Purchase and sale Flashcards
How do you adhere to Money laundering and terrorist financing regs 2022? CHECK UPDATES
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???
How do you adhere to the Estates Agent Act 1979?
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
What are the different methods of disposal and acquisition?
- 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
When would you advise to buy/sell by private treaty?
- 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
When would you advise to buy/sell by auction?
- 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
When would you advise to buy/sell by formal tender?
- 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
When would you advise to sell by informal tender?
- 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
How do you deal with bids by informal/formal tender by email?
How do surveyors apply “Auctioneers selling real estate, 2018”?
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)
What are the legal processes needed to complete a sale or purchase?
What are the factors affecting value of purchases/sales?
Supply and demand
Location
Condition
Restrictive covenants
Planning
What is the Leasehold Reform Act 1967?
What is compulsory purchase?
What are restrictive covenants? How can they affect a purchase/sale?
What do you need to obtain planning permission?
How do you purchase a property?
- 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?)
How do you sell a property?
- 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)
What is a Notice to Complete
- 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)
What are sole selling rights?
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
What is a “ready able and willing purchaser” clause?
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
What could you put in place for your client disposing of a property if the purchaser’s use is uncertain?
- value on different assumptions
- dispose as long leasehold with conditions
- agree sale with restrictions on use
- overage and clawback ADD NOTES
Can a verbal contract be legally binding?
What is capacity in relation to contract law?
The law states that individuals who enter into a contract must have the capacity to enter into a contract, otherwise it is voidable.
Does the sale of land have to be in writing and what Act defines this point?
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.
What are profits a prendre?
profits à prendre are rights to take produce from another’s land, such as to extract minerals.