Purchase And Sale

Question 1

What act governs agency agreements and what must be included

Answer 1

Act = Estate Agents Act 1979

Include:

• agency bases (sole, joint, etc)
• agency rights (sole selling vs agency)
• proposed fee agreement
• marketing costs and disbursements
• no conflict of interest confirmed
• money laundering regs required
• timescales for payments of fees
• complains handling procedure

Question 2

Agency case law

Answer 2

Wells vs Devanagari 2019 - ‘sketchy oral agreement’ over the phone was legally binding

Question 3

Agency rights: sole selling vs sole agency rights

Answer 3

Sole selling = whoever finds the eventual buyer, the agent gets a fee

Sole agency = agent only gets fee if they introduced the buyer

Question 4

What act governs freehold sales

Answer 4

Landlord and tenant act 1987

Right to first refusal

Question 5

How right to first refusal is qualified

Answer 5

Eligible premises - at least 2 flats and max 50% non resi

Tenants eligible - leaseholder or reg

Question 6

Types of S5 notice and legislation

Answer 6

Landlord and Tenant Act 1987

5A - sale by contract

5B - by auction

5c - by granting an option or right of pre-exemption

5d - some land disposals

Question 7

Proposed changes under LAFRA

Answer 7

• ban leaseholds on new homes
• cap ground rents - e.g. 0.1% of market value
• abolish 2 year ownership rule to extend lease
• Abolish marriage value
• set standard cap rate
• raise deferment rate
• new standard 990 year leases
• collective enfranchisement easier e.g. up to 50% non resi

Question 8

Does there have to be terms of engagement for an agent to be appointed

Answer 8

No - implied actions are enough for an implied agreement based on behaviours

Question 9

Lease vs license

Answer 9

Lease gives occupier part of the land in an estate

License gives a permission to use land

Question 10

What was the Leasehold Reform Act 1967

Answer 10

Gave leaseholders the right to buy (enfranchise) or extend their lease

Leaseholder must have been in for 2 years

Question 11

Misrepresentation vs misdescription

Answer 11

Misrepresentation is an incorrect fact

Misdescription is about false or misleading statements and description of the property.

Question 12

What must sales particulars include (material information)

Answer 12

Council tax band
Tenure
Purchase price

Question 13

What must agency instructions include (8 things) FOR SALE

Answer 13

Agency basis - sole, joint, etc
Agency rights - sole selling vs sole agency
Proposed fee
Marketing costs and disbursements
Confirm no conflict of interest
AML confirmation
Timescale for payments
Complaints handling procedure

Question 14

Steps of a sales instruction

Answer 14

Receive instruction
Check competence/independence/PI
Sign agreement with client
Complete AML checks
DD of info - inspect, lease, title docs, plans, etc
Analyse DD
Check vendors VAT (business which owns the asset is sold so saves VAT)
Inspect and measure
Market research/comps
Value freehold
Prepare marketing and get approved
Market
Negotiate sale, draft HOTs, instruct sols
Answer queries
Issue invoice on completion

Question 15

7 details of a compliant lease plan

Answer 15

Drawn to a scale
Scale measurement bar
Scale notes on plan
Inc 1:1250 scale location map
Full address Inc postcode
North point
Red line for demise

Question 16

Can offers be entertained after bid deadline or bid accepted

Answer 16

If not legally binding yet then yes - bad practice though

Once legally binding (exchange and deposit paid) - only if the buyer defaults on competing. If either party pulls out they lose the deposit - unless special terms agreed in the memorandum of sale/ heads of terms for the contract

Question 17

How would agents gain proof of a buyers funds when they bid

Answer 17

Firstly for AML DD

Ask for bank statements or mortgage agreements in principle

Question 18

Purchase and Sale AML requirements

Answer 18

Under money laundering, terrorist financing and transfer of funds regs 2017

Customer DD - agents must check buyer and sellers ID to verify

Must provide valid source of funds

Risk based approach adopted

Question 19

Key legal requirements for purchase and sales?

Answer 19

Marketing regulations

EPC

AML DD

Property title and lease docs

Any lease conditions

Conflict of interest

Disclose material info

Question 20

Techniques to sell

Answer 20

Agents

Online marketing

Open houses

Question 21

Key docs throughout a sale

Answer 21

Agent terms of engagement

DD/AML - ID, proof of funds

Memorandum of sale

Title deeds

Copy of lease and LPE1 form

Property Information Form

Fittings and Content Form

Building Reg Certs

EPC

Mortgage offer

Contract of Sale (exchange)

Completion Statement

Question 22

Key sections of Estate Agents Act 1979

Answer 22

S18 - clear terms of business

S21 - disclose interests

Question 23

What must property particulars disclaim?

Answer 23

Disclaimer on Misrepresentation Act 1967

Question 24

Caveat Emptor?

Answer 24

Despite protection of consumers and regulation of agents - it is also buyer’s responsibility to satisfy themselves with all info before entering into a contract to buy a property

Question 25

What is a misrepresentation and the 3 types

Answer 25

False or misrepresentative statement before a contract is entered into but impacted the parties decision to enter the contract

Fraudulent
Negligent
Innocent

Question 26

Misrepresentation penalty vs Consumer Protection Regs penalty

Answer 26

Misrepresentation - civil offence, sued for damages and contracts rescinded

CPR - criminal offence, unlimited fines and possibly prison for up to 2 years