Purchase & sale

Question 1

Tell me about the legal processes to complete a purchase/sale.

Answer 1

Title check
CPSE1 or TA6 enquiries form
LPE1 If leasehold sale
Provide evidence of any surveys/safety checks/EPC etc
Signature of contract – confirm date to be completed
Exchange of contracts
Provide copy of transfer
Completion
(a) legal completion: involving the transfer of funds and receipt by the seller’s conveyancer; and
(b) practical completion: checking the property has vacant possession and is empty, and arrangements for collection of keys by the buyer.

Question 2

How do exchange and completion work in an auction transaction?

Answer 2

Exchange of contracts is when the sale between seller and buyer becomes legally binding. At auction, this will usually be upon the fall of the gavel, after which documentation is signed by the purchaser and the deposit is taken by the auctioneer as the agent for the seller. Once contracts are exchanged, the buyer is committed to purchase the property. usually completion is then in 28 days from the exchange of contracts

Question 3

Tell me about your understanding of the Estate Agents Act 1979.

Answer 3

Its purpose is to make sure that an agent works in the best interests of your clients, and that both buyers and sellers are treated honestly, fairly and promptly.

Question 4

What are the 6 key principles of the Estate Agents Act 1979?

Answer 4

1. Honesty and accuracy
   2.Clarity as to the agency terms of engagement - specify all costs and fees in advance, in writing in terms of business (Section 18)
2. Absent of discrimination
3. Client money kept separately
4. Declaration of regarding personal interests (Section 21)
5. All offers must be reported

Question 5

How does Section 18 relate to your agency practice?

Answer 5

Clarity on terms of engagement, which must specify all costs and fees.

Question 6

What are the four agency bases?

Answer 6

Market value
Market rent
Investment value
Fair value

Question 7

Where are these defined?

Answer 7

Red Book Global Standards

Question 8

What is a ready, willing and able purchaser?

Answer 8

a buyer is ‘able’ to complete a purchase should be relatively straightforward if a financial evaluation has been carried out and ongoing monitoring of the buyer’s financial position has been recorded.
‘ready’ once all of their finances are available to send to the seller’s solicitor, subject to an acceptable survey.
Willing if they enter into a binding contract

Question 9

What is capacity in relation to contract law?

Answer 9

The law presumes that everyone has a capacity to contract.

Any person seeking to rebut that presumption must strictly prove that they belong to one of three classes of individual:

a minor. For the purposes of the law of contract, a ‘minor’ is any person under 18 (section 1 of the Family Law Reform Act 1969)
a person lacking the requisite mental capacity
a drunken person

Question 10

Does the sale of land have to be in writing and what Act defines this point?

Answer 10

yes
Law of Property (Miscellaneous Provisions) Act 1989, section 2

Question 11

What is an average consumer/material information?

Answer 11

information which the average consumer needs, according to the context, to take an informed transactional decision

Question 12

What are considered to be unfair practices under this legislation?

Answer 12

It falls below the good-faith standards of skill and care that a trader in that industry would be expected to exercise towards customers, and
It affects, or is likely to affect, consumers’ ability to make an informed decision about whether to purchase a particular product

Question 13

What does the Unfair Contract Terms Act 1977 say?

Answer 13

regulates contracts by limiting the extent to which one party can avoid liability through use of exclusion clauses such as disclaimers.

Question 14

Tell me about a factor which drives property markets.

Answer 14

Supply and demand
1 – Restrictions on property production or saturationof the market

Question 15

Tell me about government incentives which impact demand in relation to your
purchase & sale work.

Answer 15

Government subsidies help an industry by paying for part of the cost of the production of a good or service by offering tax credits or reimbursements or by paying for part of the cost a consumer would pay to purchase a good or service.

A subsidy is often granted by a government to support critical parts of the economy that are thought to be vulnerable to external forces.

Question 16

What are current SDLT levels for commercial property?

Answer 16

Property value SDLT rate
Up to £150,000 Zero
The next £100,000 2%
The remaining amount (the portion above £250,000) 5%

Question 17

What is SDLT

Answer 17

Stamp Duty Land Tax

Question 18

What are the different types of interest in land?

Answer 18

Freehold & Leasehold

Question 19

at is the difference between freehold and leasehold?

Answer 19

The freeholder of a property owns it outright, including the land it’s built on.
With a leasehold, you own the property (subject to the terms of the leasehold) for the length of your lease agreement with the freeholder.

Question 20

What are profits a prendre?

Answer 20

a right to take something from another person’s land. This could be part of the land itself, such as peat; something growing on it, such as timber or grass

Question 21

What are rentcharges?

Answer 21

A rentcharge is an annual sum paid by a freehold homeowner to a third party who normally has no other interest in the property. A rentcharge can also be referred to as a ‘chief rent’.

Question 22

What legislation relates to rentcharges?

Answer 22

Rentcharges Act 1977

Question 23

What are the implications if a rentcharge is not paid in full?

Answer 23

A right of entry onto the land to hold the land and take income from it until the arrears have been discharged; and The grant of a lease of the property to compel payment of the rentcharge and the cost of recovery.

Question 24

What is an example of an equitable interest in land?

Answer 24

an interest under a trust

Question 25

Talk me through the auction process.

Answer 25

Step 1. Auction appraisal – request free appraisals from a few auctioneers, each appraisal will include a suggested reserve price and details of fees.
Step 2. Instruction – once you have decided on a suitable auctioneer you will need to instruct the auction company by signing their terms of engagement. Once that’s done they can move ahead with preparing the catalogue entry.

Step 3. Legal pack – your solicitor will prepare the legal pack, including local searches. Prospective buyers rely on the legal pack for basic information about the property.

Step 4. Marketing – the type of marketing carried out depends on the auction company. A good auctioneer will distribute their (hard copy) catalogue by post to interested parties, advertise your property on Rightmove & Zoopla, use newspaper advertising etc

Step 5. Reserve price – the reserve price is confirmed prior to auction and will be determined by the level of interest in the property.

Step 6. Auction day – all prospective buyers will have the opportunity to bid for your property on auction day, and depending on the auctioneer that can be by phone or internet as well as attending the auction room. Once the gavel falls a legally binding contract is formed. The buyer makes a payment of 10% of the sale price.

Step 7. Completion – the auctioneer issues your solicitor with a memo of sale under common auction conditions and completion usually takes place 28 days after the auction, but that can be altered if you wish.

Step 8. Unsold lots – in the event that a property doesn’t sell at auction, the auctioneer will contact all interested parties and make the property available post auction. In many cases properties that are not sold on auction day will be sold a few days later.

Question 26

When is an auction sale legally binding?

Answer 26

when the hammer goes down

Question 27

What due diligence should be carried out pre-auction?

Answer 27

Title search
EPC check

Question 28

What are the advantages/disadvantages of buying/selling at auction?

Answer 28

Quick turnaround to completion
No further negotiations as ‘sold as seen’
low risk on low capital properties
can deter some potential buyers because of its competitive nature.

Question 29

What are the RICS Common Auction conditions?

Answer 29

The Auction Conduct Conditions govern the relationship between the
auctioneer and anyone who participates in the auction.
The Common Auction Conditions are designed for real estate auctions, to set a common standard across the industry