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JU - APC > Purchase and Sale (Submisison) > Flashcards

Purchase and Sale (Submisison) Flashcards

1
Q

Please can you talk me through your agency instruction in Chigwell?

A
  • Received instructions from clients
  • Check competence & independence - Conflict checks
  • Research the market, collate comparable evidence and appraise the site.
  • Issue ToB and ToE and property registration - signed copy
  • AML checks for compliance.
  • Gather property information for marketing.
  • Check if the property is elected for VAT.
  • inspect and measure.
  • produce marketing particulars
  • written approval for marketing particulars
  • launch marketing campaign, deal with enquiries and undertake viewings.
  • Receive offers and share them with clients for consideration.
  • Select the preferred bidder, negotiate HoT
    -HoT approved, instruct solicitors
  • assist solicitors to exchange and complete
  • issue invoice upon completion
  • save all documentation for 6 years.
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2
Q

What is the key piece of legislation for agency instructions?

A

Estate Agency Act (1979)

Misrepresentaion Act (1967)

Consumer and Business Protection Regulations (2008)

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3
Q

Do you refer to any particular sections of the Estates Agents Act (1979)?

A

s.18 in terms of clarity to the terms of agency.

s.21 in regards to openness regarding personal interests.

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4
Q

Please can you talk me through your actions up to the signed Terms of Business?

A
  • Received instructions from clients
  • Check competence & independence - Conflict checks
  • Research the market, collate comparable evidence and appraise the site.
  • Issue ToB and ToE and property registration - signed copy
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5
Q

How would you have dealt with a conflict if it had arisen?

A

If both my client and myself were happy for me to manage the conflict and felt that i could still remain independent and unbias then i would recieve informed consent from my client.

If I did not feel comfortable with the conflict then I would have declined the instruction.

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6
Q

Would you have taken the instruction if the Property belonged to a family member?

A

Yes, only if I felt comfortable doing so and I felt that I could remain independent.

However, in accordance with section.21 of the Estate Agents Act (1979), I would not enter into any negotiations until the nature and extent of my personal interest had been disclosed. We would include this information within our marketing particulars.

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7
Q

Would you have spoken to your client if you had noticed a conflict?

A

Yes absolutely, I would provide them with information on the nature, the circumstances surrounding it and any other relevant information or facts. If I felt comfortable managing the conflicts I would set out a proposal for how I intend to deal with the conflict, such as setting up an information barrier.

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8
Q

Could you give me an example scenario of a potential conflict you might encounter?

A
  • I do not have an experience with acquisitions but there would be a conflict if I was asked to advise or act for a purchaser of a site that someone in my team was selling.
  • I could have a personal conflict/own interest conflict when acting for a family member, close business associate or someone by whom I have a financial or personal interest or benefit.
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9
Q

When you took offers in for the site at Chigwell – did you have any calls offering gifts?

A

No, but I was offered to be taken for lunch after viewing by a potential purchaser which I politely declined as this could have been looked at as receiving a bribe.

Under the Bribery Act (2010) this could have meant imprisonment of 10 years and unlimited fine which I could personally be prosecuted for.

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10
Q

What are the 4 methods of sale?

A

Private Treaty
Informal Tender
Formal Tender
Auction

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11
Q

Can you give me the pros and cons to Private Treaty sale?

A

Pros
- flexible timescales
- room for negotiation
- the vendor has no obligation to sell

Cons
- potential for gazumping and more likely gazundering
- late decision not to buy
- associated abortive costs

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12
Q

Can you give me pros and cons of the Informal Tender (best offers) sale?

A

Pros:
- flexible
- the possibility of negotiating a higher bid

Cons:
- can be difficult to manage bids
- needs to be sufficient interest in the property to work well

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13
Q

Can you give me pros and cons to Formal Tender sale?

A

Pros:
- completely transparent
- definitive timescale

Cons:
- no flexibility
- the possibility of missed opportunities due to time constraint
- no aspect of negotiation

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14
Q

Can you give me pros and cons to Auction sale?

A

Pros:
- quick sale
- good method for unusual properties that are hard to value
- used when good interest is expected
- vendor can set reserve price

Cons:
- cost of promotion and publicity
- no confidentiality on the price achieved
- vendor cannot choose a purchaser

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15
Q

When do exchange and completion happen at Auction?

A

exchange = fall of the gavel
completion - might vary depending on the auction house

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16
Q

What are the basis of agency?

A
  1. Sole Agency
  2. Joint Agency (fee is split 50/50 = working with the other agent = best intention for the seller)
  3. Multiple Agency (100% of fee goes to agent who introduced buyer = competition between the two agents)
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17
Q

What are the penalties under the Consumer and Business Protection Regulations (2008)?

A

Unlimited fine and 2 years imprisonment.

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18
Q

What are the key principles of the Estate Agency Act (1979)?

A

The Hot Clients Play Darts on Monday

  • TERMS of agency (s.18)
  • HONESTY and accuracy
  • agreement of liability for any COSTS
  • Openness and transparency of any PERSONAL interests (s.21)
  • Absence of DISCRIMINATION
  • Keep client’s MONEY separate
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19
Q

What is the Blue book?

A

RICS UK Residential Real Estate Agency Pofessional Statement (2017).

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20
Q

What legislation do you refer to in terms of AML?

A

Anti Money Laundering (2017)
Proceeds of Crime Act (2002)

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21
Q

What are the penalties under Anti-Money Laundering (2017)?

A

5 years imprisonment for failing to report/ tipping off
10 years imprisonment for assisting.

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22
Q

AML what are you ultimately doing?

A

Looking to understand who the ultimate beneficial owners of a company is and checking for any Red Flags.

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23
Q

What do you do if you come across a Red Flag during an agency inspection?

A

Speak to my manager
Fill in a Suspicious Activities Report and send to the compliance officer in my team.

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24
Q

What are the criteria for which you ask offers to conclude?

A
  • Purchasers identity and ownership
  • Offer price in British pounds
  • conditions, legal and other requirements
  • the source of funds
  • solicitor
  • Proof of due diligence
  • process and timing.
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25
Q

What are included in your head of terms for Chigwell?

A

Details of the vendor and purchaser.
The address of the Freehold interest.
The agreed sale price (no VAT was applicable in this instance)
Any conditions of sale agreed. (subject to contract)
Solicitor and agent details for btoh parties.
Timings in terms of exchange and completion.

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26
Q

Why must you state that it is subject to contract in HoT?

A

To ensure it is not legally binding until exchange.

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27
Q

What is a ‘connected person’?

A

Someone who could benefit financially from the transaction such as a relation or business associate.

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28
Q

What is a cooling-off period?

A

A cooling-off period of up to 14 days is allowed for clients who change their minds and don’t want to instruct the agent in accordance with current consumer protection regulations.

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29
Q

How do you comply with the Consumer Protection Regulations (2008)?

A

I undertake thorough due dilligence on all my agency intructions to ensure all information good or bad is made aware to all potential purchasers, to whom my duty of care extends to.

Marketing particulars are checked and signed off by my client before marketing is to comence.

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30
Q

Who polices the CPR and BPR (2008) and what are the penalties under it?

A

Trading Standards Office of a Local Council

  • Prohibition
  • An unlimited fine and compensation might have to be paid to a complainant up to £25,000.
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31
Q

Who was your client for the Chigwell site?

A

A private individual who had owned the property for many years.

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32
Q

Did they select the heighest bidder?

A

We went to best and finals and the top two offers were very close but my client decided on the second heighest bidder.

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33
Q

Is the informal best bids process a binding tender?

A

No its isnt if the following statement is made:

the vendor reserves the right to not acceot the highest or any offers made.

Without this it becomes a binding tender.

34
Q

Please can you explain to me why your site in Chigwell had a resolution to grant planning permission?

A

In this instance it had resolution to grant subject to the s106 agreement being finalised which was imminently due and therfore we were seeking unconditional offers.

35
Q

What do you mean by the Chigwell site being in a desirable location and scale?

A

Chigwell itself is very well located being just off the M11, inside the M25 and on the cusp of greater London which offers great value. The location of this property was to the north of the High Street which is an area of more historical buildings offering more character but yet still benefitting from Chigwell’s location.

36
Q

What was the sale price of the property and what was it in comparison to the guide price?

A

Having undertaken my due dilligence we suggested a guide price of £700,000 but we recieved a huge amount of interest and the agreed sale price was £856,000.

37
Q

What were some fo the conditions seen in your offers for Chigwell?

A

there were not many conditions seen due to the unconditional nature of the sale but the biggest variances were in termsof the source of funds. Somebuyers wer ecash buyers whilst others were seeking finance.

38
Q

How did you prepare for you meeting with your client at Chigwell?

A

I collated a summary of all bids on an excel spread sheet with varying columns such as purchaser details, their offer, source of funds, proof of funds, and their intentions for the Property.

39
Q

Did you reccomend a particular party or conduct interviews?

A

We didnt conduct any interviews and I did not specifically advise my client on a specific party but my clients objective was to have a quick sale and therfore i advised him of the benefits of a cash purchaser who had provided proof of funds.

40
Q

What did your marketing proposal report include for your agency site in Ipswich?

A
  • Information on the property
  • marketing strategy
  • fee basis
  • additional costs and the liability to whom they fall
  • proposed timescales
41
Q

What other reports could you have commissioned as well as the topographical survey and why did you recommend that?

A

Ground investigation Survey
Ecology Survey

42
Q

What were the costs of the topographical survey from the various quotes that you recieved?

A
43
Q

Why did you feel that 8 weeks was a suitable marketing period for Ipswich?

A

Due to the size of the site I would send it to our marketing list of developers who I was aware of that were in the market for that site. I felt that was sufficient time for them to undertake their necessary due diligence and make their offer, from my previous experience.

44
Q

What are the penalties for a breach of the Estate Agents Act (1979) and who polices them?

A

National Trading Standards

  • Prohibition
  • warning
45
Q

What is the RICS guidance on estate agency?

A

Professional Statements:

  • UK Residential Real Estate Agency (2017) (The Blue Book).
  • Global Real Estate Agency and Brokerage (2016).
  • RICS UK Commercial Estate Agency (2016).
46
Q

Key principles of the RICS Global Real Estate Agency and Brokerage Professional Statement (2016)?

A

All RICS members involved in the sale, letting and leasing of real estate must follow.

Includes:
- Ethics
- Securing instructions
- Acting for the seller
- Acting for the buyer

It is similar to the UK-specific professional statement - RICS UK Commercial Estate Agency (2016).

47
Q

What are the key principles of the RICS UK Commercial Estate Agency Professional Statement (2016)?

A

Has 12 core principles:

  • Act in an honest, fair and transparent manner
  • Ensure clients are provided with Terms of Business
  • Do your utmost to avoid conflicts
  • Have adequate PII
  • Do not discriminate unfairly in any dealings

Also, advice on key agency matters i.e. acting ethically, securing instructions, marketing, gifts etc.

48
Q

What are the key principles of the RICS UK Residential Real Estate Agency Professional Statement (2017) (The Blue Book)?

A

Provides a mandatory summary of the code of practice in all aspects of property marketing for residential.

Comprises the following material:
- Relevant estate agency legislation
- Standards & ethics
- Proper marketing
- Acting for the vendor, purchaser and landlord.

49
Q

What are the main differences between CPR (2008) and Misrepresentation Act (1967)?

A

CPRs are a criminal offence.
Misrepresentation is a civil offence.

Misrepresentation Act relates to misrepresentation during the pre-contractual enquiries by the vendor and their agent to potential purchasers.
CPRs relate during the entire agency sales & lettings process.

50
Q

What is Savills PII for agency/consultancy?

A

£5 million for 6 years after the appointment.

51
Q

What do AML Checks consist of?

A

Public Limited Company:
- London Stock Exchange Listing

Publicly Accountable Body:
- Government ownership / control

Private individual:
- passport/driving license
- proof of address i.e. utility bill from last three months

Private Limited Company:
- certificate of incorporation
- full name
- registered number
- registered office
- business address
- name of stakeholders with 25% + holding
- report any discrepancies to Companies House

52
Q

How do you choose which method to use?

A
  1. Client objectives
  2. Desired timescale
  3. Public accountability
  4. Current and likely future market conditions
  5. Anticipated level of demand
  6. Likely target market
53
Q

What is formal tender and when might it be used?

A

It is often used by a statutory body / when there may be a public interest in the property as it gives control and transparency over the marketing process.

Sealed bids are requested by a formalised date. Purchasers have one opportunity to bid and there is no opportunity for negotiation. The marketing particulars would comprise a full legal pack and detailed information required within their bid.

All bids are to be opened in front of the client/independent witness/line manager.

54
Q

What is informal tender and when might it be used?

A

Used when there is a good level of interest and it can be used either at the start or to bring negotiations to a close.

Agents will invite parties to submit a bid or a ‘best and final’ bid and will ask for details to include:
- applicants solicitor
- finance arrangements
- any conditions attached to the offer

55
Q

What is a private treaty?

A

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

It is the most popular method.

56
Q

What happens if a buyer fails to complete?

A

Vendor can serve a notice to complete - giving the buyer a deadline. The legal cost is to be paid by the buyer.

If this deadline is passed, the vendor can rescind the contract and remarket.

The vendor may be able to sue for damages for any loss in value following the sale to another party at a lower price.

57
Q

what information would be in your terms of agency?

A
  1. Agency basis (sole / joint)
  2. Agency rights (sole selling / sole agency)
  3. Proposed fee
  4. Marketing costs & disbursements
  5. Confirmation of no COIs
  6. Money Laundering regulations requirements
  7. Timescale for the payment of fees and disbursements
  8. Details of CHP
58
Q

What is Gazundering?

A

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

The seller, conscious of refusing the new lower price means they are back at square one and the chain may fall apart, often feel forced to accept the new lower offer.

59
Q

What is gazumping?

A

Gazumping occurs when a buyer has had an offer to purchase a property accepted, but before the sale is completed the seller accepts a better offer from another buyer.

60
Q

What are HoT’s?

A

They provide an executive summary of the purchase.

They provide a framework for contract, purchase timescales and any pre-exchange conditions.

They are not legally binding.

61
Q

What is the role of an agent after Heads of Terms?

A

Liaising with both parties and the solicitors to ensure everything is going smoothly and going to time.

They ensure timescales are adhered to.

62
Q

What agreements and contracts are available for the purchase of land?

A
  1. Option Agreement
  2. Promotion Agreement
  3. Joint Venture
  4. Unconditional Contract
  5. Conditional Contract
  6. Development Agreement
63
Q

What is an option agreement?

A

It gives the buyer the right to band the land if they give notice to the landowner within the option period, usually in return for an option fee.

They allow the buyer to explore planning potential without the obligation to buy if they are unable to obtain satisfactory permission.

The price paid may be fixed or may be based on a formula subject to market value determined by a surveyor.

64
Q

What is a promotion agreement?

A

This enables a promoter to apply for planning permission for the development of the landlord’s property.

It provides for the property to be sold on the open market once permission has been obtained.

Profits are shared between parties.

65
Q

What is a joint venture agreement?

A

A development agreement is a form of JV. However, can take many forms.

A special purchase vehicle will be incorporated for the purposes of owning and/or carrying out the development which may be owned and controlled by either 2+ companies or individuals who wish to pool resources & limit personal liability for a project.

66
Q

What is a development agreement?

A

It is a collaboration between a landlord and a developer. It is a form of JV.

67
Q

What is an overage agreement?

A

It is a clause within a contract relating to the uplift in land value, within an agreed timeframe.

A pre-arranged % of the value is paid back to the vendor.

68
Q

What is SDLT?

A

It is a tax that is applied to the purchase of all property.

69
Q

What are the levels of SDLT?

A

Up to £250,000 = 0% (this has increased from the pre-covid rate of £125,000 = permenent increase)
£250,001 - £925,000 = 5%
£925,001 - £1.5m = 10%
+£1.5 = 12%

You will pay an extra 3% stamp duty on second homes but it is refundable if you sell your previous home within 36 months.

70
Q

When would you advise an option or promotion?

A

Option:
- if they want to be removed from the process
- less hassle for them

Promotion:
- more if they want a legacy
- have a more active role in shaping the development

71
Q

What is a freehold?

A

The permanent and absolute tenure of land or property with the freedom to dispose of it at will.

72
Q

What is a leasehold?

A

A leasehold estate is an ownership of a temporary right to hold land or property.

73
Q

If the s106 still isn’t agreed by the time you had recieved bids for Chigwell, what would you recommend to your client?

A
74
Q

Why did you recommend the client to go to market with resolution to grant planning permission? And the pros and cons of this?

A
75
Q

When would you recommend auction to a client?

A
76
Q

Why would you use informal tender as opposed to other methods?

A
77
Q

Is it your responsibility or the client to provide all info in the data room?

A
78
Q

East Bergholt – can you tell me the process of creating an online data room?

A
79
Q

How would you undertake the financial analysis of comparing the two types of offer? To compare like for like? Unconditional and subject to planning.

A
80
Q

Why did you use more of a closed marketing campaign for the 600 unit site in Ipswich?

A
81
Q

You advised an 8 week marketing period for your instruction in Ipswich, why was this?

A
82
Q

Ipswich Land - You recommended a topographical survey, why was this?

A

JU - APC (16 decks)

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