P&S Flashcards
What are the 4 Methods of Sale?
- Private Treaty – private matter, negotiate anytime.
- Formal Tender – sealed bids = sale.
- Informal Tender - best offers (private – informal – negotiations = sale).
- Auction – unusual property/strong interest.
What are the benefits and limitations of Private Treaty?
Benefits: Flexible, control, vendor not obligated to sell, confidential.
Limitations: Gazumping or gazundering, late decisions not to buy, associated abortive costs.
What are the benefits and limitations of Formal Tender?
Benefits: Competitive bidding, clear process.
Limitations: Time-consuming, may deter some buyers.
What are the benefits and limitations of Informal Tender?
Benefits: Quick process, flexibility in negotiations.
Limitations: Less formal structure, potential for confusion.
What are the benefits and limitations of Auction?
Benefits: Quick sale, competitive environment.
Limitations: Uncertainty of sale price, may not attract all buyers. lack of confidentility, intensive nature of short marketing period
When might different methods of sale be applicable?
Depending on client objectives, nature of the asset, public accountability, demand for the property, and timing requirements.
What do you mean by current and likely market conditions?
Market conditions impact interest levels; low interest rates mean low debt and more interest, while high debt rates mean fewer investors.
What are purchaser’s costs?
6.8% total costs, including Legal and professional – 1.8% and Stamp Duty – 5%.
What does Subject to Contract mean?
Not legally binding until exchanged of contracts.
What are the principles of the Estate Agents Act (1979)?
The EA Act aims to promote professionalism, transparency, and consumer production within the estate agency industry in the UK.
Promotes 7 key points: C,H,A,O,L,K
1. Clarity as to the terms of the agency (S18) – specify all costs/fees in advance
2. Honesty and accuracy – specify nature of agency eg. Sole/joint/multiple
3. Agreement and liability of costs
4. Openness regarding personal interests (S21) – this should be declared in the HOTs
5. Absence of discrimination
6. Legal obligation to tell the client about offers received – can only tell the truth about the offers
7. Keeps clients’ money separate – follow the RICS rules
What is the key section in the Estate Agents Act that deals with personal conflicts?
Section 2 and 21 – terms and declaration of personal interests. Must declare existing personal interests in writing before negotiations.
How do you determine the fee for an instruction?
Based on time invested, number of surveyors, bespoke basis, proportionality to work, and market-based agreements.
What actions do you take in acquisitions?
Conduct COI and competency checks, AML, ToE, align with client objectives, consider property search techniques, valuation, planning checks, due diligence, and negotiation.
What is the importance of CDD and AML regulations in relation to investment?
Knowing your client, source of funds, and business purpose is crucial. Complete within 48 hours of agreed heads of terms.
What relevant procedures should be undertaken?
Conduct CDD checks, gather individual information for compliance checks, and confirm source of funds.
Explain the building at 2 City Place.
3 tenants, EPC, 4.4 years Wault, £13.0M, 86,000 IPMS. Concrete frame, concrete slabs, glazed façade. Major refurbishment (£1.2m past 3 years).
What goes into a Brochure?
Price, yield, rents achieved, lease dates, address, energy efficiency, maps, agent contact details, misrepresentation disclaimer.
How did you determine pricing?
Analyzed multi-let buildings of similar size, tenant profile, and location. Gathered evidence, applied ERV and cap rate.
What is the Misrepresentation Act 1967?
Information provided in the pre-contractual stage must not be false or misleading. Civil offence; can be sued for damages.
What is the difference between the Misrepresentation Act 1967 and Consumer Protection 2008?
All information provided in the pre contractual stage must not be false or misleading. Relates to marketing particulars, ensuring information is accurate. It is a civil offence, and you can be sued for damages or loss of contraction *Action limited if by a disclaimer. Can be sued.
Consumer Protection from Unfair Trading 2008 - relates to business to consumer, consumer protection, during the entire sales or lettings process – criminal office to not treating customers fairly or misleading info. Unlimited fine, or up to 2 years in prison. You owe a duty of care as an agent. Good, bad and ugly = DECLARE
Please explain the Gatwick office market.
Aviation and media technologies; rents grown to £39.00, up 20% in the last 23 months for grade A space.
What is included in the Marketing Material?
Typically includes a brochure and populated data room with due diligence information. May also include video or signage.
How did you expand your understanding of the property?
Engaged with the landlord and property manager, conducted due diligence, and researched the local area.
What is considered accurate and relevant information?
Accurate information is correct; relevant information informs the purchaser’s idea of value. for example, income and tenancy need to be verified.
Why private treaty? And when would you switch to informal tender?
Private treaty allows for negotiation without rush. Switch to informal tender if there is significant interest.
Explain what private treaty is and its benefits.
Parties negotiate anytime without commitment to the open market. Benefits: flexibility, control, confidentiality.
What other asset management initiatives did you suggest?
Re-landscape the entrance and tidy car parking.
What is the importance of a data site?
Holds information and due diligence for purchasers, efficiently shares information, and keeps it up to date.
How do you ensure that the data site is secure?
Password protection and restricted access requests to limit individual access.
What is included in an interest schedule?
Typically collated in Excel, includes agent details, client details, requirements, inspection feedback.
What type of queries would you expect?
Queries usually arise from provided information or missing details, including interest in units, current income stream, CapEx, service charge budgets.
Explain the aplsey office?
Situated in Apsley, 4.5 acres, 43,000 sq ft. single let to government occupier. 6 years income.
What’s the significance of a gov occupier?
More secure income.
What capitalisation rate did you apply / what quote?
9.0m / 8.58% - quoted optimistic.
How did the covenant strength affect the pricing?
Low risk, subsequently, a sharper yield when comparing to other comparables.
How long was the marketing period?
The marketing period was 6 weeks overall.
What type of buyer is this?
Special purchaser, they had invested c.£5m in 2020 refurbishment.
What is special value?
Amount that reflects attributes of an asset that are only of value to a special purchaser.
Eg. this is a special value.
What do you mean by deliverability?
The tenant was government occupier, this requires several more checks/approvals from the cabinet and therefore, more security for my client. No debt was required.
What VAT would apply?
Check. TOGC – transfer of ongoing concern – purchasers not treated as supply of goods or services for VAT purposes, reduce liability of VAT eg. Sale of a property let to a tenant.
What is informal tender?
Informal Tender = Other Methods of Sale = Private Treaty, Formal Tender & Auction. I chose this method of sale because it provided the client with control of the process for example over the timeframe but also flexibility with regard to the process.
What is included in a bid schedule?
Information from the bid letter, name of the purchaser, price, conditionality, whether they will require debt, track record, due diligence undertaken, timescales.
What are seen as strengths of an offer?
A strong offer is the highest price, with the shortest timeframe, the least conditionality, a cash buyer, a strong track record and a party that has undertaken a high level of due diligence.
How do you balance price, timings, due diligence undertaken, conditions of the offer and track record to ascertain the offer?
It is about understanding the broader picture of the offer and the possible risks that could present itself as a result of these components and selecting an offer with the lowest perceived risk on balance.
What is seen as the most important regarding price and risk?
It is the cost-price trade off and you want to get the highest price but at the lowest risk and therefore it is about assessing the offers in order to be able to make a judgement on this.
What is included in Heads of Terms?
The price, the timeframe, the address of the property, the buyer’s and seller’s solicitors, the date.
Was there a reason that the office had become vacant?
The tenant’s lease had come to an end/expired and they had decided not to renew as they needed to increase their size requirement due to growth.
What do you mean by value-add?
Investment strategy that involves buying property to increase value, eg. Refurbishing, repurposing or changing the use.
Do you not think high build costs is potentially putting off investors?
This is a factor I considered when pricing the asset however, my team sold a similar asset and this received good interest so we felt there were the right buyers.
As the office is vacant, do you mean rental uplift from the previous rental term?
Headline rents in reading for grade a refurbished space is £57.00 psf (Q4 2024).
What sort of refurbishment?
M&E, improve the EPC with LED lighting, new windows, new HVAC system.
How does reliance work when the quote has been requested by your client but was being reviewed by third parties?
Without reliance.
How did you establish who to target?
My team have a hot buyers list, whereby we track interested parties and active parties. We sold a similar asset recently and approached the underbidders.
Why would you not go to the open market to make it fair?
I provided my client with several options however, it was agreed that a targeted approach would be more suitable.
What was the capital value?
£120 - £150 psf.
RICS Professional statment: uk commercial EA 2016 - explain 12 core principles?
- act honest, fair and professionally
-carry out all work with due skill, care and dilgence and ensure staff employed do so too
-ToB are clear and fairm CHP
-avoid CoI and deal if they arise
-not to discriminate unfairly - all communciations are fair
-all marketing is honest
-client money held seperately with insurance
-PII - make clear the identity of your client
-realistic assessments of selling prices, rents, financial csots = best professional judgement
-ensure all meetings, inspections, viewings carried out security and safety
what are the other key areas of the comm EA 2016?
- act ethically
- securing instructions
- marketing the property
- implementing the disposal
- acqusition of the property
