Purchase and sale Flashcards

1
Q

How do you adhere to Money laundering and terrorist financing regs 2022? CHECK UPDATES

A

from 1 September 2022

These regulations update the existing UK anti-money laundering (AML) legislation by making some time sensitive updates to The Money Laundering Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs).

The changes are being made to ensure that the UK continues to meet international standards on AML and counter-terrorist financing while also strengthening and clarifying how the UK’s AML regime operates, following feedback from industry and supervisors.

Regulation 4 widened, specifically includes Limited Partnerships

Regulation 30A of the MLRs requires relevant persons to report to the Registrar of Companies any discrepancies between the information they hold about the beneficial owners of companies, as a result of CDD measures, and the information recorded by Companies House on the public companies register. The requirement applies at the onboarding stage, “before establishing a business relationship” therefore the amendment aims to enhance the accuracy and integrity of the register by making the obligation ongoing.

Regulation 13 makes it clear that supervisory authorities can directly require members to show them Suspicious Activity Reports (‘SARs’) “to help them in fulfilling their supervisory functions, and driving greater consistency of approach to utilising SARs across supervisors”.

Regulation 6 introduces a new requirement for all supervised firms to perform a proliferation financing (PF) risk assessment (similar to the AML firm-wide risk assessment). WHAT DOES THIS MEAN???

WHO ARE RELEVANT PERSONS???

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2
Q

How do you adhere to the Estates Agent Act 1979?

A

Estate agent if:
- deal with ppl who want to buy or sell FH or LH property
- you do this as part of a business
- you act on instructions from a client

S18
What the Act requires is that there is certainty as to the circumstances of when a fee is payable, and how much that fee will be.

Must give clients in writing:
- all circumstances you will charge an agency fee inc if taken off market
- amount of fee or how calculated
- details of any charges on top of agency fee
- when quoting a % agency fee or fixed fee, should inc VAT

S21
The Act states that an agent must not enter into negotiations regarding a property in which he or a connected person has a personal interest until such interest has been disclosed to all parties.

Must reveal promptly any personal interest you or connected person have in transaction.

  • must treat everyone equally, fairly, promptly when informing clients about offers or services to buyers
  • must not make misleading statements, falsely describe a property (offence under CPRs 2008), show bias
  • must give clients written details of all offers received promptly
  • requirements on client money handling
  • 2 types of deposit:
    pre-contract (before exchange)
    contract (on exchange)
  • must put in a client account separate from rents etc.
  • pay interest of over £10 for deposit over £500 to client
  • keep detailed records of all transactions related to a client account inc receipts
  • accounts must be audited
  • must keep records for 6 years
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3
Q

What are the different methods of disposal and acquisition?

A
  • private treaty
  • formal tender (binding)
  • informal tender (subject to contract)
  • auction

depends on:
client objectives
public accountability
current and future market conditions
level of demand for property, target market
timing requirements

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4
Q

When would you advise to buy/sell by private treaty?

A
  • parties free to negotiate in own time without commitment
    -most popular method of sale
  • private matter

pros:
- flexibility
- parties control process
- vendor under no obligation to sell
- confidential

cons:
- potential for gazumping/gazundering
- late decisions not to buy
- associated abortive costs

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5
Q

When would you advise to buy/sell by auction?

A
  • ToE, conflict of interest, money laundering checks
  • clarity required over Auctioneer’s rights to refuse bids, regulate bidding increments, accept proxy, telephone/internet/postal bids, to sign contract on behalf of vendor
  • full due diligence should be completed prior to offering property for sale
  • all relevant property docs must be available for inspection in advance
  • General Conditions of Sale, Memorandum of Sale and any notice to bidders to be published by Auctioneer
  • RICS guidance CAC
  • reserve price needs to be agreed with vendor, contracts exchanged at fall of gavel
  • auction particulars must be in acc with CPRs and Misrepresentation Act 1967
  • RICS guidance online marketing and conduct of electronic bidding and dealing with clients’ money, insurance required by purchaser at point of exchange
  • actions required by purchaser before sale day:
    view property, consider structural survey
    legal advice, due diligence
    read Notice to Prospective Buyers
    arrange dposite of 10% and insurance for exchange
    provide ID for money laundering purposes

pros:
- achieves relatively short timetable for disposal
- certainty of sale, assuming reserve met
- useful for unusual property hard to value
- used where likely strong level of interest

cons:
- costs of promotion and publicity
- lack of confidentiality over price achieved
- intensive nature of short marketing period

READ RICS GUIDANCE

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6
Q

When would you advise to buy/sell by formal tender?

A
  • often used by statutory body for control/accountability, or where strong interest
  • also known as “sealed bids”
  • tenders invited, may be in excess of figure,
    vendor can state under no obligation to accept highest bid
  • full marketing material to inc comprehensive legal pack in advance and clear letter setting out requirements
  • applicants bid blindly
  • no opportunity to change bid after offer
  • usually no immediate exchange of contracts but can use blind bidding process to decide ID of purchaser then proceed to contract in acc with T&Cs of sale listed in marketing particulars

pros:
- very accountable
- can speed up process exchange contracts
- in some instances, as soon as best bid selected, banker’s draft accepted and contracts exchanged
(WHAT DOES THIS MEAN?)

cons:
- no scope for negotiation

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7
Q

When would you advise to sell by informal tender?

A
  • best offers or bids
  • used when good level of interest
  • “best bids” not legally binding
  • agent invites in writing all interested parties to bid within timescale,
    must inc deadline, sol, conditions, not variable
    (not an escalator bid offering excess of other offer)
    “vendor reserves right not to accept highest or any offer made”

pros:
- can be used during private treaty negotiations to obtain best offer from applicants
- further negotiation can follow, can be used as negotiating mechanism
- usually less onerous terms and conditions

cons:
- will not lead to direct contract for sale

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8
Q

How do you deal with bids by informal/formal tender by email?

A
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9
Q

How do surveyors apply “Auctioneers selling real estate, 2018”?

A

Common auction conditions
(not mandatory, important guide)
aims to:
- strike balance between contractual needs of seller and buyer, while recognising seller will wish to determine principle terms under which to sell
- make it easier to see all contract terms by having 1 doc that embodies all terms within it
- ensure contract user-friendly, headings and plain English
- increase convenience of goinf to auction
- reduce legal costs to buyers and sellers by using contract in common usage, easy to understand, with simple-to-complete legal form for property-specific special conditions of sale

CAC consist of:
- glossary of defined terms
- auction conduct conditions
- general conditions of sale
- extra/special conditions
- form of sale memorandum

Acting for seller:
- AML checks
- seller’s authenticity
- right to sell
- info from seller’s sol
- confirmation from seller than any existing instructions to other sellers withdrawn
- if joint auctioneers apptd, ensure seller documented duties/liabilities of each and agreed in writing basis of remuneration and reimbursement of costs

  • Fees and expenses
  • Provision of information
  • Sales prior to and post auction
  • Reporting bids prior to auction
  • The auctioneer’s terms for taking deposits
  • The auctioneer’s terms of appointment
  • Auction venue
  • Conditional contracts
  • Reserve price
  • Guide price
  • VAT
  • Rental arrears

Auctioneer’s rel with buyer/bidders:
- right to cancel auction
- sell as whole or in lots
- withdraw or sell property prior to auction
- determine conduct of auction between competing bidders
- regulate size of bidding increments
- refuse bids
- bid on behalf of seller up to, but not inc or above, reserve price

  • Publication of auction results
  • Data protection
  • Sale of qualifying investments under the Landlord and Tenant Act 1987 (qualifying owners of leasehold flats the right of first refusal to purchase the freehold)
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10
Q

What are the legal processes needed to complete a sale or purchase?

A
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11
Q

What are the factors affecting value of purchases/sales?

A

Supply and demand
Location
Condition
Restrictive covenants
Planning

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12
Q

What is the Leasehold Reform Act 1967?

A
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13
Q

What is compulsory purchase?

A
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14
Q

What are restrictive covenants? How can they affect a purchase/sale?

A
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15
Q

What do you need to obtain planning permission?

A
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16
Q

How do you purchase a property?

A
  • instructions
  • conflict of interest, money laundering
  • ToE, understand objectives and search parameters
  • techniques (inc contacts, research)
  • identify properties
  • initial info: location, plans, leases, EPC, planning, H&S/risk assessment
  • inspect and measure
  • further info: title docs, premises (fixtures and fittings?), stat comp, flooding, bdg survey if needed, if let arrears/T covenant strength
  • valuation, comps, market
  • SDLT???
  • negotiate purchase, HoTs, instruct sols
  • conditional contracts can be agreed for various conditions to be satisfied post-exchange of contract and before completion e.g. planning consent/VP
  • liaise with sol on CPSEs/RPSEs commercial/resi etc
  • see through to completion
  • issue invoice upon completion
  • update records (file / in-house e.g. prop info, insurance, finance, business rates, stat comp, service contracts if operational)
  • form of purchase vehicles inc:
    SPV (reduces SDLT)
    JV
    Offshore trusts
    REITs (UK co 75% business property investment)
    (SEE MODERN LEGAL REQUIREMENTS?)
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17
Q

How do you sell a property?

A
  • instructions
  • conflict of interest, money laundering
  • ToE
  • gather info: title docs, plans, premises (fixtures and fittings?), leases, planning, EPC, stat comp
  • check VAT position, check TOGC status
  • inspect and measure
  • valuation, comps, market
  • marketing report with recommendation
  • particulars, client written approval
  • marketing as agreed
  • negotiate sale, HoTs, instruct sols
  • liaise with sol on CPSEs/RPSEs commercial/resi etc
  • see through to completion
  • issue invoice upon completion
  • update records (file / in-house e.g. prop info, insurance, finance, business rates, stat comp, service contracts if operational)
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18
Q

What is a Notice to Complete

A
  • vendor can serve Notice to Complete on proposed purchaser giving deadline to complete
  • legal costs for this work are to be paid by proposed purchaser
  • if deadline passed, vendor can rescind contract and remarket property
  • any deposit can be retained by vendor
  • in addition, vendor may be able to sue for damages to claim for any loss in value (and assoc costs) following sale of property to another party at lower sale price

(happened a lot in 2008)

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19
Q

What are sole selling rights?

A

Sole selling rights:
- typical
- means remuneration will be payable if contracts exchanged in a period when sole selling rights exist, even if purchaser not found by agent but by other party inc client
- also a fee is due after sold selling rights period ends when property sold to a purchaser who was introduced by the firm during the period of sole selling rights contract

Sole agency rights:
- alternative, can be agreed which means a fee is only due if agent introduced purchaser within term of instruction agreement
- less advantageous for agent as only get fee if introduce party

Joint agency:
- 2 or more joint agents share fee on pre-agreed basis

Multiple agency:
- any number of agents but only successful agent gets fee

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20
Q

What is a “ready able and willing purchaser” clause?

A

defined by Estate Agents Act 1979

often inc so when an applicant is ready and able to proceed with a purchase but client decides to withdraw, abortive fee may be charged by agent

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21
Q

What could you put in place for your client disposing of a property if the purchaser’s use is uncertain?

A
  • value on different assumptions
  • dispose as long leasehold with conditions
  • agree sale with restrictions on use
  • overage and clawback ADD NOTES
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22
Q

Can a verbal contract be legally binding?

A
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23
Q

What is capacity in relation to contract law?

A

The law states that individuals who enter into a contract must have the capacity to enter into a contract, otherwise it is voidable.

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24
Q

Does the sale of land have to be in writing and what Act defines this point?

A

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 was enacted to provide clarity as to the circumstances in which a contract for the sale of land could be created.

In simple terms a contract for the sale of land can only be made in writing and by incorporating all of the terms agreed between the parties in one document.

the principles of proprietary estoppel apply so that a claim (which may include a requirement to transfer land) may arise where three principles are established:
A representation or assurance was made to a claimant;
The claimant relies upon that representation or assurance; and
The claimant suffers a detriment in consequence of relying upon the representation or assurance.
Where in any given situation these principles are satisfied the court will, if it considers that fairness demands, apply a remedy to address any unfairness.

importance of:
documenting carefully any discussions or arrangements with a third party;
heading any correspondence “subject to contract”; and
being absolutely clear as to what is intended at all times in relation to landholding.

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25
Q

What are profits a prendre?

A

profits à prendre are rights to take produce from another’s land, such as to extract minerals.

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26
Q

What are rentcharges?
What legislation relates to rentcharges?
What are the implications if a rentcharge is not paid in full?

A

A rentcharge is an annual sum paid by a freehold homeowner to a third party who normally has no other interest in the property.

Since the Rentcharges Act 1977 no new income supporting rentcharges can be created.

most will now expire automatically by 22nd July 2037 (or 60 years after they first became payable)

Certain types of rentcharge are redeemable under the Rentcharges Act 1977. This means that you pay a single lump sum and after that no longer have to pay the rentcharge.

27
Q

What is an example of an equitable interest in land?
What is an example of a legal interest in land?

A

2 tenures: freehold and leasehold

5 Legal interests
- Easement or right over land
- Rentcharge
- Charge by mortgage
- Other charge
- Rights of entry
Known as “third party rights”; rights in land controlled and enjoyed by a third party; binding on a purchaser of the land

Equitable interests
A legal interest is a right in property governed by statute and common law. An equitable (beneficial) interest is a right in property governed by the law of equity.

Historically 2 systems of justice in England: common law courts and Court of Chancery
(appeals considered according to general principles of fairness or “equity”)
Law of equity developed in parallel to common law

Legal interests in land binding on purchasers of land; other rights not i.e. “restrictive covenant”
While the text of these restrictive covenants will be noted in full on the Land Registry title concerned (ie the burdened land), the land that has the benefit, and whose owner may be able to enforce them, will not always be so easily identifiable. This is principally because the benefit of a restrictive covenant is not a legal but an equitable interest so it is not registrable by the Land Registry.
To identify the benefitting land, it will often be necessary to review the conveyance that initially imposed the restrictions

HM Land Registry registers only legal estates and the proprietor is registered as the owner of a legal estate.
A beneficial owner is a person entitled to the benefit of the land and on their death the equitable interest may not pass in the same way as the legal ownership does.

Parties who hold land on trust for themselves can do so in two ways – as joint tenants in equity or as tenants in common.
If an equitable joint tenancy exists, the beneficial interest of any joint tenant (proprietor) will pass on death to the surviving tenant. The last survivor will then hold the land as sole legal and beneficial owner and, as a result, the trust will come to an end. On a sale of the land that person will then be entitled to receive the whole of the purchase money.
Some people may not want their interest in the land to vest in the surviving tenant. If they decided to hold the land as tenants in common, on their death their share would vest in the beneficiaries under their will, for example, their children or relatives.

28
Q

Tell me about an information pack you have prepared for a purchase/sale transaction.

A

Leasehold information pack:
likely to include information on:
Ground rents
Service charges (for instance, costs needed to maintain any lifts, communal stairs or hallways, parking spaces, gardens, entry systems, etc)
Proposed future maintenance works (also known as ‘major works’)
Last three years of the management company’s accounting history
Fire risk assessments (typically, a ‘form EWS1 External Wall Fire Review’)
Buildings insurance
Asbestos survey
Freeholder contact details
Freeholder fees, including notice or deed of covenant fees (if applicable)
Disputes by the leaseholder (if applicable)
Applications to buy the freehold (if applicable)

Home information pack
Michael Gove announced on 2 February 2022 as part of his “Levelling Up proposals” an unexpected commitment to create a new version of the much-criticised Home Information Pack. It was announced that:
“We will improve the home buying and selling process, working with the industry to ensure the critical information buyers need to know is available digitally wherever possible from trusted and authenticated sources.”
Home Information Packs were first introduced in 2007 and contained a series of mandatory documents including the then-new Energy Performance Certificate, a Sale Statement which would include property searches, and evidence of title documents. For leasehold properties there were also copies of the lease and other relevant documents. The Pack had to be produced before the Property was marketed. The packs were scrapped in 2010 although the requirement to provide an energy performance certificate remained.

29
Q

Tell me about CPSEs and the sale process.

A

Commercial Property Standard Enquiries

CPSE 1 – General pre-contract enquiries for all commercial property transactions;
CPSE 2 – Supplemental pre-contract enquiries for properties subject to tenancies for commercial use;
CPSE 3 – Supplemental pre-contract enquiries for commercial property on the grant of a new lease;
CPSE 4 – Supplemental pre-contract enquiries for commercial leasehold property on the assignment of a lease;
CPSE 5 – Enquiries before the surrender of a rack rent commercial lease;
CPSE 6 – Supplemental pre-contract enquiries for properties subject to residential tenancies;
CPSE 7 – General short form pre-contract enquiries for all property transactions.

CPSE 1:
- Boundaries and extent
- Party Walls
- Rights benefitting the property
- Adverse rights affecting the property
- Title policies
- Access to neighbouring land
- Access to and from the property
- Physical condition
- Contents
- Utilities and services
- Fire safety
- Planning and Buildings Regs
- Insurance
- Rates
- Notices
- SDLT
- VAT
- TOGC

Residential:
LPE1 leasehold property enquiries form
TA6 building and property information
TA10 fittings and contents
TA7 (of leasehold property)
TA8 new homes
TA4 / TA9 commonhold
TA13 completion info for buyer’s sol (info on VP, deeds, docs, bank details, amount to be paid on completion)

30
Q

What is a Memorandum of Sale?

A

A Memorandum of Sale is a written confirmation of the essential details of a property transaction. It’s a simple document that’s drawn up by the estate agent after a property goes from being Under Offer to Sold STC.

The properties’ full address
The properties’ agreed price
How much of a deposit will be paid
Confirmation if the buyer will be paying for the property in cash, or securing finance through means such as a mortgage
The relevant HM Land Registry number
Confirmation of ownership (via HM Land Registry)
The name, contact details and address of the buyer, the seller and both of their conveyancing solicitors
What fixtures, fittings and furniture will be included in the sale
If the property is a leasehold or freehold, and in the case of a leasehold how long is left remaining on the lease
Expected exchange and completion dates

sellers vulnerable to a tactic called Gazundering, and buyers vulnerable to Gazumping until contracts are exchanged.

Auctioneers also often have tailor-made versions.
When selling your property at auction the process works differently.
This is because when the auctioneers hammer falls you are placed into a legally binding contract and have committed to the sale/purchase.
A memorandum of sale is then immediately completed and issued, while the deposit and auction house fees are paid.
The document is then to be forwarded to both parties’ solicitors.

31
Q

Talk me through the legislative/regulatory requirements relating to auctions.
Talk me through the auction process.

A

When a house goes up for sale by auction, it’ll be listed online by either an estate agent or an auction house.
Auction properties are usually online for about a month before the auction. This gives time for interested buyers to view it and decide if they want to bid.
In a traditional auction, there is a set auction day and time. The auctioneer will invite interested buyers to bid in quick succession.
In a modern auction, you can submit bids online up until a final time and date.
In both cases, the seller will set a reserve price. This is the lowest amount of money they would accept to sell.
The highest bidder over the reserve price gets the property.
If you’re the highest bidder, you’ll have to pay a deposit or a reservation fee on the day of the auction.

Traditional auctions are also known as unconditional auctions. They tend to be favoured by experienced investors and cash buyers.
This is because they’re less flexible and they have a shorter time frame.
Traditional auctions are usually held at an auction house. All interested buyers will be there and they’ll place bids in front of each other.
If you’re the highest bidder, you exchange contracts and pay your deposit on the day of the auction. The deposit is usually 10% of the purchase price.
If you back out, you lose your deposit as you’ve already exchanged legal contracts.
You then have to pay the rest of the money within 28 days.

The modern auction method is sometimes known as a conditional auction, and it gives the buyer more time and flexibility.
Think of it like bidding on e-Bay. The auction runs online, usually for up to 30 days, and you can bid at any time.
If you’re the winning bidder, you put down a reservation fee. It’s usually around 5% of the purchase price. It pays for the estate agent and auctioneer costs.
You then have 56 days in total to complete the process.
You have to exchange contracts and pay a 10% deposit within 28 days, then you get another 28 days to complete.
With this longer timeframe, it’s much easier to buy with a mortgage than in a traditional auction.

Once won, get a survey, secure finance/mortgage, get buildings insurance

32
Q

What due diligence should be carried out pre-auction?

A

Review Buyer Information Pack.
These packs typically include Local Authority Searches, Water and Drainage Searches, Property Information Form, Fixture and Fittings Form, Title Register documents and more.
The pack may not cover every aspect of a property so you should use this as a foundation to complete your own research. We recommend that you carry out additional checks, including asking questions about anything you are unsure of, completing your own investigations, and seeking independent legal advice.

View the property (and think about taking an expert)

Get your finances sorted
If you’re planning on buying with a mortgage, you’ll need an Agreement in Principle (AIP) from a bank or building society.
You’ll need to explain to the lender that you will use the loan to buy a property at auction.

Research similar properties

Take legal advice

33
Q

What are the pros of buying by auction?

A

Property auctions are a good way to land a bargain or buy a property quickly.

In the past, auctions were mosty favoured by cash buyers and investors.

But these days, all types of people buy property at auction – even if they’re buying with a mortgage.

34
Q

What is/are an Important Notice to Bidders/Memorandum of Sales/general conditions of sale for an auction?
What would the legal pack at auction contain?

A

a Buyer Information Pack contains several documents designed to help you bid with confidence.
These packs typically include Local Authority Searches, Water and Drainage Searches, Property Information Form, Fixture and Fittings Form, Title Register documents and more.

35
Q

What is an addendum at auction?

A

An Addendum, sometimes referred to as an Amendment Sheet, is a list of changes that have been notified after the catalogue being published.

36
Q

What deposit is typically payable and when at auction?

A

A non-refundable Reservation Fee is required from the winning bidder as a way of securing a property to them for the reservation period. It also provides the seller with added reassurance that the sale is likely to proceed smoothly as it reduces the chance of a fall-through. The Reservation Fee also provides the buyer with the same reassurance, as the seller is bound by the same terms of the auction, which means they cannot accept an offer from another party during the reservation period.
With Modern Method of Auction, the bid obliges you to pay a Reservation Fee and sign the Reservation Agreement to obtain exclusivity for the reservation period. With Traditional Auction, once your bid has been accepted, or auction has been won, you are required to exchange contracts and pay a 10% deposit alongside the Reservation Fee. Completion is then generally expected within 28 days. With either method, if you do not complete, you will lose your non-refundable Reservation Fee.

37
Q

How can you bid at auction?
What is a proxy bid?

A

Proxy bidding means that you advise the auctions team as to your maximum bid, and the auctioneer will bid on your behalf up to your maximum.

proof of ID, proof of residency
proof of funds
clearly bid i.e. raise catalogue/bidder number/arm

Some auction rooms operate a pre-registration system for all bidders and might also ask you which properties you are hoping to bid on. You do not need to register in advance of auction day, you can just turn up in at the venue – aim to get there 30-45 minutes before the start of the auction to ensure you have time to register before it begins.

may be possible to bid online / by telephone

38
Q

When is insurance required for in relation to an auction purchase?

A

It is often a good idea to insure the property as soon as you have exchanged contracts.

39
Q

Is VAT payable on auction properties?

A

The amount due on completion will then be the balance of the price plus VAT. You should also be aware that VAT is payable on the buyer’s premium payable to the auctioneer (if applicable) whether or not the property is elected for VAT.

40
Q

What are the EPC requirements at auction?

A

An Energy Performance Certificate (EPC) will need to be provided to the auctioneer.

41
Q

How are arrears dealt with in relation to auction properties?

A

Arrears: The buyer is required to pay all rent arrears to the seller on completion and recover these from the existing tenant himself after

42
Q

What should be included in auction particulars?

A
43
Q

What does the Sale of Land by Auction Act 1867 say?

A

The particulars or conditions of sale by auction of any land shall state whether such land will be sold without reserve, or subject to a reserved price, or whether a right to bid is reserved

Under certain circumstances the seller (or an agent acting on their behalf) has the right to bid on their own property at auction. Subsequent case law has made clear that the vendor, or their agent, is only allowed to bid up to the reserve.

44
Q

What are the requirements around the Auctions (Bidding Agreements) Acts 1927 and 1969?

A

The Auction (Bidding Agreements) Acts of 1927 and 1969 make it a criminal offence for dealers to give an inducement or reward to any person for abstaining from bidding at a sale by auction.

45
Q

Why are POA listings unlawful?

A

Not displaying the asking price is likely to be a misleading omission in that the price is information which the average consumer needs in order to take an informed transactional decision

all estate and lettings agents in England now have to disclose the price of their properties for sale or rent

(price on application)

46
Q

What key changes were introduced in respect of purchase and sale by the Charities Act 2022?

A

disposals of charity land under Part 7 of the Charities Act 2011
requirements:
- obtain and consider a written report on the proposed disposal (containing the information, and dealing with all the matters required by the Charities (Qualified Surveyors’ Reports) Regulations 1992 from a fellow or professional associate of the Royal Institution of Chartered Surveyors instructed by the trustees and acting exclusively for the charity,
- advertise the proposed disposal for such period and in such manner as is advised in the surveyor’s report (unless the surveyor advises that it would not be in the best interests of the charity to advertise the proposed disposal), and
- decide that they are satisfied, having considered the surveyor’s report, that the terms on which the disposal is proposed to be made are the best that can reasonably be obtained for the charity.
It is worth noting that this regime will not apply to leases of less than seven years (where a lighter touch regime applies)

The 2022 Act provides for a number of changes which are aimed at addressing perceived shortcomings of the existing regime and introducing greater flexibility into the procedure which charities are obliged to follow when they wish to dispose of interests in land.

Once the new provisions come into force there will be greater flexibility for charities to choose who to instruct when preparing the report on the proposed disposal.
‘designated advisers’ will now include fellows of the National Association of Estate Agents and the Central Association of Agricultural Valuers as well as RICS qualified surveyors.
Trustees, officers and employees of the charity, if they meet the above qualifications/professional memberships, will also be able to provide the advice, even if that advice is given in the course of that person’s employment.

Charity trustees will also no longer need to advertise the relevant disposal in the manner advised in the report.
If a designated adviser recommends advertising the disposal, our advice is to follow their instructions – but this will no longer be a strict obligation for the charity trustees.
At present the report has to contain the information specified by the Charities (Qualified Surveyors’ Reports) Regulations 1992.
Those regulations comprise a very detailed set of requirements including measurements of rooms which are challenging to comply with and often not necessary for most transactions.
It’s anticipated that the regulations themselves will be replaced with new ones which will provide advice concerning:
what sum to expect (or, if an offer has already been made, whether the offer represents the market value of the land);
whether (and, if so, how) the value of the land could be enhanced;
marketing the land (or, if an offer has already been made, any further marketing that would be desirable); and
anything else which could be done to ensure that the terms of the transaction are the best that can reasonably be obtained for the charity
Together with a self-certification by the adviser that they:
have the appropriate expertise and experience to provide the advice that is required; and
do not have any interest that conflicts, or would appear to conflict, with that of the charity.

While under the current regime a charity can dispose to another charity and make some charge (albeit at ‘otherwise than for best price’) for that disposal, without having to jump through the valuation hoops, it now looks as though if a charity is proposing to charge a fellow charity anything at all for a disposal it will need to obtain valuation advice.

The Charity Commission will have new powers to confirm the appointment or election of trustees and vest land in them (may be very useful for unincorporated charities)
Whether the Commission will actually be willing to use this power however, remains to be seen

Now (from 31 October 2022) all corporate forms of charity, and not just CIOs, automatically gain Trust Corporation status by being the trustee of a separate charitable trust (including if they were a trustee before 31 October 2022), without the need for a Charity Commission scheme.

47
Q

What are different vehicles through which property can be bought?

A

form of purchase vehicles inc:
SPV
The main motivation for many buyers in buying an SPV, rather than buying the property itself, is to save Stamp Duty Land Tax (SDLT).
Liability: By setting up an SPV company for each new development, the developer can ringfence their liability for a specific development into the SPV company, protecting the trading company’s assets.
JV: As limited companies are made up of shares, it is easy to divide those shares amongst multiple parties in order to share the profits generated by the company. By setting up an SPV company for each new development, a developer can easily set up joint ventures with third parties in respect of specific developments.
Finance: - In order to fund a development, a developer may offer shares in an SPV to a third-party investor (as discussed under Joint Venture above) or they may seek to borrow funds from a lender. If borrowing from a lender, that lender will almost certainly require security for their loan. When lending to limited companies, the most common form of security is a debenture, which is a charge (similar to a mortgage) over all of the company’s assets. Can limit to specific dev.
Sale: By developing though an SPV company, at the end of the development you have the option to either sell the property or the SPV company itself.
Tax:A property development SPV will often complete its development activity and then sell the finished property either to a third party or potentially to a group investment holding company. If all has gone well, the company will at this point realise taxable profits and these will be subject to corporation tax
it will often be possible for profits made through a property development SPV to be returned to corporate shareholders without any tax leakage.

JV

Offshore trusts

REITs (UK co 75% business property investment)

SIP (self-invested pension)

48
Q

What is the difference between purchasing freehold and leasehold?

A

Freehold = title absolute

Leasehold = right to occupy for set period, terms and conditions

49
Q

Does the Leasehold Reform Act apply to commercial properties?

A
50
Q

What is the difference between s106 and CIL? How else can developers contribute to infrastructure?

A
51
Q

How do LAs work out what infrastructure is required in relation to regeneration/new developments?

A
52
Q

Do Local Authorities pay VAT?

A

VAT Act 1994

LA VAT:
Because VAT is a tax on transactions, individual circumstances need to be considered according to their facts. But the general rule is that where a public body is funded by way of public expenditure (such as grant-in-aid) to do something for the public good, it’s unlikely to be engaging in business activities for VAT purposes. Such activities are outside the scope of VAT.
Conversely, where a public body supplies goods or services for consideration and by way of business, and it’s registered or required to be registered for VAT, such activities are within the scope of VAT.

Business activities:
- are mainly concerned with making supplies to other persons, for any form of payment or ‘consideration’, whether in money or otherwise
- have a degree of frequency and scale
- continue over a period of time
- are within the scope of VAT and may be standard-rated, zero-rated or exempt

Non-business activities are:
- activities you carry out for no charge and no other form of consideration, including leases you grant, or the freehold sale of land and buildings, for the nominal payment of a peppercorn or a pound and where no other form of payment is involved

Supplies of services by one local authority to another local authority are not regarded as business activities provided that they are not made in competition with the private sector. Otherwise, they fall within the scope of VAT and VAT must be accounted for at the appropriate rate.

53
Q

What are key estate agency regulations?

A

Estate Agents Act 1979
during sale or purchase of freehold or leasehold properties with capital value
s18 terms of business (fees)
s21 declaration of personal interests
offence:
- acting dishonestly
- not providing clarity in ToE or disclosing personal interest
- not telling client about offers received
penalties:
warning order or prohibition order and/or fine

Misrepresentation Act 1967
mis-statements/false/fraudulent statements or misrepresentations made during pre-contractual enquiries by vendor or their agent to proposed purchaser, freehold and leasehold transactions
offence:
- civil offence
- actionable by tort
- action can be limited by an effective disclaimer (exclusion) clause
penalties:
sued for financial damages and/or contract rescinded

Consumer Protection Regulations 2008
during the entire agency sales and lettings process
offence:
- criminal offence
- not treating “customers” fairly and/or providing misleading marketing info
penalties:
unlimited fine, prohibition order and prison up to 2 years

(BPRs)

54
Q

Do Local Authorities pay SDLT?

A

May 14, 2021

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V. Charles Ward addresses prospective tax liabilities in relation to a local authority development or investment purchase and how transactions can be structured in ways which minimises those liabilities.

A key driver in any development transaction is the need to make sure that it is structured in the most tax-efficient way possible for all parties. There are now many taxes which affect property transactions including: stamp duty land tax; VAT and Community infrastructure Levy. Each of these taxes becomes more complex year-by-year.

I believe that when acting for a client in a development purchase, it is too easy for a conveyancer just to stand back and tell the client to obtain specialist tax advice. Yes, in a multi-million pound development-transaction, advice from a specialist tax adviser has to be obtained before contracts are exchanged. But I also believe that as conveyancers we have to know enough about tax on development transactions to be able to ask the right questions. To be able to probe the advice received. And, from the outset, to be able to structure the transaction in a way which anticipates the tax advice which we are likely to receive. And not only when it comes to a development acquisition. There are also complex investment transactions in which we may be asked to become involved, particularly where there are a multiplicity of occupational tenants.

As conveyancers we stand at the interface between the local authority client and the tax adviser. Before contracts are exchanged, it is our job to make sure that the client is aware of prospective tax liabilities and can budget those liabilities in to the transaction cost. As conveyancers it is also our job to draft a stamp duty land tax return, claiming any reliefs which are appropriate, and presenting it to our client for approval before submission.

Too often in the past I have not trusted the tax advice which is in front of me. Sometimes it just appears too glib. Too superficial. Without explaining in practical terms how the transaction could be structured to minimize prospective tax liability.

Why is it that two different tax advisors can offer differing opinions on what tax reliefs can be claimed in what is substantially the same property transaction? Yes, the property addresses may be different. The development partners may be different. But the core substance of the transaction is the same. So why is it that one tax adviser tells me that registered social landlord relief can be claimed against stamp duty land tax, whilst another tells me that it can’t? I don’t just want to be told whether RSL relief does – or does not – apply. I want it explained to me.

In this article I review some of the tax issues which are relevant to development and the options for structuring the transaction in a way which minimises prospective tax liabilities.

A typical example might involve your council entering into an agreement with a development partner for the construction and purchase of 50 units of affordable housing. The total cost to the council for the development package is £10,000,000. But of that £10,000,000, £1,500,000 pounds is allocated to the land value and the remaining £8,500,00 to the construction cost. So what are the tax implications of that transaction?

It is not just about stamp duty land tax, although this may be the main tax consideration. There may be other taxes involved including VAT and community infrastructure levy. But let’s start with stamp duty land tax.

A key difference between councils and other social housing providers is that councils generally pay SDLT on their land purchases whereas other registered social landlords do not. But there are circumstances when councils can also qualify for RSL relief for a grant-funded development purchase. And it does not have to be 100% grant funded. And even if registered social landlord relief does not apply, there may be other blanket SDLT reliefs which may apply.

For example, a purchase made under the umbrella of a compulsory purchase order may qualify for blanket relief when it is intended that ownership will later be transferred by the council across to a development partner for demolition and/or reconstruction. The purposes of that CPO relief is to avoid the double-taxation which might otherwise apply on a back-to-back transaction.

If it can be confirmed that a blanket relief from SDLT applies to the substance of a property transaction, that would seem to me to be the end of the matter so far as SDLT is concerned. The SDLT return can be filed claiming that relief. But suppose it doesn’t qualify for one of the blanket SDLT reliefs?

It is then about structuring our £10,000,000 development purchase in a way which minimises potential SDLT liability. In particular we need to structure the transaction in a way which ensures that SDLT will only be charged on the £1.5M land value and not on the entire £10,000,000 cost of the development purchase.

For me the starting point has to be the Government’s Stamp Duty Land Tax Manual and in particular Section SDLTM04015 –‘Scope: How Much is Chargeable: Sale of Land with Associated Construction Costs-Para 10 Schedule 4 Finance Act 2003’. It deals with be chargeable consideration for SDLT when a vendor agrees to sell land to a purchaser and the vendor also agrees to carry out work, comprising works of construction, improvement or repair to the land sold. HMRCs view is that the decision in Prudential Assurance Co Limited v IRC [1992] STC 863 applies for the purposes of SDLT. That decision involved identification of the subject matter of the transaction as regards stamp duty. It is necessary to identify the commercial substance of the transaction. Of relevance to the SDLT calculation is whether at the date of the land transfer, construction has yet to be started or is incomplete. The SDLT calculation will then be based on the value of the land at the date of transfer.

If that land transfer does not happen until after construction of the residential units is complete and they are ready for occupation, it must be assumed that stamp duty land tax would be paid on the entire £10,000,000 cost of the development purchase. It is why many development purchases provide for the land transfer to take place at a much earlier stage of the development. But simply bringing forward the date for completion of the land transfer is not of itself sufficient to guarantee that the transaction will benefit from reduced SDLT. There is another issue.

The HMRC Tax Manual warns that there may be cases where the Agreement for Sale of the land is so interlinked with the Agreement for Works that it is not capable of independent completion. The subject matter of the transaction for the purposes of SDLT will then be the works as completed and the chargeable consideration assessed on the entire £10,000,000 cost of the transaction. It is why, so far as possible, I try to split the land transaction from the construction contract, so that it is technically stand-alone and cannot be ‘unwound’ if there are issues relating to the subsequent construction. In practice I would seek simultaneous exchange of both the land contract and the construction contract to provide a complete and binding contractual package.

Perhaps the optimum time for completion of a land transfer is when construction of the dwellings has reached ‘golden brick’, which is when the foundations are in place and construction of the walls has begun. Golden brick is important because it is the point at which a new dwelling qualifies for the zero-rating for the purposes of VAT, even if that dwelling is still under construction. Such zero-rating is important if the bare land had previously been opted for tax and the buyer might have difficulty recovering its VAT outlay as an input, which is the case for many registered social landlords. When it comes to local authorities, the rules on recovery of VAT are particularly complex as they operate under different rules. The cost of getting it wrong may, for the local authority, go far beyond VAT payable on the development cost itself.

Claiming Multiple Dwelling Relief is another way in which councils can reduce the amount of SDLT payable on a development purchase of affordable housing. Applying MDR means averaging out the aggregate purchase price between the number of dwellings being bought and then calculating the SDLT applicable to each individual dwelling and then multiplying that calculation by the number of dwellings. The result will always be less than treating the aggregate purchase price as a single lump sum. However there will always be a minimum 1% levy on top of the 3% surcharge which local authorities, as corporate purchasers, will always pay on chargeable transactions. Where more than five dwellings are involved, the buyer can also elect to tax the entirety of the transaction on a non-residential basis.

55
Q

Do charities pay SDLT?

A

As long as certain conditions are met, charities can get relief from Stamp Duty Land Tax when they buy land and property for charitable purposes.

HMRC can withdraw the relief if, within 3 years of the transaction, the charity still owns the property, and either:

stops being a charity
uses the property for purposes that are not charitable

56
Q

Do charities pay VAT?

A

As a charity you do not pay VAT when you buy some goods and services.

You must register for VAT if your charity’s VAT taxable turnover (the total value of everything you sell that isn’t exempt from VAT) is more than £85,000.

You can choose to register if it’s below this, for example if you want to reclaim VAT on your supplies.

Charities pay VAT on all standard-rated goods and services they buy from VAT-registered businesses. They pay VAT at a reduced rate (5%) or the ‘zero rate’ on some goods and services.

A charity can purchase a new building, or have a new building constructed for it. In both cases, the supply will be zero-rated. The most important condition is that the charity will use it for its charitable activities.

Where you have secured zero-rating, there is a further provision that triggers a VAT charge should you put the building or part of the building to business use within ten years of completion. This ‘change of use’ rule is complex. But essentially, you have to charge yourself VAT, which may or may not be recoverable. Trustees should ensure that, should they consider any change of activity during the first ten years from completion of the building, they seek VAT advice to address and quantify the consequences.

Where you purchase an existing building, you should check at an early stage of negotiation whether the Vendor has ‘opted to tax.’ This is quite common on commercial buildings, as it enables the owner to recover VAT on costs related to the building. The option to tax means that the sale of the property, which would otherwise be exempt from VAT, becomes standard rated.

If the Vendor has opted to tax, you should indicate that, as a charity intending to use the building for your charitable activity, you can require that the option to tax is ‘disapplied.’ This means the property reverts to being VAT exempt. You then provide a formal disapplication certificate to the Vendor. This is the evidence he will provide to HMRC should they query his VAT Returns.

The charity cannot apply for the option to tax to be disapplied if it intends to use the space as an office. HMRC advise that this means an ‘administrative’ office. For example, where a charity uses rooms to be used for counselling clients, that is not an office, but space for a HR or finance function is an office. It may be therefore that the option to tax is only partly disapplied.

Where you rent space in a building, you should check whether the landlord has opted to tax. This is quite common for commercial buildings, as it allows the landlord to recover VAT on costs related to the building. The option to tax means that rental which would otherwise be exempt from VAT, becomes standard rated. For most charities, this is an additional unwelcome cost.

If the landlord has opted to tax, you should indicate that as a charity intending to use the building (or part) for your charitable activity, you can require that the option to tax is ‘disapplied.’
The charity cannot apply for the option to tax to be disapplied if it intends to use the space as an office.

57
Q

Are property lettings/sales subject to VAT?

A

The grant, assignment or surrender of an interest in, right over or licence to occupy land is normally exempt from VAT. There are exceptions to this general exemption:

Freehold sale or long lease in new dwellings, communal residential or relevant charitable buildings by the person constructing
= generally zero-rated

Freehold sale of other types of new (3 years from completion) or partly completed buildings (for example shops)
= standard-rated

Sale of land and buildings as part of a transfer of a going concern

Parking
= standard-rated

Letting of facilities for sport and physical recreation

Sporting rights

You can opt to tax land (including buildings). Once you have opted to tax any supplies you make of the opted land will normally be standard-rated.

service charges follow the same VAT liability as the premium or rents payable under the lease or licence (normally exempt, unless you have opted to tax).

Supplies of land and buildings, such as freehold sales, leasing or renting, are normally exempt from VAT. This means that no VAT is payable, but the person making the supply cannot normally recover any of the VAT incurred on their own expenses.

But you can opt to tax land. For the purposes of VAT, the term ‘land’ includes any buildings or structures permanently affixed to it. You do not need to own the land in order to opt to tax. Once you have opted to tax all the supplies you make of your interest in the land or buildings will normally be standard-rated, and you will normally be able to recover any VAT you incur in making those supplies.

There are some supplies where, even if you have opted to tax, the option will not apply:
Buildings designed or adapted and intended for use as dwellings (for example, existing houses and flats).
Buildings for conversion into dwellings (for example, pub conversions).
Buildings intended to be used for a relevant charitable purpose.
Land sold to a relevant housing association.
Land sold to an individual for construction of a dwelling.

There are 2 stages in opting to tax. The first stage is making the decision to opt. This may take place at a board meeting or similar, or less formally. However you reach your decision, you should keep a written record, showing clear details of the land or buildings you are opting to tax, and the date you made your decision.
The second stage is to notify Gov of your decision in writing.

Your option to tax will not affect supplies made by anyone else. For example, if you are selling an opted building the buyer has the choice of whether to opt to tax or not. Similarly, if your tenant is sub-letting, they too have this same choice. For this reason, you should inform your tenant of your decision at the earliest opportunity so that they may safeguard their right to recover input tax by opting to tax, should they wish to.

58
Q

When would you opt to tax property?

A

If you have an interest in non-residential property, which you use for your own business purposes and do not rent it to others, it is unlikely that you will need to opt to tax the property.

However, if you wish to generate additional income from the land and/or property by renting it out to others, subletting part of it or indeed disposing of it altogether, you should consider whether an OTT should be made.

There are pros and cons of opting to tax and, in view of the large sums often involved in the purchase and sale of commercial property, it is essential to take specialist VAT advice.

An important feature of the OTT regulations is that they apply to a property for a 20-year period once an election has been made by a business. However, once that 20-year period has expired, income from either renting or selling the property can again be exempt from VAT, rather than standard-rated, if the business revokes its option with HMRC.

Examples:
A simple example of where it might be appropriate to OTT is as follows:

Mr Jones purchases a commercial property for £500,000 with the intention of renting it out and is automatically charged standard rate VAT on the purchase price – £100,000.

The reason Mr Jones is charged VAT is either because the property is a commercial building that is less than three years old (classed as ‘new’ for VAT purposes) or the seller had an OTT in place.

If Mr Jones rented out the property, short term, without doing anything he would not be able to reclaim this VAT because the fall back position is that the rental income is exempt from VAT.

If Mr Jones choses to OTT the property he would rent out the property to Smith Ltd for £25,000 plus VAT. Smith Ltd is not concerned about the VAT charge – it gets full input tax recovery on its costs, but the OTT election means that Mr Jones can now claim input tax on the cost of the building, including on any professional fees associated with the purchase, fit out, and any future expenses he incurs (subject to normal VAT rules).

If at a later date Mr Jones decides to sell the property he will have to charge VAT on the disposal (unless it qualifies as a transfer of a going concern for VAT purposes).

NB There can be implications if he decides to sell to a business that can’t recover all of its VAT, so Mr Jones may consider whether it is commercially viable to revoke his option (see below).

You buy a new commercial property for £650,000 with the intention of renting it out. Because it is a new commercial property you are automatically charged VAT on the purchase price - £130,000. If you simply rent it out without doing anything you will not be able to claim this VAT back because of the exempt rental income.

However, if you decide to opt to tax the property you would have to charge VAT on the rents to the tenant. In return you could reclaim all the VAT on the purchase, the associated professional costs and any ongoing expenses. If you decided to sell the property you would have to charge VAT on the sale.

In our next example, a manufacturing business buys premises for £500,000 in 2008 plus VAT of £87,500. He reclaims this in full as the input tax is attributable to his fully taxable manufacturing business.

After 5 years his business is doing so well he decides to sell up and move into bigger premises. Unfortunately for him the building is covered by something called the Capital Goods Scheme (CGS), which covers commercial building over £250,000 and lasts for 10 years. If he changes the use of the building from taxable to exempt within 10 years he will need to adjust the amount of VAT reclaimed.

If he sells after 5 years the remaining 5 years of the CGS adjustment period will be viewed as all exempt use and the VATman will ask for half the VAT back on the original purchase price (£43,750) – a rather nasty surprise!

Output VAT is the value added tax you charge on your own sales of goods and services both to other businesses and to ordinary consumers. When your business is registered for VAT, you need to add VAT to each VAT-able item on each of your sales invoices.

Input VAT is the value added tax added to the price when you purchase goods or services that are liable to VAT. If the person or businesses that is buying is registered for VAT they can deduct the amount of VAT paid from his/her settlement with the tax authorities.

In the VAT settlement, you deduct output VAT from input VAT

59
Q

What are SDLT reliefs?

A

HM Revenue and Customs (HMRC) has guidance on SDLT reliefs for:

first-time buyers
multiple dwellings
building companies buying an individual’s home
employers buying an employee’s house
local authorities making compulsory purchases
property developers providing amenities to communities
companies transferring property to another company
charities buying for charitable purposes
right to buy properties
registered social landlords
Crown employees
property investment funds, for example Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs)

You do not have to pay SDLT or file a return if:

no money or other payment changes hands for a land or property transfer
property is left to you in a will
property is transferred because of divorce or dissolution of a civil partnership
you buy a freehold property for less than £40,000
you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
you buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential threshold or non-residential threshold of SDLT

60
Q

What are typical sales fees for an agent?

A

0.5-1% of sale price

61
Q

What is a financial viability assessment?

A

Assessing viability in planning under the National Planning Policy Framework, 2019
1st ed, March 2021, effective from 1st July 2021, GN

Financial viability in planning: conduct and reporting, 2019
1st ed, May 2019, PS, effective from 1st Sept 2019

At the plan level, viability is a tool used to ensure planning policies are realistic and their cumulative cost does not undermine deliverability of the plan, taking account of variety of factors inc the reasonable expectations of landowners and developers.
At a site-specific level, viability can be used to assess the financial impact of planning policies on ind dev schemes.
An important component of financial viability is the provision of dev contributions. If dev contributions are set too high, landowners may not release land.
NPPF requires plans to set out contributions expected from dev inc the levels and types of affordable housing provision (off-site provision or payment in lieu must be robustly justified) required along with other infrastructure.
CIL charging schedules should generally be consistent with the plan and viability tested in a similar way.
The assessment of the benchmark land value (BLV) is an important part of the FVA = EUV plus a premium, but alternative use value (AUV) ignoring a premium can be used in some circumstances.

To define land value for any viability assessment, a benchmark land value should be established on the basis of the existing use value (EUV) of the land, plus a premium for the landowner. The premium for the landowner should reflect the minimum return at which it is considered a reasonable landowner would be willing to sell their land. The premium should provide a reasonable incentive, in comparison with other options available, for the landowner to sell land for development while allowing a sufficient contribution to fully comply with policy requirements. Landowners and site purchasers should consider policy requirements when agreeing land transactions. This approach is often called ‘existing use value plus’ (EUV+).
In order to establish benchmark land value, plan makers, landowners, developers, infrastructure and affordable housing providers should engage and provide evidence to inform this iterative and collaborative process.

Valuation variation can be addressed in three different ways: first by the use of mandatory sensitivity testing of viability assessments; second by the use of site-specific assessments when deemed appropriate; and third by including policies that require the use of review mechanisms within individual planning agreements, whereby additional contributions can be obtained if development returns increase significantly above expected returns.
The level of developer return is an important factor in FVAs. The level of return is related to the level of risk in the development process. Market cyclicality is a development risk and is accounted for in the risk-adjusted developer return used in the FVA. A review intending to reduce developer contributions based on reduced income or increased costs would be an attempt to protect the developer return and is precluded.

Legislation: The Town and Country Planning Act 1990 and the Planning and Compulsory Purchase
Act 2004 are the governing pieces of legislation that regulate development and set out
the planning application process in England and Wales. Policy principles relating to viability assessments are set out in the NPPF and are informed by the PPG. These two documents are the primary sources of guidance when carrying out FVAs

62
Q

What types of financing options are available in development?

A
63
Q

What are Local Authority searches?

A

How did you liaise with the solicitor on searches
Local Authority searches:
There are two parts to a local authority search – a LLC1 and a CON29. The LLC1 – Local Land Charge Register search – covers any charges or attendant restrictions relating to land or property. These can include whether the property is:
a listed building
located in a conservation area
subject to a tree protection order
in need of an improvement or renovation grant
or situated in a smoke control zone
The form also covers planning agreements and conditional planning permissions. All LLC1 registrations are legally binding on successive owners.

The second part of the search – the CON29 – supplies information relating to public highways, proposals for new roads, rail schemes or planning decisions that could affect the property, as well as outstanding statutory notices, breaches of planning or building regulations or the existence of a compulsory purchase order. Environmental factors, such as whether the house stands on contaminated land or in a Radon gas affected area are also covered.

There are a number of additional reports that are not covered by the standard local authority search and are, therefore, subject to extra fees. The need for such searches will be determined by your conveyancing solicitor or mortgage lender on a case-by-case basis (although some are considered essential by certain lenders).

These include:

The CON29 (O) optional form which deals with applications on roads proposed by private bodies, completion notices, land maintenance notices and environmental and pollution notices
Environmental searches (to determine a risk of flooding for example, as well as the proximity of any waste sites or potentially contaminated sites)
Water authority searches (which show any public sewers within the boundaries of the property which could impact upon future building or development)
Chancel Repair reports (to determine if your property is liable for church repair contributions).
It’s worth noting the additional searches, such as mining searches, flood searches and energy and infrastructure searches are determined by the locality of the property, rather than just the conveyancer or lender. For example, a mining search may be required if the property is in a mining area (rather than because the conveyancer or lender insist one is done in every case).

The government target for returning local searches is a maximum of 10 working days.
But in reality, timescales on searches can vary significantly, from 48 hours to ten weeks!