Purchase & Sale Flashcards
What is a freehold interest?
Title absolute. Owner owns land indefinitely until wants to dispose and unrestrained except by statue/covenant/conservation area/listing.
What is a leasehold interest?
Lease with landlord/tenant relationship; wasting asset; possible rent liability; lease governs what can/can’t be done.
How does age affect value?
Older buildings = closer to obsolescence and likely higher maintenance cost.
How does location affect value?
Location = proximity to workforce/customers (and prominence/exposure), plus transport links (esp logistics). More of these factors = more valuable.
How does condition affect value?
Poor conditions requires capex to bring to useable condition (useable definition depends on occupier).
How does the unexpired term of a leasehold interest affect value?`
Wasting asset. 75+ years unexpired valued as FH in practice?
How does covenant strength affect value?
Security of income = less risky investment and therefore more valuable.
What is private treaty? What are it’s merits?
Property marketed, any party able to enter into negotiations with seller. No commitment until exchange of contract, so governed by the parties and very flexible.
What is informal tender? What are its merits?
Deadline set for offers on a property – vendor chooses if to accept one and then goes into the legal process. Vendor can choose not to accept any offer, and no binding agreement after until exchange of contracts. Often used to bring private treaty to a close.
What is formal tender? What are its merits?
Deadline is set for offers/terms on a property with full legal pack etc provided beforehand. Can sometimes lead to binding contract immediately upon acceptance. Often used by local authorities etc. to ensure accountability and transparency. Tenders often opened in front of witness (solicitor).
What is an auction? What are its merits?
Property is sold with parties competing directly. Gavel falling leads to binding contract, full pack available prior. Sometimes quick method of sale, reasonable certainty of selling if reserve is realistic. Not all buyers like auctions, plus seller has no control once reserve met.
What are the Consumer Protection from Unfair Trading Regs?
Replaced Property Misdescriptions Act 1991. Duty of care to clients, potential clients, buyers, potential buyers to give accurate and required information. No important omissions.
What is the EAA 1979?
Legislation to treat all buyers/sellers fairly, honestly and promptly. 7 key principles: clear TOE, honestly & accuracy, agreement of liability for costs, disclosure of personal interest, no discrimination, legal obligation to inform clients of offers in writing, client money kept separate.
What are the Town and Country Planning (Control of Advertisements) Regulations?
Limits what signage can be erected w/o planning. 2m flat board / 2.3m V board. Max height 4.6m, max projection 1m. One board per building. Our boards – 5x4 (1.86m).
What does the RICS PS UK Commercial Real Estate Agency say?
Known as purple book. Duty of care top obtain best result for client within legal and ethical boundaries. Best practice guidance. Eg – If no inspection, all parties made aware. EPC commissioned prior to marketing, absolute max 28 days.
What did your Terms of Engagement for Hammond Avenue say?
Details of property, details of agency basis, fee liability and triggers for payment, scope of work, CHP, AML requirement.
What did you look for on your inspection at Hammond Avenue?
Other local occupiers, access, road infrastructure, site cover, condition/repair, height, loading access, office content.
What was in your marketing report?
Overview of the property, overview of the local market and requirements, valuation.
How did you negotiate a mutually acceptable purchase price at Hammond Avenue?
Gap between quoting price and initial offer. Discussed comparables and market with interested party, they discussed why they reduced from purchase price (cost of roof). Agreed mutual figure and excluded roof from survey liability.
How did you report the offers on Hazel Grove to your client?
Why did you report in writing? Reported figures, each party, proof of funding and timing. Reported in writing as per EAA 1979 and purple book.
Why is best and final offers and effective way to bring matters to a close?
Informal tender. Multiple parties all at similar figure – offer one chance to make final can lead to an increased offer and creates a sense of competition.
Why did you confirm that your client was not bound to accept any of the offers?
How does this differ from another method of sale? Auction – client obliged to accept best offer if reserve met. Clarity to protect our client.
What was your criteria for recommending acceptance of one of the offers at Hazel Grove?
Combination of timing, price and funding.
What was in your memorandum of sale?
Subject to contract. Details of parties, their solicitors, property, purchase price, interest, timing and any conditions.
