Purchase & Sale Flashcards
What are the four methods of sale? Brief synopsis
Private treaty - Most popular in Eng & Wales, private matter, no time constraints
Formal tender (sealed bids) - Applicants bid blindly and all bids opened in front of client/line manager/independent witness. High levels of accountability. Vendor does not have to accept the highest bid. Often used by Statutory bodies.
Informal tender - Used alongside private treaty, calling for best bids to conclude negotiations. Not legally binding if the vendor remembers to state that they do not have to accept the highest bid.
What is the difference between formal and informal tender?
Formal tender only offers one chance to bid, The highest figure is accepted unless stated by the vendor that this is not essential, Higher level of accountability.
Whereas, informal tender can be used during private treaty negotiations to get best bids, it does not lead to a direct contract of sale
What is the process for a sales instruction
- Receive Instruction
- Check competence & Independence
- Issue Agency instruction agreement to client (TOE’s)
- Receive signed agreement (required by EA Act 1979)
- AML checks
- Gather information (inspection details, leases, planning info, floor plans etc)
- Due diligence (Read lease, environmental, planning, no materials that will be detrimental to the sale)
- Inspect/measure
- Market research & comps
- Value the freehold (not red book)
- Prep marketing report
- Obtain written approval of marketing particulars (Consumer protection regs & misrep act 1967)
- Market
- Negotiate sale, HOT’s and instruct lawyers
- Assist with any legal queries
- Invoice for fees
What does an agency instruction need to clearly set out?
- Agency basis (sole or joint)
- Agency rights (sole selling or sole agency)
- Proposed fee
- Marketing costs + disbursements
- Confirmation of no COI’s
- Money Laundering regs requirements
- Timescales for fee payment
- Details of the firm’s complaints handling.
What is the statutory cooling off period after agreeing terms of engagement
14 days (Consumer rights act 2015)
What are sole selling rights?
A clause agreed to suggest that even if the purchaser is not identified by the agent but by another party, that remuneration is still payable.
What is the ready able and willing purchaser’s clause?
This is a clause that suggests an abortive fee is payable to the agent if the purchaser is ready to proceed and the Vendor pulls out of the deal.
What legislation do you have regards for when undertaking agency instructions?
Estate Agents Act 1979
Misrepresentation Act 1967
Consumer Protection Regulations 2008
Consumer Rights Act 2015 - 14 day cooling off period
What is TOGC?
Transfer of a going concern - when a freehold property is sold with the benefit of the existing lease, a business of property rental is transferred to the buyer
What were the rules regarding Agency Boards for your disposal in Bath?
Agency Boards in Bath are banned as it is a world heritage site and in order to not take away from the stonework.
What were the rules regarding Agency Boards for your disposal in Bath?
Agency Boards in Bath are banned as it is a world heritage site and in order to not take away from the stonework.
What can a vendor do if a sale is held up?
Serve a Notice to Complete on the purchaser with a deadline to complete. Legal costs paid by the purchaser
What forms of purchase vehicle can be used to buy property?
Special purchase vehicle - a company formed especially to avoid SDLT payments
REIT’s - A UK tax resident company that is listed on a stock exchange and has a minimum percentage invested in property of 75%
Joint ventures
What do Consumer Protection from Unfair Trading Regulations 2008 set out?
Requires candidates to treat consumers fairly and to avoid engaging in unfair commercial practices, such as providing false information in marketing material or not acting in good faith.
Penalties are an unlimited fine and/or prohibition order.
Up to £25,000 can be payable to the complainant
What are the penalties for breaching each of the Acts relating to estate agency?
Negative licensing - Right to be an estate agent taken away
A warning order - written warning to the agent not to undertake the action again
Prohibition order - tops an agent practising
These are criminal offences
What do you know about leasehold reform?
This is the discussions surrounding making it easier for leaseholders to purchase the freehold
How did you advise your client over the length of leasehold to sell the commercial unit for?
The residential flats above were already sold on 250 year leases. Therefore we aligned with this for continuity. And we valued this using sales comparables and applying a capital value basis but checked this using rental comparables multiplied by an appropriate yield and capitalised it.
What do you include in your Heads of Terms for a sale?
Freeholder
Purchaser
Price - VAT
Demise
Guarantor?
Details of the leasehold interest (125 years subject to a ground rent of 1 peppercorn
Subject to contract
Solicitors details
Cash purchase
What is the maximum penalty for breaching consumer/business protection regulations?
Unlimited fine and/or a prohibition order
Compensation may also have to be paid to the complainant up to £25,000
What key points does the estate agents act 1979 set out?
Section 18: Clarity on the terms of agency and when fees become payable within the terms of engagement
Honesty and accuracy
Agreement and liability for costs
Keep clients money separate
Section 21: Agents must disclose any personal interests they have to the client and within the Heads of terms
What are the differences between consumer protection regulations 2008 and the misrepresentation act 1967?
Consumer protection regulations are policed by the local authority and the penalty fine is up to £5,000 for any breach
Breach of Misrep act is a civil offence but the vendor and/or agent can be sued for damages and/or the contract rescinded.
What are the laws surrounding agency boards?
Planning consent required for agency boards over 2 sq. m (flat) and 2.3 sq. m v-boards and only one board per building.
They must not project more than 1m from the building and not above 4.6m from the ground.
Planning consent is also required for:
illuminated boards
remote boards
Boards erected on listed buildings and in conservation areas
They must be removed 14 days after completing a transaction
Must have owners approval
Policed by the local planning authority. They can remove them and issue fines
Who polices the Estate Agents Act 1979?
National Trading Standards Estate & Letting Agency Team (NTSELAT)
What are capital allowances?
A form of tax relief on capital expenditure for construction or purchase of commercial property or business assets.
Talk me through your disposal in Hoxton
Class F1 disposal (existing use under class E) - Long leasehold (ground floor). Marketed via the local council. Database I’d collected of schools, museums etc invited to attend open morning.
Received 3 offers, sought best and final offers (informal tender). Then Identified the best offer, ran AML checks on the Purchaser and instructed solicitors.
Talk me through your acquisition in Nuneaton
Data Centre client, needed security. Purchase was subject to planning approval of a secure parameter. Planning granted and completed.
Talk me through your acquisition in redcar
0.2 acre plot required. Able to agree a deal in excess of market.
Landlord had hope value in mind and therefore my client needed to offer in excess of market value to secure the plot.
Talk me through your disposal in Bath
Retail unit long leasehold. Under A1 prior to Use class amendments. Used zoning to append a value of £130k. Found comps to understand yield (4%). Applied a capital value rent/yield x 100 as there were no comparable sales nearby.
Uplift in value following use class amendments as Office was more valuable than retail following covid. Sold for £140k.
