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Purchase and Sale > Purchase and Sale > Flashcards

Purchase and Sale Flashcards

1
Q

What are the differing methods of sale?

A
  • Private Treaty
  • Informal Tender
  • Formal Tender
  • Auction
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2
Q

Tell me about Private treaty?

A

A deal privately negotiated

-/ Parties are free to negotiate with time pressures or commitment to the open market

x Might cause gazumping
Can be slow

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3
Q

Tell me about informal tender? (Best bid/offer)

A
  • Often used when there is a lot of interest in the beginning of marketing
  • Not legally binding until contract
  • Vendor is not obliged to accept the highest bid
  • multiple offers, people can submit higher offers after the deadline, this is unethical, you should advise your client not to accept but you must inform them of the offers in line with the estate agents act.
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4
Q

Tell me about formal tender?

A
  • Often used by statutory bodies to regulate bids
  • Tenders can be invited in excess of a figure
  • detailed terms given prior
  • Applicants bid blindly
  • deemed to exchanged contracts when bid is accepted
  • No opportunity to change the bids
  • offers open in front of client and solicitor
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5
Q

Tell me what the purchaser needs to do before an auction?

A
  1. view the property
  2. take legal advise
  3. read notice to prospective buyer
  4. Consider having a survey done
  5. Arrange a 10% deposit for exchange (hammer fall)
  6. Arrange insurance
  7. Provide ID for AML
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6
Q

Tell me what the auctioneer needs to do before an auction?

A
  1. Carry out legal and conflict checks
  2. Inspect
  3. Value
  4. Recommend reserve and guide price to vendor
  5. Agree TOE in writing
  6. Agree marketing plan
  7. Provide auction pack
  8. Prepare catalog in line with consumer protection regs
  9. Publish general conditions of the sale
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7
Q

What is a special purchaser?

A

A ‘special purchaser’ is an asset may be worth more than MV to somebody.

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8
Q

Tell me about the Money Laundering Regs 2017

A

You must look for red flags from

  1. Your client
  2. The parties
  3. Source of funds
  4. The transaction
  5. The instruction

You must ensure

  1. your staff are properly trained including data protection training
  2. you have the correct policies and systems in place
  3. Comply with new customer due diligence, enhanced due diligence and simplified due diligence requirements
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9
Q

Tell me about customer due diligence checks

A
  • I.D checks on vendor and purchaser

Simple Due diligence
Risk Assessment based

Enhanced Due diligence
When a situation presents a higher risk, risk sensitive

Politically exposed persons
Includes domestic PEPS and Foreign PEPS

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10
Q

What are the key legislation in the agency based competencies?

A
  1. Misrepresentation Act
    Providing false statements given during pre contractual enquiries which induces the other party
    civil offense - can be sued for financial damages
  2. Estate Agents Act
    s.18 - confirm terms
    s.21 - declare personal interests
    Warning order or fine can be issued
  3. Consumer Protection Regs
    Must treat consumers fairy and not mislead information during marketing
    Unlimited fine or up to 2 year in prison
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11
Q

What are the key RICS professional statements relating to agency competencies?

A

RICS UK commercial real estate agency professional statement 2016
RICS conflict of interest in real estate agency 2017
RICS countering money launder, bribery, corruption and terrorist financing 2019

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12
Q

What does the RICS UK commercial real estate agency professional statement 2016 cover?

A
  1. Standards and ethics
  2. Securing instructions
  3. Disposals inc marketing
  4. Implementing the disposal
  5. Acquisitions
  6. Ending the instruction
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13
Q

What pre acquisitions checks would you advise for land for development?

A
  • Land registry checks
  • Contamination (review the site history)
  • Ground investigations (whats on the land, services etc)
  • Any leases/licences on the land
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14
Q

Tell me about failure to complete a transaction?

A

The vendor can serve a notice to complete on the proposed purchaser and set a deadline.
The deposit can be retained by the vendor
- legal fees can be paid even if transaction doenst compelte

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15
Q

What are the advantages and disadvantages to auctioning?

A

+ - Can be quick,

  • Guarantee sale
  • useful method of it is an unusual property
  • ve
  • Lack of confidentiality
  • Vendor cannot choose the purchaser
  • cost of promotion and publicity
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16
Q

Tell me about the cooling off period?

A

14 days. It allows clients to change their minds in accordance with current consumer protection regs.

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17
Q

Talk me through a sales instruction?

A
  • Check competence
  • Check conflict of interest
  • issue agreement to the client and receive agreement sighed by the client
  • Anti money laundering checks
  • Gather information
  • Check VAT position
  • Inspect and measure
  • confirm the fixture and fittings with the vendor
  • Carry out research and establish comps
  • Undertake a valuation
  • Prepare marketing report to your client with recommendations
  • Obtain approval from your client
  • Undertake marketing as agreed with by your client
  • Negotiate, draft heads of terms and instruct legal
  • Invoice upon completion
18
Q

What must your agreement to your client state?

A
  • The agency basis
  • The Agency rights
  • proposed fee
  • Marketing costs
  • confirmation there are no conflicts
  • Money laundering requirements
  • timescales
  • Details of CHP
  • Must be signed and returned before instruction commences
19
Q

what differs between sole selling rights and sole agency rights fee basis?

A

Sole selling rights -fee can be paid even after period ends if the purchaser was introduced by the firm during the period contract

Sole agency rights - A fee is only due if the agent introduced purchaser within the term of instruction

20
Q

Talk me through an acquisition instruction?

A
  • check competent
  • Check for conflicts
  • Agreement on terms of engagement
  • Understand clients objectives
  • consider techniques to find property
  • Measure inspect and value
  • Check planning, conditions, asbestos, legal title etc
  • Arrange for a structural survey to be carried out
  • Negotiate and instruct legal
21
Q

What are the principles of the estate agency act 1979

A
  • Clarity on terms (s.18)
  • Honesty and accuracy
  • Disclose any interests
  • open and transparent
  • Dont discriminate (s.21)
  • Inform your client of all offers
  • Keep clients money separate
22
Q

What is a TOGC status?

A

‘Transfer of going concern’. Its a sale of business including assets, which is treated outside the scope of VAT. It generally results in cash flow savings for both the buyer and seller.

23
Q

What is a special purchaser?

A

Where they are likely to want to pay over MV for the land

24
Q

What must firms do to counter money laundering?

A
  1. Not facilitate or be complicit in money laundering or terrorist financing activities
  2. Have systems and training in place
  3. Report any suspicions of money laundering or terrorist financing activities to the
    relevant authorities
  4. Evaluate and review periodically
  5. Carry out checks on clients
  6. Record and retain information detailing how the firm has met the requirements of this
    professional statement
25
Q

What must firms do to counter Bribery?

A
  1. not offer or accept, directly or indirectly, anything that could constitute a bribe
  2. have plans in place to comply with applicable laws governing bribery and corruption, and ensure that these are followed
  3. report any activity
  4. act with due diligence
  5. Retain information detailing how the firm has met the requirements of this professional
    statement
26
Q

How are consumers protected by the consumer protection regulations?

A

Consumers are protected from unfair trading, consumers are protected by statutory rights and regulations against unfair contracts. They a right to have a cooling off period. (14 days)

27
Q

What are the stamp duty land taxes?

A

up to £150k - 0%
£150,001- £250,000 - 2%
£250 + - 5%

28
Q

What’s the legal process once terms have been agreed?

A

Instruct solicitors, land reg checks, prepare the transfer document, agree and sign.

29
Q

Whats the RICS guidance regarding auction?

A

RICS guidance note selling personal property at auction.

PS. Auctioneers selling real estate.

30
Q

What is the difference between sole selling rights and sole agency?

A

Sole selling rights is the same as sole agency except you have to pay the estate agent even if you find your own purchaser, such as a friend. Multiple agency agreements allow you to market the property with several agents and, as a result of the extra competition for buyers, agents charge higher fees

31
Q

What are the advantages and disadvantages of each method of sale.

A

Private Treaty =
+ve is - No time pressures from market, confidential, vendor under no obligation to sell.
-ve - Potential for gazumping, last minute decision not to buy.

Informal Tender
+ve is - Vendor is not obliged to take highest offer
-ve - people can submit higher offers after deadline, gazumping (unethical)

Formal Tender
+ve High level of accountability
Can lead to direct contract
-ve - Binding on both parties.

Auction
+Ve - quick and certainty of sale, can be used for specialized assets/ hard to value
-ve - lack of confidentiality, vendor cannot choose the purchaser. Short marketing period

32
Q

What are the penalties for not complying with the Estate Agency Act 1979?

A

Warning order or Prohibition order (stops the agent from practicing)

Run by the trading standards office.

33
Q

What are the penalties for not complying with the Consumer Regs 2008?

A

Misleading info/ concealing information

Unlimited fine and/or prohibition order or up to 2 years in prison.

34
Q

What are the penalties for not complying with the Misrepresentation Act 1967?

A

A false statement made during pre contractual inquiries which has the effect of inducing the other party to purchase.

Sued for financial damages and/or contract rescinded.

35
Q

Whats the key term about accepting the highest bid.

A

” the vendor is under no obligation to accept the highest, best or any bid”

36
Q

What are the key inclusions for a bid letter?

A
  • Timescales for the offer
  • Solicitors details
  • Confirmation of finance arrangements
  • Conditions of the offer
  • Confirmation that gazumping will not be accepted
  • “the vendor reserves the right not to accept the highest, best or any bid”.
37
Q

What due diligence did you carry out at Shortwood Road?

A
  • conflict of interest
  • anti money laundering checks
  • desktop - history of the site
  • site inspection
  • inspection of the local and surrounding area.
38
Q

Why did you proceed with the only interested party rather than putting it to the market?

A
  • special purchaser, under my firms policy if they have a special interest proceed with private treaty
  • land would not have any value to anyone else
  • garden land only
39
Q

What measures have you in place to protect money laundering for sales?

A
  • I.d checks

- check where the source of money is coming from if high risk

40
Q

What pre acquisitions would you advise for land for development?

A
  • Land registry checks
  • Contamination (review the site history)
  • Ground investigations (whats on the land, services etc)
  • Any leases/licences on the land
41
Q

What would you do if you found contamination on the land? How would you spot it?

A
  • oil drums, bare ground, underground tanks etc
    3 phase
    1. desktop - site history and site inspection
    2. Soil samples
    3. remediation report
    **Seek specialist help
42
Q

What pre acquisitions would you advise for land for development?

A
  • Land registry checks
  • Contamination (review the site history)
  • Ground investigations (what’s on the land, services etc)
  • Any leases/licences on the land

Purchase and Sale (1 decks)

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