can withdraw at the last minute
- Potential for abortive costs
Give the advantages and disadvantages of an Informal Tender Method of Sale?
Advantages:
- Not legally binding (vendor is able to withdraw if a purchased isn’t performing)
- Potential to have multiple rounds of bids
Disadvantages:
- Not legally binding (purchaser could withdraw)
- Purchaser could withdraw
- Expensive / more time consuming
Give the advantages and disadvantages of a Formal Tender Method of Sale?
Advantages:
- Fast (contract can exchange immediately)
- Transparent
- Purchaser cannot withdraw
Disadvantages:
- No negotiation
- Expensive porcess
Give the advantages and disadvantages of an Auction Method of Sale?
Advantages:
- Fast
- Certainty of sale (if Reserve Price is sensible)
- Useful for unusual properties where an accurate value is hard to achieve
Disadvantages:
- Not confidential
- Cost of publicity
- If the property isn’t sold then it shows a lack of interest to the market
What details would you mark on a set of sales details?
- Title
- Executive Summary
- Location
- Property Description
- Existing Use
- Schedule of Accommodation
Back Page - EPC, VAT, Services, Viewing arrangements, AML, Data Room
What are the 3 types of Agency? (How an agent will act_
- Sole Agency
- Joint Agency
- Multiple Agency
What should you do before accepting an agency acquisition instruction?
- Check Conflict of Interest
- Do AML Checks
- Agree Terms of Engagement
Once accepted:
Once a property is found:
What must agency disposal Instruction Agreements state? 7 key areas, think of the whole process
- Agency basis (Sole or Joint)
- Proposed fee
- Marketing costs / disbursements
- Confirmation of no conflicts of interest
- AML requirements
- Timescale for payment of fee and disbursements
- Details of the firms complaints handling procedure
Once you have accepted an acquisition instruction how would you proceed?
- Establish the clients objectives / search requirements
- Consider requirement marketing (PIP or speaking with local agents)
Once would you have found a suitable property for an acquisition how would you proceed?
- Inspect and Measure
- Assess the property against your clients requirement
- Request background Due Diligence info - Asbestos, Title, Flood Risk (are there any factors that may impact value?)
- Negotiate and put forward an offer
What does SPV stand for?
What is an SPV?
Special Purchasing Vehicle.
A Company formed for the specific purpose of buying a property to reduce payment of Stamp Duty.
What is a TOGC?
What does it imply for VAT?
A Transfer Of a Going Concern. Not treated as a supply of goods or services and therefore VAT is not payable
What happens if there’s a failure to complete a transaction?
Notice to Complete
- The vendor can serve a Notice to Complete on the proposed purchaser giving them a deadline to completed.
- The legal costs for this work are to be paid by the proposed purchaser
- If deadline has passed, vendor can rescind the contract and remarket the property
- Any deposit can be retained by the vendor
- The vendor can sue for damages to claim for any loss in value, following the sale of the property to another party at a lower sale price.
What is the main Leasing Professional Standard?
RICS Professional Standard: Code for Leasing Business Premises, 2020
\What does the RICS Professional Standard: Code for Leasing Business Premises, 2020 cover?
The code acts to improve the quality and fairness of lease negotiations
How many parts does the Code for Leasing Business Premises have?
What are they?
4
1. Intro
2. Mandatory requirements
3. Lease negotiation best practice
4. Appendices
Under the Code for Leasing Business Premises what must Lease HoT’s state?
HoTs must be in written form.
Key points:
1. Must be subject to contract
2. Identity of the property
3. Length of the term
4. Inside of outside the Landlord and Tenant act 1954
5. Options for renewal / break rights
6. Guarantor / deposit information
7. Rent amount and payment dates
8. Whether exclusive of business rates
9. Whether inclusive or exclusive of VAT
10. Rent free period
11. Service charge liability
12. Ability to assign / sublet / charge or share the premises
13. Repairing obligations
14. Use of building
15. Rights to make alterations
16. Any initial alterations or fit out
17. Any conditions to the lease (surveyrs, board approvals or planning permission).
What are the major lease terms that would effect value?
- Term
- Covenant
- Beak Clauses
- Alienation clause
- User Clauses
- Rent review mechanism
- Inside or outside of the Act
- Security of tenure
What is a break clause?
An option to terminate a lease
Who are break clauses in favour of? Landlord or Tenant?
Depends on the terms stated within the lease
What terms would be included within a lease to exercise a break clause?
- Notice period
- Who it is in favour of
- Any pre conditions (e.g. full payment of rent / returning property to ‘good order’
Are Heads of Terms legally binding?
No, they serve as a agreement between two parties for the sale and letting of a property or piece of land
If a purchaser has exchanged on a deal and pulls out what can the vendor do?
- Keep there deposit, typically 10% of the sale price
What is the difference between an Assignment and a Sub-letting?
- Under an Assignment the entire existing lease is transferred over to the Assignee under the same terms
- Under a Sub-Letting a new lease would be provided to the new ‘sub-tenant’ and the original tenant
What Act or Legislation relates to assigning or transferring a lease?
Covenants Act 1995
What was the effect of the Covenants Act 1995?
What was the effect on the market?
Made it easier for landlord and tenants to transfer their leasehold interests.
Made the leasehold commercial market more flexible through the introduction of AGA’s
What is an AGA?
What does it do?
Authorised Guarantor Agreement
Where the original tenant guarantees that the incoming tenant will comply with the terms of the lease after assignment e.g. payment of rent
What is a section 23 notice?
It set out the basic criteria for when a tenancy falls within the protection of the Act
What are the 4 requirements for a lease to be a lease?
- Exclusive occupation
- Payment of rent
- Duration for a specified term
- If more that 3 years, the terms must be in writing, signed as a deed
What is the Leasehold Hierarchy of evidence?
- Open market lettings
- Lease Renewals
- Rent Reviews
- Other e.g. Independent expert determinations
What does ‘without prejudice’ mean?
Means that the contents of the report or lease cannot be used in court
What is a ‘Tenancy at Will’?
Where would one be used?
A form of licence created by written agreement for a unspecified time in which the landlord may evict the tenant at any time.
When allowing a tenant to enter a property early e.g. for Fit out
What would the effect of rent free period to headline rent be called?
Net Effective Rent
How would you calculate Net Effective Rent?
On a ‘straight-line basis’ where an average rent would be taken until the next lease event.
What is an Interim Rent?
‘A rent payable after the expiry of a contractual term of a protected lease and before a formal lease renewal has been completed’
