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APC > Purchase & Sale > Flashcards

Purchase & Sale Flashcards

1
Q

Tell me about the four methods of sale.

A

・Auction
TofE agreed, including reserve price and right for auctioneer to sign contract on seller’s behalf, legal packs are published, when gavel falls, contracts are exchanged and 10% deposit is paid by purchaser and insurance arranged

・Private Treaty
Property is marketed openly inviting purchasers to ‘treat’ with the seller

・Formal Tender
Complex and rigid with bid deadline - usually used by Public Sector. Bids are binding on the offerors and no opportunity to withdraw or alter bids after. Offers are opened in front of independent witness, the parties go straight to exchange

・Informal Tender
Parties bid by a deadline, tender details specify what is required, bids should be opened in front of independent witness

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2
Q

Tell me about an advantage/disadvantage of sale by private treaty/formal tender/informal tender/auction.

A

Private Treaty
Positives:
・Flexibility to negotiate
・Marketing budget can be tailored to the client
・Inexpensive
・Seller is not obliged to sell
・Confidential process
Negatives:
・Potential for unethical gazumping or gazundering
・Abortive costs of late withdrawals

Informal Tender
Positives:
・Not binding
・Still relatively inexpensive
Negatives:
・Still a risk of gazundering

Formal Tender
Positives:
・Certainty of sale if an offer is accepted
・Quick exchange as all information is provided by the purchaser in their bid
・Transparent and allows full control over the process, which is good for statutory & public bodies
Negatives:
・Expensive as a full marketing pack must be prepared
・Common for the seller to assume an obligation to accept the highest bid

Auction
Positives:
・Quick sale when under time constraints
・Certainty over selling terms
Negatives:
・Expensive advertising costs
・Not confidential
・Failure to sell may lead to the property becoming ‘blighted’
・Little control over the identity of the purchaser

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3
Q

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

A

・Seller’s conveyancer provides legal title plan and register and draft contract
・Purchaser’s side negotiates contract and raises pre-contracted enquiries
・Enquiries are answered and buyer carries out satisfactory searches
・Purchaser recieves loan (if applicable)
・Completion date agreed and contracts are exchanged - both parties legally committed and deposit is paid
・Memorandum of Sale is agreed and completion occurs - purchaser’s conveyancer transfers payment to the vendor’s conveyancer and receieves the title deed and transfer deed in return

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4
Q

How do exchange and completion work in an auction transaction?

A

・When the gavel falls, contracts are exchanged and deposit paid (10%)
・Completion date set (typically 4 weeks)

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5
Q

Tell me about your understanding of legislation relevant to your agency practice.

A

・Estate Agents Act 1979
・Consumer Protection Regulations 2008
・Business Protection Regulations 2008
・Misrepresentation Act 1967

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6
Q

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

A

・Purpose is to make estate agents act in the best interest for their clients and that sellers and buyers are treated honestly, fairly and promptly
・Mandatory for P&S
・Covers the duties estate agents own to clients e.g. provide a comprehensive breakdown of fees and charges and declare personal interest before acting

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7
Q

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

A

・Be honest and accuracy
・Clairty on TofE
・Open and transparent
・Do not discriminate
・Reports offers in writing immediately
・Client’s money must be kept separate

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8
Q

How does Section 18 relate to your agency practice?

A

The following must be agreed in writing before work is started on the instruction:
・TofE
・Fees
・Agency basis
・Services provided
・Marketing strategy

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9
Q

What are the four agency bases?

A

・Sole selling rights
・Sole agency
・Joint agency
・Multiple agency

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10
Q

What are the differences between the four agency bases?

A

・Sole selling rights - An agency agreement for a set period of time within which a fee is due if a sale is agreed by anyone
・Sole agency - Exclusive right to msrket for a set period of time but a fee is not due if the sale is introdcued by the client
・Joint agency - Two agents with agency rights and fee arrangements to be agreed
・Multiple agency - Multiple, competing agents

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11
Q

Where are these defined?

A

・S18 Estate Agents Act 1979

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12
Q

What is a ready, willing and able purchaser?

A

・Defined by The Estate Agents (Provision of information) Regulations 1991
・Ready (in a position to sign a contract)
・Willing
・Legally capable
・Financially capable

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13
Q

How does Section 21 relate to your agency practice?

A

・S21 of the Estate Agents Act 1979
・Agents must disclose any personal interest they have in a property before acting

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14
Q

What 3 things do you need to make a contract?

A

・Offer
・Consideration
・Acceptance

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15
Q

Can a verbal contract be legally binding?

A

Yes

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16
Q

What is capacity in relation to contract law?

A

Some parties have limited capacity to enter into and have contracts enforced upon them
・Corporations
・Minors
・People with mental incapacity
・Drunk people

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17
Q

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

A

・Law of Property (Miscellaneous Provisions) Act 1989
・A contract for the sale of an interest in land must be in writing and only by incorporating all the terms which the parties have expressly agreed in one document

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18
Q

Tell me about key points of the Consumer Protection / Business Protection Regulations.

A

Consumer Protection Regulations
・When dealing with consumers, traders - must act fairly
・Provide accurate information
・Avoid unfair, misleading or aggressive business practices

Business Protection Regulations
・Prohibits misleading business-to-business advertising
・Imposes restrictions on how businesses can compare the products to rivals’

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19
Q

What is an average consumer/material information?

A

・Average Consumer - Reasonably well informed, reasonably observant and circumspect
・Material Information - Any unavoidable costs that will be incurred by the occupier regardless of the way it is occupied e.g. service charges, business rates

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20
Q

What are considered to be unfair practices under this legislation?

A

・False endorsements/authorisations (e.g claiming you’re part of RICS when you’re not)
・Misleading Availability (e.g stating a product is only available for a limited time to make a customer make a quick decision)
・Misleading context/effect (e.g fake closing down sales)
・Pyramid schemes
・Aggressive Sales (creating the impression a customer can’t leave until they sign a contract etc)
・Unreasonable demands (requiring a customer who wishes to claim on an insurance policy to produce irrelevant documents
・Inertia Selling (demanding payment for products sent to the consumer that they did not ask for)

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21
Q

How does the Misrepresentation Act 1967 relate to your agency practice?

A

・Ensures parties have an option to pursue in contract law and law of tort if misrepresentation causes loss to one of the parties
・If misrepresentation is found, a contract founded on this information can be effectively voided
・Can be fraudulent, negligent or an innocent mistake

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22
Q

What does the Unfair Contract Terms Act 1977 say?

A

・Imposes limits on the extent to which contractual provisions like ‘exclusion clauses’ can be used to avoid liability for breach of contract, negligence or other breaches of duty

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23
Q

Tell me three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).

A

RICS Real Estate Agency and Brokerage, 2016 (PS)
・Very similar to RICS UK Commercial Estate Agency, 2016 but focuses on purchase & sale rather than leasing & letting
1. Ethics & duty of care – diligent service, act within scope of competence, avoid conflicts, don’t discriminate
2. Securing instructions – Terms of engagement, including fees, agency basis. Also KYC and AML.
3. Advice on Acting for the seller – Give realistic and justifiable likely selling prices that reflect your professional judgement and market conditions and confirm this in writing. Keep records of how you arrived at this value – inspection notes, comps etc
4. Acting for the seller: agreeing the sale – make reasonable endeavours to find out the source of funds, communicate all offers in writing to the client immediately, confirm acceptance and conditions in writing to the buyer.
5. Acting for the buyer – use your market knowledge and networks, provide frequent updates to the client and confirm offers & acceptance promptly in writing.
6. Ending the Instruction
7. Safety & Security – Confidentiality, data protection & personal safety.

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24
Q

Tell me about a factor which drives property markets.

A

・Supply
・Demand
・Interest rates
・SDLT holiday
・Government policy - Use Class change

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25
Q

Tell me about supply and demand in a property market you are familiar with.

A

・Industrial market
・Restricted supply (5% vacancy rate)
・Strong demand and thus upward rental pressures

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26
Q

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

A

・SDLT had a big impact on demand - removing additional costs a purchase would usually take on, thus purchasers saw this as an opportunity to buy

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27
Q

What is SDLT

A

Stamp Duty Land Tax - a tax imposed by the U.K. government on the purchase of land and properties with values over a certain threshold.

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28
Q

What are the different types of interest in land?

A

・Freehold
・Long leasehold
・Leasehold
・Legal interests - e.g. easements
・Equitable / beneficial interests - e.g. beneficiary of a trust that owns an investment

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29
Q

What is the difference between freehold and leasehold?

A

・Freehold - Absolute ownership: registered on land registry and has the deed
・Leasehold - Ownership of the property for a set period of time, but not the land it is built on

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30
Q

Where are interests in land defined?

A

・Law of Property Act 1925
・Freehold, leasehold, easements

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31
Q

What are profits a prendre?

A

・The right to take something from another person’s land (e.g. wildlife killed on it)

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32
Q

What are rentcharges?

A

・A charge paid by the freeholder to a someone with a rentcharge (a pevious owner who sells land to a developer at a reduced sum in return for a rentcharge)

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33
Q

What legislation relates to rentcharges?

A

・Rentcharges Act 1977

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34
Q

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

A

・No provisions to end a rentcharge lease once arrears are settled, meaning the property owner may be held to ransom until it pays a fee for surrender of the lease

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35
Q

What is an example of an equitable interest in land?

A

・Where someone has paid one or more instalments on the purchase of the property but not yet the full sum and so hasn’t been provided with th property deed

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36
Q

What is an example of a legal interest in land?

A

Freehold, leasehold, easement

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37
Q

Why would you use online marketing for a purchase/sale transaction?

A

・Hit other agents, wider range of marketing, hit national and regional occupiers/developers

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38
Q

Why would you use a marketing board for a purchase/sale transaction?

A

・To hit local occpiers, investors, developers

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39
Q

Tell me about an information pack you have prepared for a purchase/sale transaction.

A

28 Boulogne Road, Croydon
・Title plan and register
・EPC
・Asbestos report
・Bid proforma

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40
Q

Tell me about CPSEs and the sale process.

A

・Commercial Property Standard Enquiries
・Suite of industry-standard pre-cntract enquiries forcommercial property transactions, endorsed by the British Property Federation
・The seller is under no legal obligation to give replies, but must disclose latent defects affecting the property e.g are there any legal rights of way/drainage etc that aren’t listed in the deed?
・If replies are inaccurate or latent defects aren’t provided, a claim may be brought to rescind the contract.

41
Q

What is a Memorandum of Sale?

A

・Written confirmation of the essential details of a property transaction once it’s sold (similar to a RR memorandum)

42
Q

Talk me through the legislative/regulatory requirements relating to auctions.

A

“・Auctioneers Act 1985
・Estate Agents Act 1979
・RICS Auctioneers Selling Real Estate (2018) - PS”

43
Q

Talk me through the auction process.

A
  1. Auctioneer’s terms of appointment are agreed, including bidding increments, conditional contracts, reserve price and guide price
  2. Property is marketed for 3-4 weeks in the auction catalogue, information all to be verified by the seller
  3. Auction occurs & exchange with 10% deposit happens when the gavel falls
  4. Completion required within 28 days
44
Q

When is an auction sale legally binding?

A

On exchange, when the gavel falls

45
Q

What due diligence should be carried out pre-auction?

A

・Legal, conflict and AML checks
・Surveyor inspect the property
・Recomment reserve price to Vendior
・Agree TofE
・Agree marketing plan
・Provide auction pack
・Publish brochure, general conditions of sale and memorandum of sale

46
Q

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

A

Advantages
・Short disposal timeframe
・Certainty of sale if realistic reserve price is set
・Transparency of sale for public bodies

Disadvantages
・Expensive fees
・Lack of confidentiality
・May stigmatise the property if it fails to sell

47
Q

What are the RICS Common Auction conditions?

A

・Defined in RICS Auctioneers Selling Real Estate, 2018
・Designed to set a common standard across the auctioneering industry
・Not mandatory but good practice

48
Q

What are the key principles?

A

・During the period from exchange to completion, the seller has no obligation to insure the lot

49
Q

Under these, when is completion set for?

A

・As agreed in ‘Special Conditions’
・If not specified, then 20 business days after the contract date

50
Q

How do you find out about an auction property?

A

・Auctioneer’s catalogue

51
Q

Should you view an auction property before buying?

A

Yes

52
Q

What is/are an Important Notice to Bidders/Memorandum of Sales/general conditions of sale?

A

・Important Notice to Bidders - Notice from the Auction House explaining the auction process to bidders
・Memorandu of Sale - Like HOTs
・General Conditions of Sale - my conditions attached to completion (if none stated, then none)

53
Q

What would the legal pack contain?

A

・Auction T&Cs
・Any special conditions of the sale
・EPC
・Title register & plan
・Local searches (drainage, water etc)
・Fittings and contents form
・CPSE forms
・Tenancy documents where it is tenanted

54
Q

What might be a special condition of sale?

A

Vacant possession being provided

55
Q

What is a guide price?

A

・A guide to purchasers of where they can expect the property to be sold for

56
Q

What is a reserve price?

A

・Minimum the auctioneer can accept
・The existence of a reserve price must be declared, but not the figure

57
Q

Which of guide price or reserve price are confidential?

A

Reserve price

58
Q

What is an addendum?

A

・An attachment to a contract that modifies the terms and conditions of the original contract

59
Q

What fees are typical for an auctioneer?

A

・2% + VAT
・Entry fee £300 + VAT
・Auction legal pack £200 + VAT

60
Q

Can you sell a property before or after auction?

A

・Yes

61
Q

How does finance work for auctions?

A

・Often a condition of the sale is delaye completion in order to allow finance (briding loans) to be sorted

62
Q

What deposit is typically payable and when?

A

10% on exchange

63
Q

How can you bid at auction?

A

・In person or the auctioneer can be advised of your bid beforehand

64
Q

What is a proxy bid?

A

・When someone bids on your behalf in the Auction House

65
Q

When is insurance required for in relation to an auction purchase?

A

・Unless otherwise stated, purchaser is responsible for insurance from exchange

66
Q

Is VAT payable on auction properties?

A

If the property is elected for VAT

67
Q

What are the key principles of RICS Guidance Note Auctioneers Selling Real Estate (6th Edition)?

A
  1. Introduction
  2. Standards & Ethics
  3. Common Auction Conditions
  4. Auctioneer’s relationship with the seller
  5. Auctioneer’s relationship with the buyer
  6. AML Regulations
  7. Publication of Auction results
  8. Data Protection
  9. Sale of Investments
68
Q

What are the EPC requirements at auction?

A

EPC’s are required and must be provided to the auctioneer

69
Q

What does the Sale of Land by Auction Act 1867 say?

A

・Certain declarations must be made prior to the auction, including if there is a reserve price and if the seller has reserved the right to bid

70
Q

How are arrears dealt with in relation to auction properties?

A

・The buyer must pay all arrears to the seller on completion and recover these from the tenant himself after completion

71
Q

What should be included in auction particulars?

A

Same as marketing details
・Guide price, tenure, any tenancies or VP?, planning, whether it is elected for VAT, EPC, location, features

72
Q

What is the power to sell?

A

・The right of a lender (mortgager) to sell a property if the mortgagee defaults on payments

73
Q

What are the requirements around the Auctions (Bidding Agreements) Acts 1927 and 1969?

A

・It is illegal to bribe someone to abstain from bidding

74
Q

Explain what you understand by the planning use classes.

A

・Town and Country Planning (Use Classes) Order 1987 (as amended) - Amended 2020
・Categorises different types of property

75
Q

When were these last amended and what changes were made?

A

・Amended in 2020
・Introduced new Use Class E: Commercial, Business and Service (A1, A2, A3, B1, B2, D1 and D2)
・A4, A5 and D2 -> Sui-Generis

76
Q

Why are POA listings unlawful?

A

・The property’s price is information which the average consumer needs in order to make an informed transactional decision, such as to make enquiries about the property, conduct further research or arrange a viewing.

77
Q

What key changes were introduced in respect of this competency by the Charities Act 2022?

A

・Charities no longer need to get advice from and follow the advice of a surveyor. There is more flexibility and they can use Estate Agents as well. They no longer need a Chartered Surveyor to provide a S117 / Charities Act report, which demonstarted they were receiving value for the asset

78
Q

Explain a factor which impacts upon sale value/sale terms.

A

・Easements
・Location
・Condition
・Economy

79
Q

Talk me through an example of when you have purchased/sold a property.

A

TAVR, Selsdon
・Undertook AML checks
・Agreed terms of engagement for sole agency
・Marketed on a private treaty basis
・Client then needed to secure a quick sale so I recommended we go to informal tender for best unconditional bids
・Sent out a n information pack and request for bids from interested parties including the conditions and date by which bids needed to be received and that my client wasn’t bound to accept the highest offer
・Sold on an unconditional basis to the highest bidder

80
Q

High Street, Croydon - how did you market this property?

A

I sold by private treaty and marketed online

81
Q

High Street, Croydon - what did you include in marketing particulars?

A

・Date, descripton, location, size, EPC, RV, Price, VAT

82
Q

High Street, Croydon - What risk did you advise in respect of STP offers?

A

・I advised that the risk of accepting a STP offer is that planning could be refused - ultimately risking the sale of the property and could stigmatise the property from a planning point of view for other purchasers

83
Q

High Street, Croydon - How did you ensure the purchaser adhered to timescales in respect of planning?

A

・We collaboritvely agreed and set clear timescales in the Memorandum of Sale

84
Q

High Street, Croydon - What did you include in Memorandum of Sale?

A

・Identified the parties
・Price of the sale
・Conditions - STC, STPP
・Timescales for planning, exchange and completion
・Tenure

85
Q

Foxley Lane - how did you arrive a proposed guide price?

A

Researched comparable investment yields

86
Q

Foxley Lane - what did you include in Data Room?

A

Within the Data Room I included
・Freehold title documents
・Leases
・Conveyance plans

87
Q

Foxley Lane - What type of purchaser did you think would be attracted to this property?

A

・Residential investors
・On SHW’s Aclium Portal there is a category for residential / ground rent investments - they seem to be companies specialising in the acquisition of ground rent investments

88
Q

How did you analyse the 11 offers?

A

I analysed on the basis of price offered

89
Q

What right did the leaseholders have in respect of purchase?

A

・The right of first refusal - S5 notices were sent out and the tenant’s took up their rights to purchase the freehold

90
Q

London Borough of Croydon - tell me about the portfolio of commercial properties.

A

・A portfolio of a range of commercial properties from small workshops to larger office blocks

91
Q

London Borough of Croydon - What advice did you give on marketing strategy?

A

・I have provided a range of advice to the Council
・The key aims from the Council was to achieve maximum price
・Due to the requirements from the Council - we marketed the property on an informal tender basis

92
Q

London Borough of Croydon - What action points did you raise that the Council needed to do?

A

・I actioned points such as further information we required from the Council prior to putting the properties on the market - such as leases, EPCs

93
Q

London Borough of Croydon - Tell me about some of the strategic recommendations you made.

A

・2 Godstone Road, Kenley - I receieved 4 offers for this residential development opportunity. 3 offers were low and one was in excess of the guide price but STP. I advised the Council to accept the STP offer. The party undertook a pre-app, a planning application and subsequently exchanged and completed on the property

94
Q

London Borough of Croydon - What was the method of sale In this Instance and why?

A

・Informal Tender - I used informal tender for all of the council disposals. We set bid deadlines, best and final bids where required and provided mini reports to the Council summarising offers and providing my advice.

95
Q

Park Lane - What was the basis of your fee proposal?

A

In the fee proposal, I included
・Method of sale
・Basis of agency
・Commercial market and residential development market commentary
・Guide price
・Marketing strategy - websites listed, how we will market
・Legal requirements - EPC and AML
・Fees
・Attached TofE

96
Q

Park Lane - How did you market this property and why?

A

・I marketed the property online - the use of a marketing board was restricted as the property was within a Conservation Area

97
Q

Park Lane - Why did you advise using private treaty?

A

・I advised using private treaty as it provides good exposure to the market
・There wasn’t any time constraints on the sale and therefore provided the most flexibility to the marketing campaign

98
Q

Park Lane - How did you establish the guide price?

A

・I established the guide price through establishing similar office comparable evidence - taking into account owner occupiers (nurseries and offices users), and PD conversion. PD conversion was limited as the property was in a Conservation Area. Invited offers in excess of £675,000 and sold for £700,000

99
Q

Park Lane - How did you obtain proof of funds from the purchaser?

A

・I asked the purchaser to provide proof of funds via bank statement for the purchasing entity to demonstrate they had the funds available to proceed with the purchase

APC (8 decks)

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