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RICS APC - YN > Purchase and Sale > Flashcards

Purchase and Sale Flashcards

1
Q

What are the threats of Private Treaty?

A
  • Gazumping/guzundering
  • Late pull-out
  • Sometimes properties can be on the market for a lengthy period of time
  • Associated abortive costs
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2
Q

What are the advantages of Private Treaty?

A
  • Greater negotiation.
  • Time (time to consider offers from prospective buyers).
  • Flexibility (e.g. Ii you have specific needs, like wanting a late completion date)
  • Vendor not under any obligation to sell
  • Confidential
  • The parties control the process
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3
Q

What are the advantages of Informal Tender?

A
  • Vendor under no obligation to accept an offer
  • Vendor can control the process and timescales
  • Allows for further negotiation
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4
Q

What are the disadvantages of Informal Tender?

A
  • Not legally binding so either party can withdraw up until contract
  • Doesn’t lead to contract for sale
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5
Q

What are the advantages of Formal Tender?

A
  • As soon as best bid is accepted, can speed up the process to exchange contracts
  • Vendor can be under no obligation to accept highest, best, or any bid
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6
Q

What are the disadvantages of Formal Tender?

A

No opportunity for further bids

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7
Q

What is dual agency?

A
  • Acting on both sides of the transaction (one agent works for both the buyer and seller)
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8
Q

Why is obtaining the best value for a charity important?

A

Accountability - check
The organisation must be established for a charitable purpose – so, for public benefit

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9
Q

What is the difference between the offence of Misrepresentation Act 1967 and Consumer Protection Regulations 2008?

A

One is civil and the other is criminal

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10
Q

When does the Estate Agents Act 1979 apply?

A

During the sale or purchase of freehold or leasehold properties with a capital value

  • S.18 = Terms of Business
  • S.21 = Declaration of personal interest
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11
Q

When does the Misrepresentation Act 1967 apply?

A
  • Mis-statements/false/fraudulent statements
  • Misrepresentations made during pre-contractual enquiries by the vendor or their agent to the proposed purchaser
  • Freehold + leasehold transactions
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12
Q

When does the Consumer Protection Regulations apply?

A

During the entire agency sales and lettings process

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13
Q

What is the offence of the Misrepresentation Act 1967?

A
  • Civil offence
  • Actionable by tort
  • Action can be limited by an effective disclaimer (exclusion clause)
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14
Q

What is the offence of Estate Agents Act 1979?

A
  • Acting dishonestly
  • Not providing clarity to ToE or disclosing a personal interest
  • Not telling the client about offers being received
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15
Q

What is the offence of the Consumer Protection Regulations 2008?

A
  • Criminal offence
  • Not treating ‘customers’ fairly
  • Providing misleading market information
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16
Q

What are the penalties for non-compliance with the Misrepresentation Act 1967?

A
  • Sued for financial damages
  • Or contract rescinded
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17
Q

What are the penalties for non-compliance with the Estate Agents Act 1979?

A
  • Warning order or
  • Prohibition order or
  • Fine
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18
Q

What are the penalties for non-compliance with the Consumer Protection Regulations 2008?

A
  • Unlimited Fine
  • Prohibition order
  • Prison up to 2 years
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19
Q

What is formal tender?

A

Sealed Bids

  • Applicants bid blindly in a prescribed form without knowing what other parties are bidding
  • No opportunity for the prospective purchaser to change or increase their bid after the submission of their offer
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20
Q

What must be provided in advance of the formal tender process?

A
  • Full marketing material
  • Including a comprehensive legal pack
  • A clear letter sent to all prospective purchasers setting out all the information required accompanying the written offer
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21
Q

For formal and informal tender who should witness all of the bids?

A

All bids should be opened in front of the client or an independent witness

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22
Q

Who often uses Formal Tender?

A
  • Statutory bodies
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23
Q

Why is Formal Tender used?

A
  • Gives control + transparency over the marketing process
  • Provides a high level of public accountability or when there may be a strong interest for the property
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24
Q

For formal tender, is there immediate exchange of contracts upon opening the highest bids?

A

Usually no…

  • BUT… the client can use this blind bidding process to decide upon the identity of the proposed purchaser + then proceed to contract, in accordance with the terms + conditions of sale already stated in the marketing particulars - speed up the process to exchange contracts
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25
Q

In formal tender, can the vendor state that they are under no obligation to accept the highest bid?

A

YES

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26
Q

What are the four methods of sale?

A
  • Formal tender
  • Private Treaty
  • Informal tender
  • Auction
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27
Q

What factors need to be considered when choosing what method of sale is most appropriate?

A
  1. Client objectives
  2. Public accountability
  3. Current + likely future market conditions
  4. Likely level of demand for the property - likely target demand
  5. Timing Requirements
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28
Q

What is the main differences between formal tender and informal tender?

A
  • With an informal tender, the bid is not legally binding whereas formal tender is
  • Informal tender can bid again through further negotiations whereas formal tender only provides a potential purchaser with a single chance to bid for a property
  • It is possible for the formal tender to lead directly to a contract for sale whereas the informal tender will not lead directly to a contract for sale
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29
Q

What are the advantages of auction?

A
  • Short timescales can be achieved
  • Competition
  • Best price can be achieved with wide market exposure
  • The property can be sold with certainty over selling terms
  • Protected by the reserve price
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30
Q

What are the disadvantages of auction?

A
  • Cost of marketing
  • Lack of confidentiality over price achieved
  • Vendor cannot choose the purchase
  • Intensive nature of short marketing period
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31
Q

What is an auction?

A

A sale in which a property is sold to the highest bidder

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32
Q

What is the difference between auction and private treaty?

A

An auction has a fixed timescale for exchange and completion whereas Private treaty there is no fixed timescale for exchange or completion

Bids at auction are binding and incompletion of the sale is not an option and would see the buyer losing their 10% deposit as well as being contracted to buy the property, whereas in private treaty they are not binding until contracts are signed allowing you to walk away from a property

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33
Q

When are AML checks conducted at an auction?

A

Before auction (before you are able to bid)

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34
Q

What AML check will be conduct on private individuals?

A
  • Certified proof of identity document e.g. passport, driving
    licence
  • Certified proof of address document e.g. driving licence,
    utility bill
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35
Q

What is the auction process?

A
  • Prospective buyers compete against each other by increasing their bids until the auction stops/expires/no one bids any further
  • When the gavel falls, contracts are exchanged + the purchaser generally pays a 10% deposit + arranges insurance
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36
Q

What are the four types of agency?

A
  1. Sole Agency
  2. Joint Agency
  3. Multiple Agency
  4. Dual Agency
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37
Q

What is sole agency?

A

Just one agent

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38
Q

What is joint agency?

A

Two or more joint agents sharing a fee on a pre-agreed basis

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39
Q

What is multiple agency?

A

Any number of agents but only the successful agent gets a fee

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40
Q

What did Wells v Devani 2019 establish?

A
  • SC held that a “sketchy oral agreement” made by phone between residential sales agent + their client was LEGALLY BINDING

-Interpreted in context + taking the parties behaviour in context

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41
Q

What must an agency instruction agreement set out?

A
  • Agreed agency basis e.g. sole agency etc.
  • Agency rights
  • Proposed Fee
  • Marketing costs + disbursements
  • Confirmation of no COI
  • Money Laundering Regulation requirements
  • Timescale for payment of fees & disbursements
  • Details of the practice’s CHP
42
Q

What are the seven principles of the EA 1979?

A
  1. Clarity as to TERMS of the agency (s.18)
  2. Honesty + accuracy
  3. Agreement + liability for COSTS
  4. Openness regarding PERSONAL INTERESTS (s.21)
  5. Absence of DISCRIMINATION
  6. Legal obligation to tell the client about OFFERS
  7. Keep CLIENT MONEY secure + separate
43
Q

What is Informal Tender?

A

Best offers/bids

44
Q

When is informal tender used?

A

When there is a good level of interest in the property either at the commencement of a marketing campaign or to bring negotiations to a conclusion

45
Q

What is Cluttons agency disclaimer policy?

A
  1. These particulars are only a general outline for the guidance of intending purchasers or lessees and do not constitute in whole or in part an offer or a Contract
  2. Reasonable endeavours have been made to ensure that the information given in these particulars is materially correct, but any intending purchaser or lessee should satisfy themself by inspection, searches, enquiries, and survey as to the correctness of each statement
  3. All statements in these particulars are made without responsibility on the part of Cluttons LLP or the vendor or lessor
  4. No statement in these particulars is to be relied upon as a statement or representation of fact

5.Neither Cluttons LLP nor anyone in its employment or acting on its behalf has authority to make any representation or warranty in relation to this property

  1. Nothing in these particulars shall be deemed to be a statement that the property is in good repair or condition or otherwise nor that any services or facilities are in good working order

7.Photographs may show only certain parts and aspects of the property at the time when the photographs were taken and you should rely on actual inspection

  1. No assumption should be made in respect of parts of the property not shown in photographs

9.Any areas, measurements or distances are only approximate

  1. Any reference to alterations or use is not intended to be a statement that any necessary planning, building regulation, listed building or any other consent has been obtained
  2. Amounts quoted are exclusive of VAT if applicable
46
Q

What is the Estate Agents (Undesirable Practice) No2 Order 1991?

A

Estate agents must inform their clients at the same time as they are informed about their ToB, as to any services to be offered to prospective purchasers unless offered free of charge

47
Q

Explain what the Estate Agent (Provision of Information) Regulations 1991 are?

A
  • Relate to the provision of information which should be supplied to a client
  • Must provide information in writing regarding:
    • the service to be provided
    • remuneration
48
Q

What is “cooling-off” period in relation to EA regulations?

A

A cooling-off period = up to 14 days for client who change their minds

49
Q

What relationship does the Consumer Protection Regulations relate to?

A

Business - Consumer

50
Q

What is Private Treaty?

A

Parties are free to negotiate in their own time + without commitment in the open market

51
Q

What does the T&C Planning (Control of Advertisement) (England) Regulations say?

A

Planning consent is required for non-residential boards over 2.5 sqm (flat) + 2.3 sqm (V board) only one board per building

CHECK

52
Q

What regulation relates to marketing signage?

A

Town & Country Planning (Control of Advertisement) (England) Regulations 2007

53
Q

When was the final gov. report on the Regulations of Property Agents published?

A
  • Published in July 2019

Proposed that all property agents to be regulated by an independent regulator, with mandatory qualifications for agents + code of practice

54
Q

Who will the Regulation of Property Agents apply to?

A

It will apply to estate agents across the UK + letting and managing agents in England

55
Q

What are sole selling rights?

A

It means a fee will be payable when contracts are exchanged even if the purchaser is not found by the agent.

It means a fee will be payable if the property is sold to a purchaser who was introduced by the agent during period of sole selling rights.

56
Q

What is Gazumping?

A

Gazumping is when someone else makes a higher offer on a property you are in the process of buying. Even if you have an offer accepted on the property, someone can make a larger offer at this late stage in the process.

This can happen before you exchange contracts. Until you sign a contract, there is no legal agreement between you and the seller to sell the property to you.

57
Q

What is Gazundering?

A

Gazundering is when a buyer lowers their offer at the last minute, just before contracts are exchanged.

58
Q

Are you aware of any guidance that the RICS give to Residential Agency?

A

The Bluebook RICS UK Residential Real Estate Agency Professional Statement, 2017

59
Q

How does the Misrepresentations Act of 1967 apply to your line of work in estate agency?

(submission)

A
  • The Misrepresentations Act 1967 is relevant as it imposes a duty of truthfulness and accuracy when providing information to clients.
  • Any false or deceptive information provided can lead to contract rescinded or being sued for financial damages
60
Q

In what situations would the Consumer Protection from Unfair Trading Regulations of 2008 apply?

A

During the entire agency sales and lettings process

61
Q

How does location affect the sale of a property?
(submission)

A

Properties closer to amenities and public transport are more attractive

Properties in prime locations tend to fetch higher prices and sell faster, while those in less desirable locations may struggle to find buyers

CHECK

62
Q

Can you describe how the wider economic and political climate can influence property sales?

(submission)

A

The wider economic and political climate can affect property sales in terms of demand and supply, interest rates, and property prices.

For example, in times of political instability or economic recession, property sales may decline due to uncertainty and lack of consumer confidence.

63
Q

What role does the condition and tenure of a property play in its sale?

(submission)

A

The condition of the property will directly affect its value and desirability.

The tenure of the property (leasehold or freehold) could also affect a potential buyer’s willingness to purchase the property.

CHECK

64
Q

In what ways does the price of a property impact its sale?

(submission)

A

The price of a property can impact its sale immensely. If priced too high, it may deter potential buyers.

If priced too low, it may signify to buyers that there may be something wrong with the property.

CHECK

65
Q

What is a title?

A

It documents your proof of ownership

66
Q

What are the most important sections in the Estate Agents Act 1979?
(submission)

A
  • Section 18 - Terms of Business
  • Section 21 - Declaration of Personal Interests
67
Q

What does customer due diligence entail?

A

Vendor

  • Proof of ownership
  • Proof of address (utility bill)
  • Proof of identity

Buyer

  • Proof of identity
  • Proof of funds
  • Proof of address
68
Q

What does enhanced due diligence entail? (Buyer & Vendor )

A
  • Further investigations into their background & purpose of background
  • Increase monitoring
69
Q

What is a Memorandum of Sale?

(submission)

A

Written confirmation of the essential details of a property transaction.

70
Q

What are some of the things included in a Memorandum of Sale?

(submission)

A
  • Complete address of the property being sold
  • The agreed price of the property;
  • HM Land Registry number;
  • The name, phone number(s), email and current address of both the seller and the buyer;
  • Full contact details of the solicitors representing the buyer and seller;
  • Whether the property is freehold or leasehold. If it’s the latter, the memo should also state how many years remain on the lease;
  • How much of a deposit will be paid;
71
Q

What is included in a Memorandum of Sale? (additional information)

A
  • Whether the deposit has been verified/confirmed;
  • Where possible, the mortgage lender and whether there is a decision in principle in place (if so, for how much);
  • The name/details of the mortgage brokers/advisors involved in the sale;
  • Confirmation of ownership (via HM Land Registry). Note, the estate agent should have done this already before listing the property;
  • Whether the property is being bought in a company name;
  • Expected exchange and completion date;
  • Special conditions of sale such as a delayed completion, cash advance or an option agreement (which can take several forms);
  • Whether the vendor is buying another property and the details of the onward purchase if so;
  • Any legal issues that may need investigation (such as planning restrictions, rights of way or other constraints);
  • What fixtures and fittings will be included in the sale;
  • Any extra notes/observations relevant to the sale.
72
Q

What is the leading case for the Misrepresentation Act 1967?

(submission)

A

Headley Byrne & Co Ltd v Heller & Partners (1964)

  • Relates to liability to negligent statements
  • Refers to test of reasonableness (also under Unfair Contract Terms Act)
73
Q

What case created the three tests to decide agent’s liability for negligent statements?

(submission)

A

Headley Byrne & Co Ltd v Heller & Partners (1964)

74
Q

What are the three tests that Headley Byrne & Co Ltd v Heller & Partners (1964) created?

(submission)

A
  1. Forseeability - the damage is reasonably foreseeable
  2. Proximity - the relationship can be characteristed in law as being sufficiently proximate
  3. Fairness - It is regarded as fair, just and reasonable for such a duty of care to arise
75
Q

Porchester Place - How did you convince the prospective purchaser to offer a higher price on their second visit?

A
  • I highlighted the best features of the property and the potential of the property
  • I also highlight the area’s benefits and popularity
76
Q

Porchester Place - What strategies did you employ to persuade the vendor to consider the revised offer?

A
  • I said that this buyer was ready to proceed had the funds ready
  • Could complete quickly
77
Q

Porchester Place - How did you analyse and explain the current market conditions to the vendor?

A
  • I explained that with interest rates rising that it could reduce the number of people wanting to submit an offer
78
Q

What is the document called that is issued to both parties after the seller/vendor offer has been accepted?

A

The Memorandum of Sale

79
Q

When might you suggest a sale of a property by auction?

(Submission)

A
  • Properties with short leases
  • Unmortgageable properties
  • Property with structural issues
  • Residential properties requiring significant improvement
  • Properties subject to a statutory tenancy
80
Q

Do you have to sign a Memorandum of Sale?

A

NO

81
Q

Can you talk me through the process after an offer has been accepted?

A
  • As soon as the offer is accepted, then estate agent will issue a Memorandum of Sale to the vendor, buyer, and their solicitors (STC)
  • Parties will hire solicitors (if they haven’t already got one) in the hands of the solicitors to start the conveyancing process (drawing up and drafting the contract, searches and enquires)
  • At this point in the process, EA are there to help the sale progress and support the entire conveyancing process, liaising with their client (the seller), both sides solicitors and the person buying the property
  • Home Buyer Survey take place during this time (not a legal requirement)
  • If buyer is using a mortgage to purchase, the mortgage deed must be signed before change completion
  • Completion date discussed prior to exchange of contracts
  • Exchange of Contracts
  • Completion
82
Q

What Is Conveyancing?
(submission)

A

The work involved in the legal process of moving land or property from one owner to another

83
Q

What is a Home Buyer Survey?
(submission)

A
  • Expert assessment of a property’s condition

You can choose from three types of survey, which offer varying levels of detail.

84
Q

What legal work is the conveyancing solicitor will usually be responsible for?

A
  • Drawing up and reviewing the contracts
  • Conducting the local searches
  • Corresponding with the Land Registry
  • Managing payments, collection and transfer of funds
  • Providing you with legal advice as and when you need it
85
Q

What does completion involve?

A

Completion = all funds are to be transferred from the purchaser’s solicitor to the vendor’s solicitor

  • The sale confirmed
86
Q

What does exchange mean?

A
  • Both parties sign their respective contracts which are then ‘exchanged’ between the two solicitors
  • Exchanging contracts is where things become legally binding
  • A deposit of 10% of the sale price is paid by the buyer at exchange
  • After this point neither party can pull out without being liable for significant compensation
87
Q

Who policies the CPR 2008?

A

Trading Standards Office of the Local Authority

88
Q

What does Caveat Emptor mean?

A

‘Let the buyer beware’

Buyers are responsible for ensuring that they are satisfied with all matters relating to the property

E.g. When a seller is asked to disclose is there anything structurally wrong with the property and they said to the best of their knowledge they haven’t had a survey done since they have owned the house but they have had no issues, the EA would report this and then it is up to the buyer to sort out a survey to double check etc.

89
Q

What does BPR relate to?

A

Business to Business activities

90
Q

When should I complete AML checks on Sellers and Landlords?

A

Prior to marketing property

91
Q

When should I complete AML checks on Buyers?

A

When the offer has been accepted

Initiate at Memorandum of Sale

Needs to be completed by exchange of contracts

92
Q

Who is your Money Laundering Reporting Officer (MLRO)?

A

James Gray

93
Q

What would you do if you are unable to complete AML check?

A

Always report to MLRO if you can’t obtain AML docs/info

They would then look at the reason why we haven’t been able to obtain and report any suspicious findings

94
Q

Where are the risks of money laundering in your market?

A
  • Customer risk: who is the buyer and are there any other parties involved? As well as issues with finding out who the customer is or with a customer who is unwilling to answer questions.
  • Transaction risk: source of funds, complexity of the payment, but also the type of property, the valuation of it (undervalued or overpriced) and use of cash.
  • Geographical risk: location of the property versus location of the buyer, either if these do not match or if the location is known to have weak anti-money laundering regulations.
95
Q

What are examples of suspicious activity in your market?

A
  • Refusing to provide AML
  • Fraudulent documents
  • Selling / renting below market value
  • Seller client instructing quickly after purchase
  • Unusual tenancy set up e.g. tenant and occupier
  • Occupier is providing funds for tenancy
  • Request to pay rent upfront
  • Paying / renting in excess of marketing price
  • Adverse information identified e.g. previous criminal
    convictions, Land Registry
96
Q

Which home buyer survey do people usually choose?

A

RICS Home Survey - Level 2

97
Q

Is it possible to exchange and complete on the same day?

A

It is possible to exchange and complete on the same day

Exchanging and completing on the same day is increasingly common, and has certain advantages

  • It certainly speeds the conveyancing process up, and means you don’t have to pay a deposit on exchange of contracts
98
Q

What happens during a typical sales instruction?

A
  1. Receive instructions from the client
  2. Check competence + independence
  3. Issue agency instructions agreement
  4. Receive agreement signed by the client
  5. Complete AML
  6. Gather info e.g inspection deatils, legal title docs
  7. Undertake due diligence - read lease
  8. Check VAT position of vendor
  9. Inspect + measure the property
  10. Confirm position of fixtures and fittings with the vendor
  11. Research market and assemble comp evidence
  12. Undertake valuation of freehold interest (NOT RED BOOK)
  13. Prepare market report to Vendor
  14. Obtain written approval of contents of the marketing particulars (MPR 1967)
  15. Undertake marketing campaign as agreed
99
Q

What can the Vendor serve on the proposed purchaser to give them a deadline to complete?

A

An Notice to Complete

(legal costs for this work are to be paid by the proposed purchaser)

100
Q

What are some of the forms of purchase vehicles?

A
  1. Special purchase vehicle
  2. Offshore Unit Trusts
  3. REITs
  4. JVs

RICS APC - YN (22 decks)

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