Purchase & Sale Flashcards

Question

What are Sole Selling Rights?

Answer 1

The agent would be owed a fee, even if they were not involved in introducing the buyer (i.e. the client introduced the buyer themselves).

Answer 2

Sole Agency = Does NOT include private introductions (i.e. client introduces buyer direct). Sole Selling Rights = Private introductions are included (i.e fee due even if agent didn't find purchaser).

Answer 3

The Terms of Engagement must contain: Confirm Basis of Agency (Sole, Joint or Multiple) Confirm Agents Rights (Sole selling rights) Proposed Fee (I typically use 1% of the purchase price) Any Expenses to be paid, marketing costs and disbursements. Confirm no Conflict of Interest / personal interest. Confirm AML checks to be undertaken Timescale for the payment of fees (i.e. fee will be payable upon successful sale). Make reference to Complaints Handling Procedure --> These ToE MUST be signed and returned before marketing can begin.

Answer 4

Estate Agents Act (1979) - the main one. Consumer Protection Regulations (2008) Misrepresentation Act (1967) Extras; Town & Country Planning Regulations (2007) Bribery Act (2010)

Answer 5

Disposal or Acquisition Freehold Property Leasehold Property Land as well as buildings

Answer 6

Agents must act with Honesty and Accuracy Section 18 - Clear Terms of Engagement and clarity on basis of agency. - All costs/fees must be specified in advance, in writing, in ToE. - Sole, Joint or Multiple agency basis (clearly outlined). Section 21 - Disclosure any Personal Interests. - Disclose any 'Connected Person' who could benefit from the transaction. EAA says you MUST report ALL offers recieved to the client (promptly and in writing). EAA says you must not Discriminate against parties (ensure all have equal opportunity) EAA says you must keep client's money separate (separate named bank account with the word 'client').

Answer 7

Section 18 - Clear Terms of Engagement and clarity on basis of agency. - All costs/fees must be specified in advance, in writing, in ToE. - Sole, Joint or Multiple agency basis (clearly outlined). Section 21 - Disclosure any Personal Interests. - Disclose any 'Connected Person' who could benefit from the transaction.

Answer 8

Policed by the National Trading Standards: Warning Order (If agent's first offence) Prohibition Order (will prevent the agent from practising). Failure to comply = criminal offence.

Answer 9

Relates to the WHOLE agency process. CPRs extend agents duty of care to all 'consumers' (e.g. existing/potential clients, viewers, tenants) - duty of care beyond your paying clients. Requires the Agent to give accurate info and DECLARE EVERYTHING known about a property (good and bad). = No more Caveat Emptor ("Buyer Beware"). Offences include: Exerting undue pressure, omissions, hiding information, misleading information. OMISSIONS = Breach. Example could include: Not declaring wider information e.g. proposed development next door, flood risk, flight path, listed building etc. Policed by Trading Standards & is a CRIMINAL OFFENCE.

Answer 10

Relates to misrepresentation / false statements made during the PRE-CONTRACT ENQUIRIES (either knowingly or unknowingly) which has the effect of inducing the party to purchase. - Agent has obligation to check info is reliable. - Disclaimer clauses can protect agent who has done sufficient DD. Misrepresentation can be either: fraudulent, negligent or innocent. The agent has a duty of care to check info is reliable. It is a civil offence actionable by tort (not criminal).

Answer 11

CPRs (2008) govern unfair treatment and withheld info THROUGHOUT THE WHOLE marketing process, e.g. not declaring a proposed development next door. Agent has a duty of care to the 'consumer'. Agent must declare everything (good and bad) about a property. Criminal Offence. Misrepresentation Act (1967) relates to false statement (either knowingly or unknowingly) made during PRE CONTRACT ENQUIRIES that induces a transaction, e.g. false statement on marketing particulars. Civil offence actionable by tort - not criminal.

Answer 12

Undertake significant due diligence on every new instruction Ensure that a disclaimer is included on the marketing particulars, stating that these have been produced in good faith and are believed to be correct. (Prevents the sales particulars being viewed as part of contract).

Answer 13

Set out in Estate Agents Act (1979) Ensures abortive fees can be chrarged by the agent if a client pulls out of a transaction, even if a purchaser is ready, willing and able to proceed.

Answer 14

EPCs MUST be commissioned before marketing the property. The EPC rating (energy rating) MUST be included in the marketing particulars (graph not necessary). It is the AGENTS RESPONSIBILITY to ensure EPC is in the marketing material.

Answer 15

As of April 2023 - all commercial property must legally have an EPC rating of 'E' or above to be let, including existing leases. I am aware of proposed increases for the MEES to reach band 'C' by 2027 and 'B' by 2030.

Answer 16

Listed Buildings Religious Buildings + Places of Worship (think big church / mosque) Temporary buildings Buildings with no heating Buildings due to be demolished / redeveloped within 2 years Stand alone buildings with a total floor area of less than 50 sq m (circa 500 sq ft)

Answer 17

EPC is valid for 10 YEARS (unless changes made to the property).

Answer 18

Address of property and floor area Technical information on the proeprty's energy provision An energy performance rating from A+ to G Benchmarking Information

Answer 19

Enforced by Local Trading Standards teams Fines. Max penalty equal to 12.5% of the Rateable Value of the building (minimum of £500, max £5,000 fine)

Answer 20

Town & Country Planning Regulations (2007) state that: Planning Consent is required for non-residential boards over 2 sq m (flat), or 2.3 sq m (if V board). Only one letting board is allowed per building No more than 1m projection from face of the building NO illumination Must be removed within 14 days after completion of a letting/sale.

Answer 21

Advise the Vendor they can serve a Notice to Complete - giving the purchaser a deadline to complete. If deadline not met = contract rescineded and property can be remarketed.

Answer 22

The salient information included: Offer Price Source of Funds (Cash or reliance on third-party finance) Any conditionality attached to the offer (e.g. subject to planning) Track Record of the bidder Timescale (Sale & leaseback or delayed completion) Potential reputational damage

Answer 23

1. Honesty and Accuracy 2. Clarity of Terms of Engagement and basis of agency (Section 18) 3. No discrimination (everyone gets a fair shot) 4. Disclose any Personal Interest (Connected Person) 5. Duty to report all offers to the client (promptly and in writing) 6. Keep clients money separate (separate bank account named client)

Answer 24

RICS Professional Statement: UK Commercial Estate Agency & Brokerage (2016) RICS Professional Statement: Conflicts of Interest - UK Commercial Property Market Investment Agency (2017) RICS Professional Statement: Countering Bribery and corruption, money laundering and terrorist financing (2019)

Answer 25

This mandatory professional statement outlines principles of fairness and transparency that underpin all activities undertaken by real estate agents. It covers the various stages: 1. Ethics 2. Securing Instructions 3. Acting for the seller - marketing the property 4. Acting for the seller - agreeing sale or lease 5. Acting for buyer 6. Ending instruction 7. Safety and security 8. Agency management It also sets out 12 core principles such as acting honestly, due diligence, clear terms, no discrimination.

Answer 26

Mandatory professional statement Provides requirements to adhere to when acting on the open market investment transactonis (sale or acquisition) in the UK- in order to avoid Conflicts of Interest. It covers: Dual Agency Multiple Introductions Incremental Advice

Answer 27

Dual Agency is where an agent can have a Conflcit of Interest if acting for both the Seller and Purchaser. This is BANNED (in the above professional statement)

Answer 28

Terms of Engagement must be agreed and it must be clear if the agent is acting on an exclusive or non-exclusive basis. If non exclusive, you should gain informed consent and set infomation barriers (as per RICS PS CoI Investment Agency 2017).

Answer 29

This occurs if an agent acting for a Seller is approached by a purchaser to provide incremental advice. Incremental Advice (e.g. planning advice) is allowed under the RICS PS CoI Investment Agency (2017). The client MUST be notified before any advice is provided to a prospective purchaser and INFORMATION BARRIERS must be in place.

Answer 30

Final higher bids may be made after deadline but VERY UNETHICAL (but must still report to client). You must still inform the client under the Estate Agents Act (1979) to report all offers to the client and advise accordingly based on individual merits.

Answer 31

I would report both offers to my client in writing as per the Estate Agents Act (1979). All equity purchaser (cash) is safer and can provide proof of funds, transact quicker and is not subject to finance.

Answer 32

SDLT is a tax on the purchase of a FH or LLH interest over a certain value. The commercial brackets are: Up to £150,000 = Zero £150,001 to £250,000 = 2% The remaining amount over £250,000 = 5% E.g. If you buy a Freehold commercial property for £275,000, the SDTL owed would be: 0% on the first £150,000 (£0) 2% on the next £100,000 5% on the final £25,000

Answer 33

Offices: Prime Yield (West End) = 3.5% Prime Yield (City) = 4% Prime Headline Rent (West End) = £125 per sq ft Prime Headlien Rent (City) = £82.50 per sq ft

Answer 34

Charities Act (2022) report MUST be required when selling, leasing or otherwise disposing of charity land or property - to demonstrate the charity is obtaining "best value" for the asset. There have been recent changes to the Charities Act (2022) - this has broadened the scope on who can give advice to now include Estate Agents and Agricultural Valuers who are not RICS members. It is now termed "Designated Advisor" rather than "Qualified Surveyor" report. The change also simplified the sections of the report.

Answer 35

Money Laundering is the process of cleaning illicit money from criminal activity so it appears to have been legitimately acquired.

Answer 36

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on Payer) Regulations (2017) (as amended in 2022). All letting agents MUST register with HMRC if they let individual properties for more than the equivalent of €10,000/month. AML checks MUST be carried out on both PURCHASERS and SELLERS (as a minimum -cannot be delegated).

Answer 37

All letting agents MUST register with HMRC if they let individual properties for more than the equivalent of €10,000/month. Customer Due Diligence (CDD) checks MUST be carried out on both PURCHASERS and SELLERS at a minimum. Enhanced Due Diligence (EDD) checks MUST be undertaken if RED FLAGS occur (e.g. high-risk country) or you are dealing with PEPs. A firm MUST appoint a Money Laundering Reporting Officer (MLRO) to report Suspicious Activity Reports (SARs) to the National Crime Agency. The MLR (2017) requires firm-wide risk assessments - and firms to provide employees with regular AML training. (Remember to say firms must register with HMRC).

Answer 38

With the SELLER (client) e.g. Landlord = at the time of the appointment to dispose of the asset. With the PURCHASER = When the offer to buy/acquire has been accepted.

Answer 39

MUST carry out CDD checks on PURCHASER and SELLER as a minimum. Identify the client and verify their identity based on a reliable source (e.g. passport / driving licence photo). Identify the Beneficial Owners (e.g. check Companies House). For a Private Company = Its name, company number and address of registered office is required (and names of Directors/Shareholders with 25% or more holding). For a Public Limited Company = You DONT need names of Directors. This is the most secure! Just check their listing on the London Stock Exchange.

Answer 40

Obtain further information in the event any 'RED FLAGS' occur or you are dealing with a POLITICALLY EXPOSED PERSON (PEP) or associated member. A PEP presents higher risk for involvement in bribery and corruption by virtue of their position / influence. Essentially EDD procedures require additional evidence and monitoring. More detailed examination into Proof of Funds and what the purpose of the transaction actually is. (E.g. ensure the first payment is made from an account that was opened in the customer's name).

Answer 41

Beware of any of these Red Flags: Unwillingness to provide ID documents (passport/driving licence ID) Unusual transaction features (unexpected urgency required by parties) If a 'high risk third country' is involved. Wanting to pay in strange currencies (e.g. cryptocurrency) If the transaction will be clearly loss making for one party.

Answer 42

MLRO = James Gray Compliance Officer = Vicky Moss

Answer 43

Regulated = Financial Conduct Authority (FCA) Enforced in the UK = HMRC and National Crime Agency (NCA)

Answer 44

Max. 14 YEARS prison sentence and/or unlimited fine for ASSISTING with money laundering. Max. 5 YEARS prison sentence and/or unlimited fine for TIPPING OFF a person they are under investigation.

Answer 45

On the SELLER (Landlord) = BEFORE accepting the instruction to sell the asset. On the PURCHASER = When the offer to buy/acquire has been accepted.

Answer 46

Once suspicious activity has been identified, a firm's MLRO will conduct an independent investigation. They will then decide whether to submit a Suspicious Activity Report (SAR) to the National Crime Agency.

Answer 47

Company Name Company Number Address of registered office Names of Directors/Shareholders with 25% or more holding. (then I would check if i need to do EDD checks)

Answer 48

This is the most secure - just requires proof the PLC is listed on the London Stock Exchange.

Answer 49

Verify ID via reliable source (Passport / driving licence) Copy of bank statement showing proof of address

Answer 50

RICS Professional Statement: Countering Bribery & Corruption, Money Laundering and Terrorist Financing (2019).

Answer 51

It is RICS advice to members - provides guidance on how to inerpret and apply the law. (Covers the same topics as the legislation - must register with HMRC, CDD, EDD, PEPs, Red Flags, have a MLRO etc)