Purchase and Sale

Question 1

What did the Agreement for Lease include for at Tesco New Malden?

Answer 1

Re painting car parking spaces, a new access and egress

Question 2

What is the definition of GB?

Answer 2

Golden brick is a term used to describe the level of construction a new development needs to reach in order to qualify for zero rating. This enables housing associations (who can’t recover VAT) to purchase land free of VAT which might otherwise be charged. It also allows the developer to recover its own VAT.

Question 3

When does GB happen?

Answer 3

Commonly known as the ‘golden brick’, that is, beyond foundation level. This means the supply can normally be zero-rated.

Question 4

What law relates to purchase and sale ?

Answer 4

Estate agency Act 1979
Misrepresentation Act 1967
Consumer Protection from unfair trading regulations 2008
Bribery Act 2010
Equality Act 2010

Question 5

What are the principles of the Estate agency Act 1979

Answer 5

• Clarity as the terms of agency (Section 18)
• Honesty and accuracy
• Agreement and liability for costs
• Openness regarding personal interest (section 21)
• Absence of discrimination
• Legal obligations to tell client about offers received
• Keep client money separate
  CIVIL matter and can be stopped from trading as an agency if you do not adhere with Act

Question 6

What are different of Asbestos ?

Answer 6

White
Brown
Blue

Question 7

What are the different methods of sale ?

Answer 7

Formal
Informal
Private treaty
Auction

Question 8

What process would you follow if you were asked to sell a brownfield site?

Answer 8

• SUK
• Conflicts, independent and terms
• Due diligence
• Marketing
• Customer due diligence
• If interest is high then carry out an informal tender (no obligation)
• Refer all offers to client
• Get approval from client
• Instruct solicitors
• Assist in answering queries
• Finalise sell
• Raise invoice and close appointment.

Question 9

If you were selling a property what checks would you do?

Answer 9

Terms of engagement
Conflicts of interest
Money laundering checks
Due diligence
Marketing
Recommendation to client

Question 10

What are the key sections of the estate agency act 1979?

Answer 10

Section 18- Terms
Section 21- personal interest

Question 11

What type of searches are carried out during the purchase process?

Answer 11

Local search – to obtain a variety of information from the local council, such as whether the property is affected by plans for a new bypass or a planning enforcement notice.

Drainage and water search – does the property have mains water and drainage? The local water company will also provide other useful information, such as the position of pipes.

Environmental search – is the property affected by contamination that could involve costly removal?

Planning search – find out whether the neighbours have got planning consent for a large extension or if a planning application has just been lodged for a new superstore down the road.

Flood risk report – check whether the property is at risk from flooding.

Coal mining, brine pumping, and other mining searches – to find out if the property could be affected by old mine workings or a new opencast mine nearby.

High Speed Rail 2 (HS2) – reveals if your new home will be affected by new rail line.
Chancel repair liability search – check you won’t be liable to pay for the maintenance of your local church.

Land registry pre-completion search – make sure the seller still owns the property on completion.

Question 12

What are the two selling rights?

Answer 12

Sole selling rights
Sole agency rights

Question 13

What is sole selling rights?

Answer 13

Means fees are payable if contracts are exchanged in a period when the sole selling rights exist. Fees payable even if someone else sells the property in that period.

Question 14

What is sole agency rights?

Answer 14

Means that the fee is payable only if the agent introduced the purchaser.

Question 15

What are the Types of Agency?

Answer 15

Sole
Joint
Multiple

Question 16

What is multiple agency?

Answer 16

Any amount of agents can be involved but the agent who finds the purchaser gets paid the fee.

Question 17

How does Section 18 relate to you’re agency practice? What are the four agency bases?

Answer 17

S.18 (provision of information) – terms of engagement
a. Cost and when client would be liable
b. Nature of agency
c. Other services you intend to offer
d. Confirm will forward any offers (make in writing)
e. Must be a prescribed – or no legal right to sue for fees

Specify all costs/fees in advance , in writing in terms of business or engagement
* sole selling rights

The client will be liable to pay remuneration, in addition to any other costs or charges agreed, in each of the following circumstances:

• if (unconditional contracts for the sale of the property are exchanged for the sale of the property are concluded) in the period during which we have sole selling rights, even if the purchaser was not found by us but by another agent or by any other person, including yourself and
• if (unconditional contracts for the sale of the property are exchanged for the sale of the property are concluded) after the expiry of the period during which we have sole selling rights but to a purchaser who was introduced to you during that period or with whom we had negotiations about the property during that period.
• sole agency

The client will be liable to pay remuneration in addition to any other costs or charges agreed, if at any time (unconditional contracts for the sale of the property are exchanged for the sale of the property are concluded): ∫
- with a purchaser introduced by us during the period of our sole agency, or
- with whom we had negotiations about the property during that period or with a purchaser introduced by another agent during that period.

• joint agency
  At least two agents are appointed. Payment will be apportioned as agreed by you, the seller and the other joint agents within an agreed timescale. A joint sole agency will have at least two agents acting as sole agents. Your payment will be divided as agreed, no matter who sells the property, and the timescale for this should be agreed in advance.
• multiple agency
  Two or more agents are appointed and payment is paid to the agent who finds the buyer

Question 18

What is a Memorandum of Sale?

Answer 18

Sales agreement, something called head of terms or sale memo. Include terms of sale, price, timeline, schedule of payments, any conditions, names of parties and their solicitors

Question 19

What was involved in your Agreement for lease at Tesco New Malden?

Answer 19

This involved us completing a number of elements of work to begin developing the overall scheme, thus redesigning
a car park and providing a new access and egress to the site.

Question 20

What did you negotiate on the HoTs at Manor Road Quarter?

Answer 20

I negotiated Heads of Terms including elements such as CHG Interest in the Property, Lease Term, Service Charge, Development Agreement, Grant Funding clause, Golden Brick Clause and Performance Bond working.

Question 21

What did the Bid Proforma include at Tesco New Malden?

Answer 21

It included Purchaser Details, Deposit, Planning Overage, Proof of Funding and an acceptance of vendor’s conditions.

Question 22

What did you agree with the party regarding GB?

Answer 22

I agreed an update definition as per the Tax Teams advice.

Question 23

What did you need confirmation regarding?

Answer 23

Evidence of CIL exemption and confirmation of LA Nomination agreement

Question 24

What due diligence did you require before completing at Ilderton Road?

Answer 24

Utility Capacity Checks, UXO Survey and legal due diligence

Question 25

What does the The Estate Agents Act 1979 cover?

Answer 25

The disposal or acquisition of a freehold interest in land, or leasehold with capital value.

Question 26

What are the key elements of the act?

Answer 26

○ Section 18 of the Act, in particular, requires clear terms of agency to be agreedwith itemised costs or fees agreed in advance, in writing.
○ Section 21 requires candidates to declare any personal interestin the marketing particulars and terms of engagement, or otherwise to decline to act if it is not possible to do so ethically.

Question 27

What are the four methods of sale?

Answer 27

 Private treaty is the most common method of sale, typical approach used by residential estate agents to sell houses.
○ The advantages of private treaty are
○ Flexibility -the parties can negotiate in their own time and without commitment in the open market
○ Advertising can be limited or extensive to suit the client’s requirements
○ It is relatively inexpensive
○ The seller is not obliged to sell
○ It is a confidential process

 The disadvantages of private treaty are:
○ There is the potential for gazumping or gazundering, both of which are considered to be unethical practices by RICS
○ There may be the risk of a late decision not to buy (withdrawals) and associated abortive costs
○ The quoting price could be under or over stated, requiring prudent advice on offers put forward or offers considered

• Formal tenders are relatively uncommon, being used primarily by public bodies to demonstrate accountability, and the process is generally costly. After a bid is accepted, contracts are immediately exchanged. No further negotiations take place after tender returns are received. OJEU bids. The tender pack should include full marketing material, a legal pack and requirements for the contents of written bids, e.g. being in excess of a specified figure.
• Informal tenders, which are far more common, sometimes used to draw a private treaty sale to a conclusion by inviting prospective buyers to submit best and final bids. May be used for sensitive sites, where there are competing developers for land, when advising a local authority and price is not the sole consideration, where a property requires modernisation. Interested parties are asked to submit the required information by a certain date, and these returns are then opened in front of an independent witness. There is no obligation in an informal tender for the client to accept the highest or indeed any other bid,and either party can withdraw until exchange because the process is not legally binding.
• Pros/cons between formal/informal tender
  Further negotiation is possible and the vendor is not obliged to accept any offer, allowing them to control the process and timescales.
  ○ Defined timescale for receipt of offers and encourages interested parties to act swiftly.
  ○ Disadvantage -parties having insufficient time to arrange lending facilities
  ○ Either party can withdraw until the point of exchange
  ○ Informal –
• Expensive due to administrative requirements –full legal pack
  ○ Blind bids –no opportunity to withdraw or alter
  ○ Sellers agent makes recommendation
  ○ Selected party informed –may be legally binding –binding tender

Formal
* The choice of method will depend on the client’s objectives and budget, the need for accountability, market conditions and timing requirements.
Selected party informed –may be legally binding –binding tender
○ May proceed straight to contracts

Auction sales tend to be used where a property is unique or cannot be priced accurately; for instance, when it is in poor repair, a quick sale is needed, there is high market demand, or there are serious defects. At auction, contracts are exchanged and a deposit paid when the gavel falls. Auction has advantages because it provides certainty over timing; however, it can reduce marketing exposure and is not confidential, while the purchaser cannot be selected and a failure to sell may lead to blighting of the property.
* “The vendor is under no obligation to accept the highest best or any bid”

Question 28

What regulations covering Money Laundering?

Answer 28

Money laundering Regulations 2007

THREE main areas of offence:

○ Tipping off
○ Assisting
○ Failing to report

• Must have procedures for identifying clients & ask for photographic ID and proof of address

Failure to comply could result in 14 years / unlimited fine

Question 29

What are the 7 key principles of the Estate Agents Act (1979)?

Answer 29

Clarity on the Terms of Agency (S.18)
Honest and Accuracy
Agreement of liability for Costs
Openness regarding Personal interests (S. 21)
Absence of Discrimination
Legal obligation to tell the client Offers
Keep client’s Money separate

Clients have a 14 day cooling off period upon instruction of an agent.

Question 30

Who policies the Estate Agents Act?

Answer 30

National Trading Standards Estate & Letting Agency Team

Question 31

Key principles of the RICS Global Real Estate Agency and Brokerage Professional Statement (2016)?

Answer 31

Professional Statement

All RICS members involved in the sale, letting and leasing of real estate must follow.

Includes:
- Ethics
- Securing instructions
- Acting for the seller
- Acting for the buyer

It is similar to the UK specific professional statement - RICS UK Commercial Estate Agency (2016).

Question 32

How do you choose which method of sale to use?

Answer 32

1. Client objectives
2. Desired timescale
3. Public accountability
4. Current and likely future market conditions
5. Anticipated level of demand
6. Likely target market

Question 33

What do HoTs generally include?

Answer 33

A
1. Vendor’s agent
2. Vendor’s solicitor
3. Purchaser
4. Purchaser’s solicitors
5. Purchase price
6. The property
7. The deposit
8. Timing
9. Purchaser’s obligations
10. Rights
11. Costs

Question 34

What are the forms of purchase vehicles?

Answer 34

Special purchase vehicle companies
- a company formed to buy a property to reduce the payment of SDLT

REITs
- a company tax resident in the UK which is listed on the stock exchange and has at least 75% of business in property investment.

JVs between 2+ parties.

Question 35

What is SDLT?

Answer 35

It is a tax that is applied to the purchase of all property.

There are different residential and commercial bands.

Varying eligibility criteria depending on if you’re i.e. a first time buyer or a 2nd home buyer.

Question 36

What are the residential SDLT rates?

Answer 36

£0 - £125k = 0%
£125 - £250k = 2%
£250 - £925k = 5%
£925k - £1.5m = 10%
£1.5m + = 12%

Question 37

What are the recent changes to SDLT?

Answer 37

This measure increases the amount that a purchaser can pay for residential property before they become liable to Stamp Duty Land Tax (SDLT), while maintaining the higher rate of 3% on additional dwellings.

The measure increases the residential nil-rate tax threshold from £125,000 to £250,000.

The nil-rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.

The measure means that all individuals purchasing residential property on or after 23 September 2022 will pay less or no SDLT.

Question 38

Suggested timeline of a sales instruction?

Answer 38

A
1. Receive instructions from client
2. Check competence and conduct COIs
3. Issue agency instruction agreement
4. Receive signed agreement back (S. 18 EAA 1979)
5. Money laundering checks
6. Gather information & undertake due diligence
7. Check VT position
8. Inspect property
9. Prepare marketing report & recommendations
10. Get marketing materials signed off
11. Undertake marketing
12. Negotiate
13. Draft HoT
14. Liase with lawyers during legal process
15. Invoice

Question 39

How do you seek proof of funds?

Answer 39

A written statement from the purchaser’s solicitor.

Question 40

What happens at exchange?

Answer 40

Buyer pays a deposit and the sale/purchase contract becomes legally binding

Question 41

When must a firm be regulated?

Answer 41

If 50% or more of the principles are RICS members

Question 42

Name a time you submitted a bid?

Answer 42

Tesco site, New Malden – After completing a residual valuation for the site and running multiple sensitives, I had an offer signed off by our Group Development Director. The purchase involved stepping into an Agreement for lease that I instructed a solicitor to review to ensure the terms were acceptable to Clarion.

This involved us completing a number of elements of work to begin developing the overall scheme, thus re-designing a car park and providing a new access and egress to the site.

I prepared an offer letter outlining the conditions and required information for the bid including payment profile in line with our expected programme for the work required by the Agreement for lease and solicitors details.

Further to this, I also completed the Bid Pro forma that included Purchaser Details, Deposit, Planning Overage, Proof of Funding and an acceptance of vendor’s conditions.

Question 43

Name a time you advised on a S106 bid?

Answer 43

Manor Road Quarter, Canning Town – I worked alongside Clarion’s Partnerships team to negotiate a S106 Offer. To do this I prepared a residual appraisal to support the bid. When this figure was accepted I negotiated Heads of Terms including elements such as CHG Interest in the Property, Lease Term, Service Charge, Development Agreement, Grant Funding clause, Golden Brick Clause and Performance Bond working.

Further to this alongside Clarion’s Tax team I reviewed the possible implications of a Golden Brick definition, which I needed to clarify and instructed them to review and provide an overview of the tax implications of Golden Brick. I then negotiated an updated definition in line with the version suggested by the Tax team.

I then outlined the terms and conditions, and ADVISED the Senior Leadership team to bid as per the negotiated clauses including the confirmation of LA Nomination Agreement and satisfactory evidence of CIL exemption.

This deal was unsuccessful due to the Local Authority requiring 100% of nominations and this being unacceptable to Clarion.

Question 44

Name a time you advised submitting a bid and why you did?

Answer 44

Ilderton Road – After completing a residual appraisal I prepared an initial Offer Letter which acknowledged a required 8 week period to complete various elements of due diligence including Utility Capacity Checks, UXO Survey and legal due diligence.
I advised that the Client make an offer to unlock the opportunity of looking at the site further as we were aware the vendor was looking at re-submitting planning and we wished to work alongside them and influence the planning. However, the vendor rejected the offer.