Purchase and Sale Flashcards
Tell me about the four methods of sale
- Private Treaty
- Parties negotiate a deal in their own time, without commitment in the open market. - Informal Tender
- Best bids. Not legally binding. Agent invites interested parties to submit best bids with an offer letter. - Formal Tender
Sealed bids. Parties provided with marketing particular and legal pack with bids letter outlining terms. - Auction
Sale goes to the highest bidder.
Tell me about advantages and disadvantages of Private Treaty?
Advantage
- Flexibility
- Control
- V reserves the right not to accept the highest or any offer at all
- Confidential
Disadvantage
- Gazumping/Gazundering
- Late notice withdrawal
- Abortive costs
Tell me about advantages and disadvantages of Informal Tender?
Advantage
- Transparency
- Timescales
- V under no obligation to accept highest or any offer at all
Disadvantage
- Marketing costs
- Not legally binding so can withdraw whenever
Tell me about advantages and disadvantages of Formal Tender?
Advantages
- Fairness
- Competitive Pricing
Disadvantages
- Cost
- Time Consuming
- Lack of flexibility
Tell me advantages and disadvantages of auction?
Advantage
- Speed
- Deal Security
- Good depth of marketing
- Price
Disadvantage
- Lack of flexibilty, cannot control buyer
- Marketing Time
- Cost
Tell me about your understanding of legislation relevant to your agency practice.
Misrepresentations Act 1967
The Estates Agent Act 1979 provide rules for EA to act fairly, honestly and promptly.
The Estates Agents Regulations 1991
Money Laundering and Terrorist Financing Regulations 2020
Tell me about your understanding of the Estate Agents Act 1979.
Regulates EA’s to act in the best interests of their client.
Ensures buyers and sellers are treated honestly, fairly and promptly.
There are seven principles. S18 and S21 are considered of most importance.
What are the 7 principles of the Estate Agents Act 1979?
- S18 - Clarity as to terms of agency (TOB)
- Honesty and Accuracy
- Cost agreement and liability
- S21 - Declare personal interests
- Client money handling, keep seperate.
- Absence of Discrimination.
- Legal obligation to report all offers to the client.
Who polices the Estate Agents Act 1979?
NTSELAT
National
Trading
Standards
Estate
and
Lettings
Agency
Team
How does Section 18 of the Estates Agency Act relate to your agency?
Section 18 refers to the clarity in terms of engagement.
Provides client with information before engaging in a contract in relation to scope of services, fees, marketing and basis of agency.
Terms of Engagement.
CIT
Competence
Conflicts of Interst
Terms of Engagement
VPS 1 Terms of Engagement
What are the four basis of agency?
Whilst the agency agreement is in place:
Sole Selling Rights - Fee will be owed regardless of whether the agent introduced the buyer.
Sole Agency Rights - Client only pays you a fee if the agent introduced the buyer
Sole - Exclusive rights to one agent
Joint - two agents act together on a pre agreed shared fee
Multiple - Numerous agents appointed, whoever introduces the buyer will get the fee.
Where are the four bases of agency defined?
The Estates Agent Regulations 1991
What is a Ready, Able and Willing Purchaser?
Purchaser who is prepared and able to exchange unconditional contracts.
Included in terms of engagement, when there is a ready, able and willing purchaser able to proceed with a purchase, depending on the agreement an abortive fee may be payable.
How does Section 21 relate to your agency practice?
Openness regarding personal interests.
Relates to the declaration of any conflicts of interest and how to deal with conflicts of interest, if there is one present and when to not to act.
RICS PS Conflicts of Interest (2017) Eff Jan 2018
What 3 things do you need to make a contract?
Offer
Acceptance
Consideration
Can verbal contracts be legal be legally binding?
Yes, they can. - Howard v Pickford Tool (1951).
Written contracts can provide evidence and certainty, and lessen the potential for disputes between parties than verbal agreements.
What is capacity in relation to contract law?
‘Capacity’ refers to a persons ability or competence to enter into a legally binding contract.
Minors are considered to lack the capacity to enter into a contract, as are those who are mentally challenged.
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 states -
A contract for the sale of an interest in land can only be made in writing and incorporating all the terms which the parties have expressly agreed, in one document where contracts are exchanged.
Tell me about the RICS guidance in relation to Estate Agency?
RICS Global REA&BPS 2016
RICS Global Real Estate Agency & Brokerage 2016
very similar to the
RICS UK CREAPS
RICS UK Commercial Real Estate Agency Professional Statement 2016
12 priniciples of the CREAPS includes:
- Honest, Fair and Transparent proffessional manner
- Skill due care and knowledge
- Terms of business & CHP
- Conflict of interest
- No discrimination
- Identify Client
- Clear and precise communication with client
- Client money handling separate
- Honest marketing material
- Realistic Pricing
- Health and Safety on inspection
What is the Estate Agents (Undesirable Order) (No2) Order 1991?
Sits under the Estate Agents Act 1969.
States that EA must state at the same time in the business of terms any service provided to a potential purchaser unless it is free of charge.
What is the Estate Agents (Provision of Information) Regulations 1991?
Provides guidance as to what estate agents must provide clients, includes:
- Services to be provided
- Remuneration
Tell me about the Registration of Overseas Entities?
The registration of overseas entities was introduced in August 2022. It requires any overseas entity that owns land in the UK to register the beneficial owner with Companies House.
It will promote transparency in UK property which will help inhibit money laundering.
Who do the Consumer Protection Regulations (2008) relate to and is it under?
Business to consumer
Unfair Trading Regulations
Who do the Business Protection Regulations (2008) relate to and under what?
Business to Business
Unfair Trading Regulations
Tell me about the key facts involved in the CPRs and the BPRs
- Regulations apply to sales and lettings
- Info must be passed on
- Full DD must occur prior
- Agents owe a DOC to clients and all interested parties
- Declare everything positive and negative
- No pressure on buyers
- Omissions mean a breach of regulations
- Validated by client
- Policed by TSO Trading Standards Office
- Disclaimers do not apply
What is the punishment for breach of regulations?
Fine
Prohibition
Compensation of up to £25k
Who is a Duty of Care owed to under the CPRs and BPRs?
Client, viewer, bidders, potential buyers, actual buyers
What agency do the CPR’s and the BPR’s relate to?
Lettings
Sales
Online Agency
Who polices the CPR’S and BPR’s
Trading
Standards
Office
What does Caveat Emptor mean?
‘Let the buyer be aware’
The buyer should satisfy all matters relating to the property.
What is the Consumer Rights Act 2015?
- Amends existing consumer law to give consumers new rights and remedies.
- Combines consumer laws relating to unfair terms and contracts between consumer and business.
- Letting agents must state changes. Info must state calculation of payments and who is required.
- If holding client money, provide details of the client money handling scheme
FINES - up to £5k
What is the Misrepresentation Act and what year?
1967
A misrepresentation or false information of a fact made by a party during pre contractual agreement which induces the party to purchase
V/agent can be sued for damages in civil law.
Fradaulence/Negligence
Disclaimer can protect
Which case law relates to Misreps Act 1967?
Hedley Byrne v Heller & Partners 1977
Refers to a test of reasonableness, created 3 tests to decide agents liability for negligent statements:
1. Foresight
2. Proximity
3. Fairness
What is an average consumer/material information in relation to CPRs and BPRs?
The CPRs/BPRs refer to an average consumer as someone who is well informed and is used to determine whether something is misleading. What would the average consumer believe.
Material information is information relevant to a consumers decision to purchase.
What are considered to be unfair practices under the CPRS & BPRs?
False Advertising
Hidden Fees
Unfair contract terms
Unrealistic Pricing
How does the Misrepresentation Act 1967 relate to your agency practice?
Mainly relates to investment marketing brochures that are published and sent out to the open market. Information must be accurate and be validated by the client.
Information around tenancy, description of the property, tenure must be accurate.
A disclaimer is placed on all investment brochure stating the misreps act 1967.
Tell me three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).
Conflict of Interest
Client Money Handling
Due Diligence
Client Care
Marketing & Advertising
Confidentiality
Tell me about a factor which drives property markets.
Supply and Demand
Demand can be affected by economic outlook, government policies, population growth
Or the availability and cost of financing. Currently interest rates are at 4.5% and likely to go higher which means
Tell me about supply and demand in a property market you are familiar with.
Within the occupational retail warehousing market, if there is too much space for occupiers to take up in a town then there will be no rental growth as there would be no rental tensions. Each retail park will undermine the rents on other parks.
With less space in a town, it ensures healthy competition between tenants and the potential to push rents on as all the tenants want to have representation.
What are current SDLT levels for commercial property in England/Scotland/Wales?
England
up to £150k - 0%
£151 - £250k - 2%
£250k + - 5%
Scotland (Land and Building Transaction Tax LLBT)
£150 - 0%
£151 - £350 - 3%
£350 + - 4%
Wales
Land Transaction Tax (LTT)
£250K - 0%
£250 - £1M - 1%
£1M + - 2%
What is SDLT?
Stamp Duty and Land Tax is a tax that is paid by a purchaser on the purchase of land. It is calculated as a percentage of the purchase price.
What are the different types of interest in land?
Freehold and long leasehold
