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RICS APC - EVIE > Purchase and Sale > Flashcards

Purchase and Sale Flashcards

1
Q

What is the global statement for agents?

A

RICS Global Real Estate Agency Brokerage 2016

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2
Q

What is the UK specific professional statment for Commercial Agents?

A

RICS Professional Statement: UK Commercial Estate Agency 2016

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3
Q

What are the 12 principles which agents must observe according to the RICS Professional Statement: UK Commercial Estate Agency 2016?

A
  1. Act in an honest and transparent manner.
  2. Carry out work with care and skill
  3. Ensure clients are provided with clear, fair ToB with CHP.
  4. Avoid CoI and deal with them fairly
  5. Do not disciriminate unfairly
  6. All communication with clients is fair and transparent
  7. All advertising and marketing is honest and truthful
  8. Hold appropriate PII
  9. Client money to be held separately
  10. Make it clear the identity of your client
  11. Give realistic assessments of selling prices having regard to comparable evidence
    12 ensure all meeting, inspections and viewings are carried out in accordance with client wishes
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4
Q

What other areas does the RICS Professional Statement: UK Commercial Estate Agency 2016 cover?

A

1) Acting Ethically (gifts, incentives, CoI)
2) Securing Instructions (Legal requirements such as AML checks)
3) Marketing the property (Legal requirements, Market Appraisals etc.)
4) Implimenting the disposal (methods of sale and legal requirements)
5) Acquisistion of the property (CoI, communication etc,)

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5
Q

What is the Professional Statement for Residential Agents?

A

RICS Professional Statement: UK Residential Real Estate Agency 2017

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6
Q

What is the Estate Agents Act 1979?

A

Regulates Estate Agents work throughout the sale or purchase of property and to ensure that all parties are treated honestly and fairly

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7
Q

What are the 7 principles of the Estate Agents Act 1979?

A

1) Clarity as to the terms of agency/ToE (Section 18)
2) Honesty and Accuracy
3) Agreement and liability for costs
4) Openness regarding personal interests CoI (Section 21)
5) Absnce of discrimination
6) Legal obligation to tell the client about offers recieved
7) Keep clients money separate.

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8
Q

What are the other important points laid out within the Estate Agency Act 1979?

A
  • Specify all costs / fees in advance, in writing within the ToB (Section 18)
  • Itemise all payments
  • specify the nature of agency
    -Disclose personal Interests and deal with them appropriately (Section 21)
  • Misrepresentation of interest/ offers
  • Handling clients money - follow rics rules
  • Procedures to follow when offers are recieved in writing.
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9
Q

What are the penalties for the Estate Agents Act 1979

A

Warning/Prohbilition or Fine
Policed by the National Trading Standards

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10
Q

How long is a cooling off period as per the consumer protection regulations?

A

14 days

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11
Q

What are the Consumer Protection from Unfair Trading Regulations 2008 ?

A
  • Replace the Property Misdescriptions Act.
  • Protect against unfair practices and misleading information throughout the entire sales and lettings process.
  • Policed by the Trading Standards Office and maximum breach is a unlimited fine or prohibition order or 2 years in prison
  • Criminal Offense
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12
Q

What are the Consumer Rights Act 2015

A

Relates to unfair terms in contracts.

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13
Q

What are the Misreprestations Act 1967?

A

Mis-statements/false/fraudulent statements.
Misrepresentations made during pre-contractual enquiries by the vendor or their agent to the proposed purchaser.
Freehold and leasehold transactions.
- Civil Offense
- Sued for damages

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14
Q

What are the threats of Private Treaty ?

A

Gazumping
Late pull-out
Sometimes properties can be on the market for a lengthy period of time
Associated abortive costs.

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15
Q

What are the benefits of Private Treaty?

A

” Greater negotiation
Time (time to consider offers from prospective buyer).
Flexibility
Vendor not under any obligation to sell
Confidential
The parties control the process.”

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16
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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17
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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18
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 bid or any bid.”

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19
Q

What are the disadvantages of Formal Tender ?

A

No opportunity for further bids

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20
Q

What is dual agency ?

A

Acting on both sides of a transaction.

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21
Q

Why is obtaining best value for a charity important?

A

In line with the Charities Act 2011 - public benefit

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22
Q

What is the difference between the Mistrepresentations Act and the Consumer Protection Act ?

A

One is Civil and one is criminal

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23
Q

When does the Estate Agents Act 1979 apply?

A

“During the sale and purchase of freehold or leasehold properties with a capital value.
- S18 Terms of Business
- S 21 Declaration of personal interest.”

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24
Q

When does the Misrepresentations 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 and leasehold transactions.”

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25
Q

When does the Consumer Protection Regulations apply?

A

During the entire agency sales and lettings process.

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26
Q

What is the offence of the Misrepresentations Act 1967?

A

“Civil offence
Actionable by tort
Action can be limited by an effective disclaimer”

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27
Q

What is the offence of the 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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28
Q

What is the offence of the Consumer Protection Regulations 2008?

A

“Criminial Offence
Not treating customers fairly
Providing misleading market information.”

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29
Q

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

A

“Sued for financail damages
Or contract rescinded”

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30
Q

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

A

Warning order, prohbition order or fine

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31
Q

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

A

Unlimited fine prohibition order or up to 2 years in prison.

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32
Q

What is Formal Tender ?

A

“Sealed bids
- Applicants bid blinding lin a prescribed form without knowing what the other parties are bidding.
- No opportunity for prosepctive purchasers to change or increase their bid after the submission of their offer.”

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33
Q

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

A

“Full marketing materials
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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34
Q

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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35
Q

Who often uses Formal Tender?

A

Statutory Bodies

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36
Q

Why is Formal Tender used?

A

“Gives control and 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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37
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 T&Cs of the sale already stated in the marketing particulars - speed up the process

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38
Q

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

A

Yes

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39
Q

What are the four methods of sale ?

A

“Private Treaty
Auction
Formal Tender
Informal Tender”

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40
Q

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

A

“1. Clients Objectives
2. Public accountability
3. Current and likely market conditions
4. Likely level of demand for the property- likely target demand
5. Timings required.”

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41
Q

What is the main differenced between formal and informal tender ?

A

“Informal tender - the bid is not legally binding where as formal tender the bid 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 where as the informal tender will not lead directly to a contract for sale.”

42
Q

What are the advantages of Auction ?

A

“Short timescales
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.”

43
Q

What are the disadvantages of Auction?

A

“Cost of marketing
Lack of confidentiality over price received.
vendor cannot choose the purchaser
Won’t nessisarily sell.”

44
Q

What is an auction ?

A

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

45
Q

What is the difference between Auction and Private Treaty ?

A

“Auction has a fixed timeframe for exchange and completion - private treaty has no set timeframes.
Bids at auction are binding and incompletion of the sale is not an option- Private treaty is not binding.”

46
Q

When are AML checks conducted at an Auction?

A

Before Auction

47
Q

What AML check will be conducted on private individuals ?

A

Proof of identity and proof of address.

48
Q

What is the Auction process ?

A

“Prospective buyers compete against each other by increasing their bids until the auction stops/expires.
When the gavel falls, contracts are exchanged and the purcchaser pays a 10% deposit and arranges insurance.”

49
Q

What are the four types of agency?

A

“Sole agency
Joint agency
Multiple agency
Dual Agency “

50
Q

What is sole agency ?

A

Just one agent

51
Q

What is joint agency ?

A

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

52
Q

What is multiple agency ?

A

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

53
Q

What did Wells V Devani 2019 establish?

A

“SC held that a ““sketchy oral agreement”” made by phone between residential sales agent and their client was legally binding
Interpreting context - taking the parties behaviour into context”

54
Q

What must an agency instruction agreement set out ?

A

“Agreed agency basis
Agency rights
Propoosed fee
marketing costs and disbursements
confirmation of no COI
Money Laundering Regulation requirements
Timescales for payment of fees and disbursements
Details of the practices CHP”

55
Q

What are the seven principles of the EA 1979?

A

“1. Clarity as to Terms of the Agency (S18)
2. Honesty and accuracy
3. Agreement and liability for costs.
4. Openned regarding personal interests
5. Absence of discrimination
6. Legal obligation to tell the client about offers.
7. Keep client money secure and separate.”

56
Q

What is informal tender ?

A

Best bids/ offers

57
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.

58
Q

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

A

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

59
Q

Explain what the Estate Agent Regulations (Provision of Information) 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 and the money to be paid for this service

60
Q

What is a cooling off period in relation to the Estate Agent regulations?

A

A cooling off period = 14 days for clients who change their minds.

61
Q

What relationship does the Consumer Protection Regulations relate to ?

A

Busimess - Consumer

62
Q

What is Private Treaty ?

A

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

63
Q

What does the T&C Planning 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.

64
Q

What regulation relates to marketing signage ?

A

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

65
Q

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

A

“July 2019
Proposed that all property agents to be regulated by an independent regulator with suitable qualifications

66
Q

Who will the Regulation of Property Agents apply to ?

A

It will apply to estate agents, letting agents and managing agents across the UK

67
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 feee will be payable if the property is sold to a purchaser who was introduced by the agent during the period of sole selling rights.”

68
Q

What is Gazumping ?

A

“When someone 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 higher offers 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.”

69
Q

What is Gazundering ?

A

When a buyer lowers their offer at the last minute before contracts are exchanged.

70
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

71
Q

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

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.”

72
Q

In what situation would the Consumer Protection from Unfair trading regulations of 2008 apply?

A

During the entire agency sales and lettings process.

73
Q

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

A

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

74
Q

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

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 purcahse the property.”

75
Q

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

A

If priced too high this can deter potential buyers and if priced too low it may signify to buyers that there may be something wrong with the property.

76
Q

What is a title ?

A

It documents your proof of ownership

77
Q

What are the most important sections of the Estate Agents Act 1979?

A

“S18 - Terms of Business
S21 - Declaration of Personal Interests”

78
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”

79
Q

What does enhanced dur diligency entail?

A

Further investigations into their background and increased monitoring.

80
Q

What is a memorandum of sale?

A

Written confirmation of the essential details of a property transaction.

81
Q

What are some of the things included in a memorandum of sale?

A

“Complete address of the property being sold
The agreed price of the property
HM Land Registry number
The name and phone number, email and current address of both the seller and buyer
Full contact details of the solicitors representing the buyer and the seller.
Whether the property is freehold or leasehold. If its the latter the memo should also state how many years remain on the lease.”

82
Q

What is the leading case for the Misrepresantation Act 1967?

A

“Headley Byrne and Co V Heller and Partners (1964)
Relates to liability to negligent statement
Refers to test reasonableness (also unfair contract terms)”

83
Q

What case created the three tests to decide agents liability for negligent statements?

A

Headley Byrne and Co V Heller and Partners (1964)

84
Q

What are the three tests stipulated in Headley Byrne and Co V Heller and Partners (1964)

A

“Forseeability - the damages is reasonably forseeable
Proximity - the relationship can be characterised in laws as sufficient proximate
Fairness - It is regarded as fair, just and reasonable for such duty of care to arise.”

85
Q

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

A

“Properties with short leases
Unmortgagable properties
Properties with structural issues or in need of improvements
Properties subject to a staturory tenancy”

86
Q

Do you have to sign a memorandum of sale?

A

No

87
Q

Can you talk me through the process once an offer is accpeted.?

A

“1. As soon as the offer is accepted then estate agent will issue heads of terms /Memorandum of sale to the vendor, buyer and their solicitors (STC).
2. Parties will hire solicitors to start conveyancing the process.
3. Exchange
4. Completion.”

88
Q

What is Conveyancing ?

A

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

89
Q

What legal work is the conveyancing solicitor usually responsible for?

A

“Drawing up and reviewing the sale contract
Conducting local searches
Corresponding with Land Registry
Managing payments, collection and transfer of finds
Providing you with legal advice when you need it “

90
Q

What does completion involve?

A

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

91
Q

What does Exchange mean?

A

“Both parities sign their respective contracts with are then ‘exchanged’ between the two solicitors
Exchange contracts is where things become legally binding
Deposit of 10% of the sale price is paid by the buyer at exchange
After this point neither party can pull out without being liabile for compensation.”

92
Q

Who polices the CPR 2008?

A

Trading Standards Office of Local Authority

93
Q

When should AML checks be completed on Sellers and Landlords?

A

Prior to marketing the property

94
Q

When should you complete AML checks on buyers ?

A

“When the offer has been accepted
Needs to be completed by exchange of contracts “

95
Q

Who is your money laundering officer?

A

Katie Stanford

96
Q

What would you do if you couldn’t perform an AML check?

A

Report to ML officer if you cannot obtain aml checks.

97
Q

What are the risks of ML 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.”

98
Q

What are examples of suspicious activity in the market ?

A

“Refusing to provide AML
Fraudulent documents
Selling /renting below market value
Seller client intructing to sell quickly after the purchase
Unusual tenancy set up eg; tenant and occupier
Occupier is providing funds for tenancy
Request to pay rent upfront
Paying/renting excess of marketing price
Adverse information identified eg previous criminal convictions.”

99
Q

What is the global statement for estate agents?

A

RICS Global Real Estate Agency Brokerage 2016

100
Q

What is set out in Section 18 of the Estate Agents Act 1979?

A

Terms of Engagement which should include:
1) Charges - the fee and how it is calculated.
2) Liability - when the client will pay the agent.
3) Agency terms - the type of agency
4) Any services that might be provided to the buyer

101
Q

What is set out in section 21 of the Estate Agents Act 1979?

A

Disclosure of personal interests
- Who to disclose to
- When to disclose
- What to disclose

RICS APC - EVIE (20 decks)

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