Leasing and Letting Flashcards
RICS UK Commercial Estate Agency Professional Statement, 2016
- similar to RICS Global Real Estate Agency and Brokerage Professional Statement, 2016
- mandatory professional statement provides set of mandatory standards for RICS for members involved in agency and real estate mgmt work, supported by detailed guidance
- replaced RICS Purple Book 2014
12 core principles agents must observe:
1. act in honest fair transparent manner
2. carry out work with skill
3. ensure clients have terms of business that are fair and clear (with complaints handling procedure)
4. do utmost to avoid conflicts of interst and where they do arise, deal with them openly and fairly
5. dont discriminate unfairly
6. good communication
7. honest marketing
8. client money held seperately with adequate insurance
9. hold appropriate PII to ensure customer doesnt suffer loss due to negligent act
10. identify client and ensure all parties are clear of obligations to each party
11. give realistic assessments of selling prices/rent, giving regard to market evidence and using best professional judgement
12. ensure all meetings, inspections and viewings are carried out in accordance with clients wishes and have due regard to security and safety - act ethically
- securing (duty of care, gifts, conflict of interest)
- instructions (legal requirements, AML checks, H&S)
- marketing the property (legal requirement, marketing particular)
Estate Agents Act 1979
Application:
- disposal or acquisition of an interest in land
- freehold property
- leasehold property with a capital value
- land as well as buildings
Principles (to promote 7 key points):
1. clarity as to terms of agencys (Section 18)
2. Honesty and accuracy
3. Agreement and liability for costs
4. Openness regarding personal interests (Section 21)
5. Absence of discrimination
6. Legal obligation to tell client about offers recieved
7. Keep clients money seperate
- specify all costs/fees in advance, in writing in terms of business (section 18)
- itemise all payments, no global budget
- specify nature of agency and selling rights to be agreed (sole, joint sole agency or multiple agency)
- advise clients of any services available to applicant ie. financial advice
- disclosure of personal intersets - a connected person (section 21) is someone who could benefit financially from the transaction such as a relation or business associate
- any personal interest should be declared on the heads of terms as a minimum and if appropriate, not continue to act
- misrepresentation of interest/offers (you can only tell the truth regarding offers received)
- handling clients money (follow RICS rules)
- procedure to follow when offers are received promptly and in writing
Penalties:
- act policed by trading standards office of local authority
- negative licensing (the right to be an estate agent can be taken away and not granted)
- act allows prohibitiation or warning order to be made against an agent
- prohibition order stops an agent practising
- warning order less punitive, it just gives an agent a written warning not to undertake the action again
- usually only around 10-12 orders issues each year
- can be against individual or practise and costs can also be awarded
Estate Agents (Undesirable Practices) (No 2) Order 1991
- order made under Estate Agents Act 1979
- estate agents must inform their clients at the same time as they are informed about their terms of business, as to any services to be offered to prospective purchasers unless offered free of charge
Estate Agents (Provision of Information) Regulations 1991
- regulations relate to the provision of information which should be supplied to a client
- this information must provide info in writing regarding the service to be provided and renumeration
- a cooling off 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
Public Register of Overseas Property Ownership in the UK
- new bill is proposed
- gov hopes it will prevent money laundering in property sector and make the UK a world leader on corporate transparency
- it is proposed that it will require overseas companies to provide details of their ultimate owners to make the UK property market more transparent and to declare the beneficial owner of properties purchased by non-UK parties
- information to be placed on public register
- currently unexplained wealth oders (UWOs) 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
Consumer Protection from Unfair Trading Regulations 2008 (CPRs)
- Property Misdescriptions Act 1991 was repealed in Oct 2013 replaced with the new Consumer Protection Regulations under Unfair Trading Regulations 2008 for estate agency work and business protection from the Misleading Marketing Regulations (Business Protection Regulations) which have been in force since 2008 under Enterprise Act 2002
- Consumer Protection Regations relate to Business to Consumer
- these regulations offer boarder, non-specific consumer protection for estate agents
- new regulations are principle based
- impose much boarder requirements than PMA 1991
- relate to potential buyers and vendors and extend the duty owed to not just clients, but to potential clients, viewers, buyers, to give accurate and necessary material information and not to make any misdescriptions in the material
- CPRs prohibit unfair business to consumer commerical practices, and define average consumer as reasonably well-informed person
- regulations apply to lettings as well as sales and online agency
- unfair practice could include giving false/misleading info, holding or failing to provide info, omissions and exerting undue pressure on consumer and failing to show professional diligence
- all agency processes must be demonstrated with due diligence audit trail
- policed by trading standards office of local authority
- maximum penalty for breach of CPRs and BPRs is unlmited fine and prohibition order
- compensation may also have to be paid to the complaintant up to £25k
Key facts: - regulations apply to all lettings and sales
- agents have duty of care to clients and all interested parties
- agents must declare everything known about property
- agents must not exert undue pressure
- if info is discovered during process, must be passed on to all parties
- any omissions can also lead to breach of regulations
- full due diligence is required for all new instructions
- must be validated by the client
- policed by trading standards office
- disclaimers do not apply to this criminal offence
Business Protection from the Misleading Marketing Regulations 2008 (BPRs)
- BPRs relate to business to business activities and mirror CPRs
- regulations prohibit misleading business-to-business advertising
- they impose restrictions on how businesses compare their products from other companies
Caveat Emptor
- let the buyer beware
- the starting point when discussing who has responsibility of the disclosure of information
- the overriding common law principle means that the buyer should satisfy itself on all matters relating to the property
Consumer Rights Act 2015
- act amends existing consumer protection law and gives consumers new rights and remedies
- consolidates the law relating to unfair terms and contracts between businesses and consumers
- since oct 2015 letting agents must clearly display summary of their charges both in their office and on their website for letting and management of property
- information must be provided based on calculation of the charges and who is responsible for payment
- if a residential agent holds any clients money, then the firm is required to also publish a statement as to whether they are a member of a client money scheme and details of the scheme
- policed by local authority and penalty is a fine up to £5k for each breach
Misrepresentation Act 1967
- act relates to misrepresentation or false statement of fact made by a party during pre-contractual enquiries, which has effect of inducing the party to purchase
- the vendor and/or agency can be sued for damages and/or contract rescinded
- civil offence, actionable as tort (not criminal), a wrong at common law and a form of negligence
- misrespresentation can be fraudulent, negligent or innocent
- agent has a duty of care to check that the advice, information or opinion is reliable
- exclusion clauses may be effective in protecting the vendor and their agent if they are fair and reasonable
- leading case is hedley byrne v heller and partner 1964 (relates to liability to negligent statements, refers to test of reasonableness, case created 3 tests to decide agents liability for negligent statements:
1. forseeability - the damage is reasonably forseeable
2. proxmity - 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) - applies also to professional opinions and 3rd party advice
- court held that no duty of care was owed by a bark to the plantiff relying on advice as to the customers creditworthiness because there was no special relationship involving the undertaking of responsibility
Tenant Fees Act 2019
- act came into force on 1st june 2019 and aims to improve transparency and affordability in the resi letting markets
- bans various fees often charge to resi tenants for new lettings
Marketing signage - Town & Country Planning (Control of Advertisement) (England) Regulations 2007
- planning consent is required for non-residential boards over 2sqm (flat) and 2.3 sqm (V Board), only on board per building
- different sizes for residential boards with a maximum size allowed of 0.5sqm (flat) and 0.6sqm (V board)
- must not project more than 1m from face of building and not above 4.5m from ground in a safe condition
- also needs planning consent for illuminated board, remote boards, boards erected on listed buildings and conservation areas
- must be removed 14 days after completion of transaction
- certain local authorities have more restrictive requirements such as London Boroughs
- must have owners approval
- policed by local planning authority who can remove boards and issues fines and order costs
Summary of Key Estate Agency Legislation
MISREPRESENTATION ACT 1967
- applies to mistatements/false statement or misrepresentations made during a contractual enquiries by the vendor or the agent to the proposed purchaser, freehold and lease hold transactions
- civil offence actionable by tort, action can be limited by an effective disclaimer clause
- penalty for non-compliance is sue for financial damages and/or contract rescinded
ESTATE AGENTS 1979
- applies during sales or purchase of freehold or leasehold properties with a capital value
- s18 = terms of business
- s21 = declaration of personal interests
- offence is acting dishonestly, not providing clarity to terms of engagement or disclosing a personal interest, not telling client about offers recieved
- penalty is warning order or prohibition order or fine
CONSUMER PROTECTION REGULATIONS 2008
- applies during entire agency sales and lettigns process
- offence is criminal offence, not treating customers fairly and/or providing misleading marketing information
- penalty is unlimited fine, prohibition order and prison up to 2 years
VAT
- specialist advice always recommended
- some occupiers cannot register for VAT such as financial institutions, charities and medical practicioners
- landlord can choose to elect a property to charge VAT, to recover VAT on costs expended. When this happens rent (and any service charge) is charged subject to VAT. This has implications for occupiers who cannot be VAT registered
- transfer of going concern (TOGC) purchases are not treated as a supply of goods or services for VAT purposes. The can reduce liability for VAT eg. in the sale of a property let to a tenant. If the property is registered for VAT, and the rent is subject to VAT, it may be possible not to charge VAT on the sale
Capital allowances
- these are an important form of tax relief upon capital expenditure for the construction or purchase of commercial property or business assets
- they can generate substantial tax savings/relief on the value of plant and machinery fixtures such as air conditioning and lifts
- the allowances can be offset against taxable profit
- specialist advice is always required
- The Finance Act 2019 includes some significant changes, including to Enhanced Capital Allowances, Structures and Building Allowance and the Annual Investment Allowance
