Purchase and Sale Flashcards
How did you carry out a conflict of interest check?
Sent a companywide email, verified the instruction on our internal conflicts software, against both the client and the building.
What is included in Terms of Business?
Required as part of Estate Agents Act, alongside Terms of Engagement.
CHP
Money Laundering Procedures
Calculation of Fees
Timing of payment
Limitation of Liability
Health and Safety
Anti-Corruption
Data Protection
Equality Act compliance
Why is it important to outline the scope of works?
A requirement of RICS RoC and Estate Agents Act 1979 (Sections 18 + 21). Case of Wells v Devani 2019 - made by ohone and interpreted in context
What is the required AML regulation?
Money Laundering, Terrorist Financing and Transfer of Funds Regulations, 2017 (amended 2022)
What is the RICS Professional Statement relating to purchase and sale?
UK commercial market investment agency, 2017. Came into effect 1st January 2018
What does it ensure?
Deals with Dual agency – illegal, multiple instructions, incremental advice, Personal/Own interest conflict
Define Book Value
The value of a security or asset as entered in internal financial statements
Define ‘net sale proceeds’
The amount received minus all costs and expenses deducted from the gross proceeds.
What is a Transfer of Going Concern?
Where the property is sold as a business
VAT exemption?
Default position - commercial property exempt for VAT purposes. Where the VAT exemption applies, the purchaser or tenant does not have to pay VAT. This means they are unable to recover VAT incurred on related costs.
VAT election?
An owner can elect or opt to charge VAT when selling or leasing property. Benefit - That the LL can also recover VAT incurred on costs relating to property. Eg. refurbishment. But, some businesses unable to recover VAT incurred on costs. Eg financial services, insurance, health
What is a transfer of Going Concern?
Where the purchaser intends to continue to let the property then, assuming certain conditions are satisfied, the transfer is a TOGC. Here, no VAT is charged on the purchase price which is clearly attractive for most purchasers.
Normally, where a property subject to an option to tax is sold with tenants in place or with the benefit of an existing lease, then the vendor will usually need to charge VAT at the standard rate.
What is included in a Request for Bids letter?
Bids deadline, request for the following:
ID of purchaser/purchase price/Funding details/timescale/deposit/DD/data room request/surveys/approvals/conditions/AML
What is a mutual break clause?
Enabling either landlord or tenant to terminate a lease at anytime during the term.
What notable restrictions would have an adverse impact on value?
Use restrictions, titular
What is alienation?
Right granted in a lease for a tenant to assign, sublet or share occupation of demise.
What is included in Class E usage?
Commercial, business and service tenants
What is a defect?
An inherent issue with the building. Eg structural
Define Market Value?
Estimated amount for which an asset or liability should exchange on the valuation date, between willing buyer and seller, at arm’s length, after proper marketing, where both parties have acted knowledgeably, prudently and without compulsion
What is the hierarchy of evidence?
Category A – direct comparables of contemporary
Category B – general market data that can provide guidance
Category C – other sources
What are the benefits of the auction technique?
Allows for quicker process, shorter period of DD, can offer more targeted marketing approach. Contracts exchange at the fall of the gavel.
What is included in the Estate Agents’ Act
7 key principles:
Clarity as to terms of agency
Honesty and accuracy
Cost liability agreement
personal interests exposure
Absence of discrimination
Legal obligation to tell client about offers received
Keep clients’ money separate
Describe Private Treaty
-Parties free to negotiate in own time and without commitment to open market
Advantages include:
- Flexibility, control, vendor not under any obligation to sell
- Confidential
Disadvantages include:
- Potential for gazumping, late decisions not to buy, abortive costs
Describe Informal Tender? (best offers or bids)
Used either at beginning of marketing campain or to bring to conclusion
-not legally binding, can withdraw at any point up to contract
-best and final bids request
Describe Formal Tender? (Sealed bids)
Often used by statutory bodies to give control and transparency over marketing process
High level of public accountability
No opportunity for purchaser to change or increase bid after submission of offer
Blind bids without knowledge of what other parties are bidding
No immediate exchange of contracts upon opening of highest bid.
Differences between informal and formal tender?
Formal
- Provides single chance to bid
- High accountability
- Terms/conditions of sale published in advance with offer to bid letter
- Highest figure accepted (unless vendor states beforehand)
Informal
- Used during private treaty negotiations to obtain best offer from applicants
- Further negotiations can follow on from outcome of process
- Less onerous terms/conditions prepared
- Won’t lead direct to contract for sale
- Used as negotiation mechanism to invite all parties to bid
- Vendor does usually state that under no obligation to accept highest or any offer received
What are assignable measured and building surveys?
Surveys that can be assigned to the new owner when it is transferred
What do you mean by searches?
Local property, water, drainage, environmental, flood search