Purchase and Sale Flashcards
What are the four main methods of sale?
- Private treaty
- Informal tender
- Formal tender
- Auction
What are some factors you might consider when deciding the method of sale?
- Client’s objectives
- Public accountability
- Market conditions
- Demand/target market
- Timing
What is private treaty?
Parties are free to negotiate in their own time and without commitment to the open market.
What are the advantages of private treaty?
- Flexibility
- The parties control the process
- Vendor not under any obligation to sell
- Confidential
What are the disadvantages of private treaty?
- Gazumping / gazundering
- late decisions not to buy
- Associated abortive costs
what is informal tender?
Used when there is good level of interest either at commencement of marketing or to bring negotiations to conclusion
‘Best bids’ procedure - not legally binding
Agent invites all interested parties to submit their ‘best and final’ offer in accordance with a prescribed timescale
In informal tender, what details need to be included in the a letter to interested parties?
- Date and time of receipt of written offer
- Name and address of applicants solicitor
- Confirmation of finance agreements
- Any conditions
- Cannot have a variable offer (i.e. ‘higher than the highest bid’)
- The vendor reserves the right not to accept the highest offer, or any offer
Who might typically use formal tender?
A statutory body to give control and transparency to the marketing process
What is formal tender?
Applicants bid blindly in a prescribed form without knowing what other parties are bidding
There is no opportunity for the prospective purchaser to change or increase their bid after submitting their offer
What is an auction?
A public sale to the highest bidder
What are the advantages of Auction?
- Short timeline
- Certainty of sale (assuming reserve figure is achieved)
- Useful for unusual properties that are hard to value
What are the disadvantages of Auction?
- Cost of promotion and publicity
- Lack of confidentiality
- Cannot choose the purchaser
- Intensive / short marketing period
What is the procedure with auctioneering?
- TOE agreed in advance
- COI / AML checks undertaken prior
- Full DD completed beforehand
- All documentation available in advance
- Reserve price needs to be agreed
- Contracts exchanged at all of gavel
What are the actions required by the purchasers before an auction?
- View the property + consider survey
- Take legal advice and complete a DD exercise
- Read Notice to Prospective Buyers
- Arrange deposit of 10% and insurance for exchange
- Provide ID for AML checks
What are the three types of agency?
- Sole
- Joint (split fee)
- Multiple (only successful agent gets fee)
For Agency Instruction Agreements, what must be clearly set out?
- Agency basis (sole/joint)
- Agency rights (sole agency/selling rights)
- Proposed fee
- Marketing costs
- Confirmation of no COI
- ML regulation requirements
- Timescale for payment of fees
- Details of CHP
What is the ‘ready able and willing purchasers’ clause? Estate Agents Act 1979.
Relates to abortive fees. When an applicant is willing and ready to proceed with a sale and the seller pulls out an abortive fee may be charged.
What is a Notice to Complete?
Served by the vendor giving the purchaser a deadline. Legal costs for this to be paid by purchaser.
If deadline passed, vendor can rescind the contract and remarket the property.
Deposit retained by vendor
Name a few of the 12 core principles set out in the RICS Professional Statement: UK Commercial Estate Agency 2016.
- Act in an honest, fair and transparent manner
- Carry out work with due skill, care and diligence
- Ensure clients have clear TOB, with the firm’s CHP
- Avoid COI and where they arise deal with them openly
- Not to discriminate unfairly in any dealings
- Advertising / marketing material is truthful
- Client money held separately and covered by insurance
- Hold appropriate PII
- Give realistic assessments of selling prices / rents etc.
The Principles of the Estate Agent Act 1979. What 7 key points do they promote?
- Clarity on the terms of the agency (Section 18)
- Honesty and accuracy
- Agreement and liability for costs
- Openness regarding personal interests
- Absence of discrimination
- Legal obligation to tell the client about offers received
- Keep clients’ money separate
What is said in the Consumer Rights Act 2015?
It amends existing consumer protection law and gives consumers new rights
Consolidates law relating to unfair terms between businesses and consumers
Letting agents must display a summary of their charges for letting and management
Info must be provided based on calculation of the charges and who is responsible for payment
Policed by Local Authority and the penalty is a fine up to £5,000
What is the Misrepresentation Act 1967?
Relating to a false statement of fact made by a party during pre-contractual enquiries (which has the effect of inducing the party to purchase)
The vendor or agent can be sued for damages and/or contract rescinded
Civil offence - a wrong at common law and a form of negligence
Can be FRAUDULENT, NEGLIGENT or INNOCENT
Agent has a duty of care to check that the advice, information or opinion is reliable
When does the Misrepresentation Act 1967 apply?
False or fraudulent statements or misrepresentations made during pre-contractual enquiries by the vendor or their agent to the proposed purchaser
What is the OFFENCE under the Misrepresentation Act?
Civil Offence
Actionable by tort
Action can be limited by an effective disclaimer (exclusion) clause
