Leasing and Letting LV 1 Flashcards
Tell me about your understanding of legislation relevant to your leasing and letting practice?
“1) Misrepresentation Act 1967 - Applies when Mis-statements/ false / false fraudulent statements made during pre-contactual enquiries by the vendor or agent to proposed purchaser. This relates to freehold and leasehold transactions. It is a civil offence and actionable by tort (not criminal). You can be sued for financial damages and/or contract rescinded.
2) Consumer Protection Regulations 2008 - Applies during sales and letting process. It is a criminal offence to not treat customers fairly and providing misleading marketing information. The penalty is an unlimited fine, prohibition order and up to 2 years in prison.
Also includes; Bribery Act, 2010 and Equality Act 2010 “
Tell me about your understanding of the Estate Agents Act 1979.
”* Applies during sale and purchase of freehold or leasehold proeprties with capital value. There are 7 key points which the act promotes including S.21 and S.18.
The offences covered include: Acting dishonestly, Not clarifying ToE, Not disclosing personel interest, Not telling clinet about offers received.
Penalty includes warning order (not to take the action), prohibition order (to prevent agent practicing) and/or fine
“
What are the 7 key principles of the Estate Agents Act 1979?
“COAL HAK
- Clarity relating to Terms of the Agency (SECTION 18)
- Openess regarding personel interests (SECTION 21)
- Agreement and liability for costs
- Legal obligation to tell client about offers receved
- Honesty and Accuracy
- Absence of discimination
- Keep clients money seperate”
What must you do according to the Estate Agents Act 1979 when you receive offers?
“1. Report offers received promtly to the client
2. Must only tell the truth regarding offers “
Who polices the Estate Agents Act 1979
Trading Standards Office (estate and lettings team)
How does Section 18 relate to your letting practice?
”* Specify all costs/fees in advance, in writing in the terms of business
- Itemise all payments - no global budget is allowed”
What are the various agency bases?
“1. Sole letting rights - Sole agent for period agreed and fee due once let. Private introductions included
2. Sole Agency - Exclusive right to introduce tenant in agency period but NOT including private introductions
3. Joint-Agency - Employ more than one agent to market property
4. Multiple agency - S.18 Estate Agents Act 1979 and Misrepresentation Act 1967 govern agreement with client”
What is a ready, willing and able purchaser?
“Purchaser who is:
1. In a position to sign a binding contract
2. Prepared
3. Legally capable
4. Financially able”
How does Section 21 relate to your letting practice?
”* 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. “
“Tell me about key points of the Consumer Protection / Business Protection
Regulations”
“Consumer Protection from Unfair Trading Regulations 2008
Relate to Business to Consumer.
Duty of care to Client, Buyers, Vendors and viewers
Agents must declare everything known about property
Omission can lead to breach of regulation,
Policed by Trading Standards Office, compensation up to £25k
Business Protection from Misleading Marketing Regulations, 2008 (BPR)
Business to Business and mirror the above
Prohobit misleading business to business advertising
“
What is an average consumer/material information?
The CPRs define the ‘average consumer’ as a reasonably well informed person.
What are considered to be unfair practices under this legislation?
“1. Misleading Information
2. Failing to Provide information
3. Omissions
4. Exerting perssure on consumer
5. Failing to show professional diligence”
How does the Misrepresentation Act 1967 relate to your agency practice?
“The act relates to misrepresentation or a false statement of fact made by a party during pre-contractural enquiries which has the effect of inducing the party purchase.
I have a duty to check that my advice, opinion and information is reliable”
What is a leading case under the Act and what tests did the case creast to test agents liability ?
“Hedley Byrne & Co v Heller and Partners (1964)
1.Forseability
2. Proximity
3. Fairness”
What does the Unfair Contract Terms Act 1977 say?
Refers to the test of reasonableness
Do you need to inform your client if you offer a service to a prospective tenant?
“Estate Agents (Undesriable Practices( (No 2) Order 1991
1. Made under the Estate Agents Act 1979
2. Must inform client regarding any services to be offered to prospective purchasers unless free of charge”
What information needs to be supplied under Estate Agents (provision of information) Regulations 1991
The Service to be provided to the client and Remuneration
What is a cooling off period
Period of 14 days allowed for clients who change their minds and do not wan to instruct the agents in line with CPRs
Tell me about your understanding of the Code for Leasing Business Premises in England & Wales
“Mandatory Professional Statement.
The objectives of the Code are to improve quality and fairness for negotiation of lease terms to promote use of a new set of HoTs to make legal drafting of leases more efficient.
Set out in 4 Parts:
Part 1 - Introduction
Part 2 - Mandatory requirements
Part 3 - Lease negotiations best practice
Part 4 - Appendicies “
Please outline some of the points from Part 2 - The Mandatory requirements
“1) Negotiations in a constructive and collaborative manner
2) Party not RICS member represented must be made aware of code and advised to seek professional advice
3) Minimum HoTs to include”
What does Part 3 - Lease negotitations best practice include
Advice on specific lease terms to include such as rent deposits, rent reviews, service charges, repairs and alienation.
When and how was it last updated?
1st September 2020 and updated 2007 Code
Tell me three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).
“RICS UK Commercial Estate Agency Professional Statement, 2016
*Provides advice in key areas such as:
- Acting Ethically - Duty of care, gifts (adopting RoC) and dealing with COI
- Securing Instructions - Legal requirements (Legislation followed), AML checks, types of Agency and H&S, Handling Clients Money (must be able to account for all funds).
- Marleting the Property - Legal and regulatory requirements, check existing lease arrangements, Inspection, Measurement, Market Appraisla and Advice.
- Implementing the disposal - Make sure tenants aware of terms, HoTs agreed, Lease prepared by clients legal advisors.
- Acquisition of Proeprty - Property Search (use network and local knowledge), communicate with your clients requirements/offers. Offer to be made to the seller wothin 1 day of receiving from client, follow up in two days.
“
Give me some example of the Core Principles from the UK Commercial Estate Agency Professional Statement, 2016 (DOESN’T NEED TO BE LEARNT).
“RICS UK Commercial Estate Agency Professional Statement, 2016
*Statement provides a set of mandatory standards for members in agency and management, there 12 Core Principles including:
- Clients know Terms of Business and complaints handling procedure
- Act Honestly, Fairly and in Transparent manner
- Work with due due dilligence, skill and care
- Avoid Conflicts of Interest and manage if needed
- Do not discriminate in any dealings
- Communication with Client is Fair, Timely, Clear and Transaprent
- Advertising is honest and truthful
- Make your identity clear to client and obligation to each party
- Give realistic assessment of costs, rents having regard to market evidence and professional judgement. “
Explain what alienation is
“Alienation means dealing with the leashold interest of a property by way of assignment, sub-letting, sharing occupation or charging.
Governed by the terms of the lease. Important for both parties to have an exit stratedgy. The tenant may wish to relocate to a larger of less costly premises.
Nornally Alientation will confirm whether: the tenant can assign or sublet, part or whole, landlords consent is required (if so NTBUWOD), There are any conditions such as subletting at a market rent. “
What happens if there is no alienation clause in a lease?
If there is no alienation clause the tenant will be able to deal with it as it wishes. However, this is rare.
What is subletting?
A sub-lease is granted between the tenant and the sub-tenant meaning the original landlord tenant relationship remains intact. (The landlord will want to retain control over the original tenant particularly in terms of paying rent and adheing to lease obligations).
What is assignment?
“An assignment is where a third party steps into the shoes of the current tenant - The lease is transferred to another party who becomes the new tenant. The landlord will not want the original tenant to assign their lease to a weaker tenant.
An assignment can only be refused if landlord is acting reasonably. “
Explain your understanding of the Landlord & Tenant (Covenants) Act 1995 and how it affects your leasing work.
“Before January 1996 the original tenant remained liable until expiry along with subsequent tenants and any guarantors who gave a direct covenant (via a license to assign) to the landlord. This was known as Privity of Contract.
From January 1996 Privity of Contract was abolished so the original was automatically released from future liability on assignment. Where reasonable the landlord can ask for an Authorised Guarantee Agreement (AGA) which effectively requires the most recent former tenant to guarantee the lease obligations to the immediate assignee. “
