Key Legislation

Question 1

What is the main Act which regulates work as an agent?

Answer 1

Estate Agents Act 1979

Question 2

What are the key principles of the Estate Agents Act 1979?

Answer 2

1. Clarity on TOE (Section 18)
2. Honesty and accuracy
3. Open and transparent regarding personal interests (Section 21)
4. No discrimination
5. Inform client of all offers
6. Keep client’s money separate

Question 3

Can you give a brief explanation of the Misrepresentation Act 1967?

Answer 3

Protects consumers against false/fraudulent claims when buying a property. Covers false statements made during pre-contractual enquiries to a proposed purchaser.

Question 4

What is the Consumer Protection from Unfair Trading Regs 2008?

Answer 4

Protect customers from unfair/misleading trading practices, covers treating customers unfairly and is over the entire sale/letting process.

Question 5

Name 3 pieces of legislation that is integral when considering the regulation of purchasing a property.

Answer 5

Bribery Act 2010
General Data Protection Regulation 2016
Data Protection Act 2018
Countering Bribery and Corruption, Money Laundering and Terrorist Financing 2019

Question 6

What are the main rights to a fee? (Basis of agency)

Answer 6

Sole selling/letting rights - fee payable if contracts exchanged where the rights exist, even if purchaser isn’t found by agent

Sole agency rights - fee only payable if agent introduced purchaser within term of instruction. If client finds purchaser then no fee.

Joint agency - split fee between joint agents

Multiple agency - first to get sale gets fee

Question 7

What is the main purpose of the RICS Professional Statement Real Estate Agency and Brokerage 2016?

Answer 7

Outlines principles for fairness and transparency in agency.
Main sections include:
- Ethics
- Securing instructions
- Acting for the seller - marketing the property
- Acting for the seller - agreeing the sale/lease
- Acting for the buyer
- Ending the instruction
- Safety and security
- Agency management

Question 8

What is the name of the RICS Professional Statement that encompasses conflicts of interest in relation to purchase and sale?

Answer 8

Conflicts of Interest - UK Commercial Property Market Investment Agency (1st Edition) 2017

Question 9

What is Conflicts of Interest - UK Commercial Property Market Investment Agency (1st Edition) 2017 and what does it cover?

Answer 9

Provides mandatory requirements when acting on sale/acquisition investments in order to avoid COI and protect clients’ best interests.

Covers:

Dual agency

Multiple introductions

Incremental advice

Question 10

What is dual agency?

Answer 10

When an agent has a contractual relationship with the seller and buyer at the same time. Not accepted in the UK, must not be undertaken.

Question 11

What are multiple introductions?

Answer 11

When an agent has competing contractual relationships simultaneously with several buyers for investments. Agents should advise clients in writing of this and ask for written confirmation that clients are happy to proceed.

Question 12

What is incremental advice?

Answer 12

When an agent is asked to provide advice related to a purchase/disposal that is incremental to the existing instruction.

Must only provide incremental advice in the following situations:

• Information barriers must be in place and must maintain confidentiality between team dealing with existing instruction and team giving advice
• informed consent must be obtained where agent has an exclusive instruction to purchase before providing advice to another prospective buyer
• where agent has a sale instruction, client must be notified before advice is provided (informed consent not required)

Question 13

State the main elements of a sale instruction from beginning to completion.

Answer 13

Receive instructions from client
Issue TOE
Receive TOE signed by client
Complete/record AML checks
Gather information
Undertake due diligence
Inspect/measure property
Research market, prepare marketing report outlining advice/recommendations
Prepare marketing particulars and begin marketing
Conduct viewings
Negotiate sale, agree terms
Instruct lawyers
Assist with legal process
Issue invoice upon completion and retain file

Question 14

What are the main methods of sale?

Answer 14

Private treaty

Auction

Formal tender (sealed bids)

Informal tender (best bids)

Question 15

What is private treaty and what are the main advantages and disadvantages?

Answer 15

Most common method of sale, parties free to negotiate in their own time. Purchaser makes an offer in writing to an agent.

Advantages - flexibility, confidential, parties control the process, vendor under no obligation to sell

Disadvantages - potential for gazumping, late decisions not to buy resulting in abortive costs, can be slow with no defined closure

Question 16

What is the auction method of sale?

Answer 16

The process of buying or selling a property, normally to the highest bidder in a short period of time. Reserve price needs to be agreed. Contracts exchanged at fall of the gavel. Auction particulars prepared in accordance with Consumer Protection Regs 2008 and Misrepresentation Act 1967.

Before sale day, purchaser needs to view property and consider structural survey, complete due diligence, arrange 10% deposit and insurance, provide ID for AML procedures

Question 17

What are the advantages and disadvantages of an auction?

Answer 17

Advantages:

• Achieve a relatively quick sale
• Certainty of sale (assuming reserve price achieved)
• Useful method for unusual property which is hard to value

Disadvantages:

• Cost of promotion/publicity
• Lack of confidentiality over purchase price
• Vendor cannot choose purchaser

Question 18

What is an informal tender?

Answer 18

Used when there is a good level of interest in a property, either at the start of marketing or to conclude negotiations. Can be used during private treaty negotiations.

“Best bids” are invited - not legally binding, either party can withdraw whenever.

Agent’s letter requesting “best bids” to include:

• Deadline for offer to be submitted
• Name/address of applicant’s solicitor
• Confirmation of finance arrangements
• Any conditions attached to the offer
• Vendor reserves right not to accept highest, or any, offer made

Question 19

What is a formal tender?

Answer 19

Applicants bid blindly without knowing other parties’ bids. Prospective buyers can’t change their bid once submitted. Vendor can state they are under no obligation to accept highest bid. Full marketing material to include comprehensive legal pack must be sent in advance of any offers received.

Question 20

What is the main difference between a formal and informal tender?

Answer 20

Informal is best offers/bids, formal tender is sealed bids.

Informal is usually less onerous terms prepared, formal requires detailed terms to be prepared by vendor and published in advance with the offer to bid letter.

Informal will not lead direct to a contract for sale, further negotiations may be required. Formal can lead direct to a contract for sale.