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APC Spring 2024 > Purchase & Sale > Flashcards

Purchase & Sale Flashcards

1
Q

What are the four methods of sale? (4)

A
  • Private treaty
  • Informal tender
  • Formal tender
  • Auction
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2
Q

What are the main factors that should be considered when choosing which method to use? (4)

A
  • Client’s objectives
  • Market conditions
  • Likely level demand for the property
  • Timing requirements
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3
Q

What is private treaty? (2)

A
  • Most common method of sale in England and Wales
  • Parties are free to negotiate in their own time and without commitment in the open market
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4
Q

What are the advantages of private treaty? (4)

A
  • Flexibility
  • The parties control the process
  • Vendor not under any obligation to sell
  • Confidential
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5
Q

What are the disadvantages of private treaty? (3)

A
  • Potential for gazumping or gazundering
  • Late decisions not to buy
  • Associated abortive costs
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6
Q

What is informal tender?

A
  • This is where an agent invites in writing all interested parties to submit their ‘best and final’ offers or ‘best bid’ in accordance with a prescribed timescale.
  • Used when there is a good level of interest in the property to bring negotiations to a conclusion
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7
Q

Is the ‘best bids’ procedure legally binding?

A

No - either party can withdraw up until the point of contract

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8
Q

What details should be included within an agent’s letter to interested parties in relation to the best and final bid offer? (6)

A
  • Required date and time of receipt of the written offer
  • Name and address of the applicant’s solicitor
  • Confirmation of finance arrangements
  • Details of any conditions attached to the offer
  • Confirmation that offers of a variable nature will not be considered (e.g. escalator bid)
  • The vendor reserves the right not to accept the highest or any, offer made
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9
Q

What is formal tender? (4)

A
  • When applicants bid blindly in a prescribed form without knowing what other parties are bidding (sealed bids)
  • No opportunity to change the offer once submitted
  • Often used by statutory bodies to give control and transparency over the marketing process
  • Vendor can state that they are under no obligation to accept the highest bid
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10
Q

What is required prior to formal tender? (2)

A
  • Full marketing materials, including a comprehensive legal pack, must be provided in advance of the tender process
  • Clear letter sent to all prospective purchasers setting out the information required accompanying the written offer
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11
Q

What are the main differences between formal and informal tender? (2)

A
  • There is no opportunity for further bids in formal tender, whereas, with informal tender, there may be the opportunity for further negotiations
  • It is possible for the formal tender to lead directly to a contract for sale
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12
Q

What are the advantages of an auction? (4)

A
  • Achieving a relatively short timetable for a disposal
  • Certainty of sale, assuming a reserve price is met
  • A useful method of sale when a valuation is hard to accurately value
  • Can be used for a property which is likely to generate a strong level of interest
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13
Q

What are the disadvantages of an auction? (4)

A
  • Lack of confidentiality over the price achieved
  • Vendor cannot choose the purchaser
  • Potentially smaller pot of buyers due to some buyers not liking the auction process
  • Can be more risky
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14
Q

What is the procedure of an auction? (8)

A
  • Terms of engagement must be agreed in writing in advance
  • Conflict of interest checks undertaken prior
  • AML checks must be completed for all vendors and proposed purchasers in advance
  • Auctioneer’s rights to refuse bids, proxy bids, regulate bidding increments, sign the contract on behalf of the client etc. must be agreed beforehand
  • Full due diligence must be completed beforehand
  • All relevant documentation must be made available
  • General conditions of sale, memorandum of sale to be published
  • Reserve price to be agreed
  • Contract is at the fall of the gavel
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15
Q

What does a purchaser need to do before an auction? (6)

A
  • View the property
  • Consider a structural survey
  • Get legal advice and complete due diligence
  • Read the Notice to Prospective buyers
  • Arrange a deposit of 10% and insurance for exchange
  • Provide ID for money laundering
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16
Q

What are the 3 types of agency? (3)

A
  1. Sole agency - only one agent
  2. Joint agency - two or more agents sharing a fee on a pre-agreed basis
  3. Multiple agency - any number of agents but only the successful agent gets a fee
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17
Q

What is a typical timeline of a sale instruction? (22)

A
  1. Receive instructions from the client
  2. Check competence
  3. Check independence
  4. Issue terms of engagement with the client
  5. Receive signed terms of engagement from the client (in accordance with S.18 of the Estate Agents Act 1979)
  6. Complete AML checks
  7. Gather information (e.g. legal documents, planning info, floor plans etc.)
  8. Undertake due diligence (legal documents, environmental, contamination etc.)
  9. Check whether VAT is applicable
  10. Inspect and measure
  11. Confirm the position with fixtures and fittings with the client
  12. Research the market, and get comparable evidence
  13. Undertake a valuation (not red book)
  14. Prepare a marketing report to the client with full recommendations
  15. Obtain written approval for the marketing particulars (in line with CPR 2008 and Misrep 1967)
  16. Undertake marketing
  17. Negotiate the sale and heads of terms, instruct lawyers
  18. Liaise with the vendor’s lawyer for CPSEs
  19. Assist with any legal inquiries
  20. Complete TR1/TP1s
  21. Complete
  22. Issue invoice
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18
Q

What must be included within an Agency Instruction Agreement or Terms of Engagement? (7)

A
  • Agency basis (sole/joint agency)
  • Agency rights (sole selling or sole agency rights)
  • Proposed fee
  • Marketing costs and disbursements
  • Confirmation of no conflicts of interests
  • AML requirements
  • Complaints handling procedure available
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19
Q

What is the difference between sole selling rights to a fee and sole agency rights to a fee? (2)

A
  • Sole selling rights means that remuneration will be payable if contracts are exchanged in a period when sole selling rights exist, even if the purchaser is not found by the agent. A fee is also due after the sole selling rights period ends if the property is sold to a purchaser who was introduced by the firm during that period
  • Sole agency rights means a fee is only due if the agent introduced the purchaser within the terms of instruction agreement. If the client finds the purchaser, no fee is due
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20
Q

What is a ‘ready able and willing purchasers’ clause, as defined by the Estate Agents Act 1979?

A
  • Often included so that when an applicant is ready and able to proceed with a purchaser, but the client decides to withdraw, an abortive fee may be charged to the client
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21
Q

What can happen if a property is failing to complete? (4)

A
  • The vendor can serve a ‘Notice to Complete’ on the proposed purchaser giving them a deadline to complete.
  • The legal costs for this work are to be paid by the proposed purchaser
  • If this deadline is passed, the vendor can rescind the contract and remarked the property, whilst keeping the deposit
  • The vendor may be able to sue for damages to claim for any loss in value following the sale of the property to another party at a lower sale price
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22
Q

What is a typical timeline for a property acquisition? (12)

A
  1. Check for competence and conflicts of interest
  2. AML checks
  3. Agree terms of engagement
  4. Understand the client’s objectives and search parameters
  5. Consider techniques to find properties
  6. Once a property is found, measure and value the property
  7. Complete due diligence (e.g. planning use/consent, asbestos, contamination, legal title etc.)
  8. Check for any rent or service charge arrears
  9. Covenant approval information to be supplied to the landlord/vendor
  10. Negotiation
  11. Heads of terms
  12. Instruction of solicitors
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23
Q

What different forms of purchaser vehicles are there? (4)

A
  1. Special Purchaser Vehicle (SPV) companies - a company formed specifically to buy a property to reduce the payment of SDLT
  2. Offshore unit trusts such as JPUTs (Jersey Property Unit Trusts
  3. Real Estate Investment Trusts (REIT) - a company tax resident in the UK which is listed on a stock exchange and has at least 75% of its business in property investment
  4. Joint ventures between two parties
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24
Q

What are the RICS documentations regarding estate agency? (2)

A
  • RICS Professional Statement Global Real Estate Agency and Brokerage 2016
  • RICS Professional Statement UK Commercial Estate Agency 2016
25
Q

What are some of the core principles that agents must observe according to the RICS Professional Statement UK Commercial Estate Agency 2016? (5)

A
  1. Act in an honest, fair, transparent manner
  2. Fair and clear terms of business with complaints handling procedure
  3. Not to discriminate unfairly during dealings
  4. Advertising is honest and truthful
  5. Appropriate PII cover
26
Q

When does the Estate Agents Act 1979 apply?

A

During the sale or purchase of freehold or leasehold properties with a capital value

27
Q

What are some of the offenses under the Estate Agents Act 1979? (4)

A
  • Acting dishonestly
  • Not providing clarity on the terms of engagement
  • Not disclosing a personal interest
  • Not telling the client about offers received
28
Q

What are the key principles within the Estate Agency Act 1979? (7)

A
  1. Clarity as to the terms of the agency (Section 18)
  2. Openness regarding personal interests (Section 21)
  3. Honesty and accuracy
  4. Agreement and liability for costs
  5. Don’t discriminate
  6. Legal obligation to tell clients about offers received
  7. Keep the client’s money separate
29
Q

What are the two key sections within the Estate Agents Act 1979? (2)

A

S18 - Terms of Engagement
S21 - Declaration of Personal Interests

30
Q

What are the penalties for non-compliance with the Estate Agents Act 1979? (3)

A
  • Warning order
  • Prohibition order
  • Fine
31
Q

When does the Misrepresentation Act 1967 apply?

A
  • Mis-statements or misrepresentations made during the pre-contractual stage for freehold and leasehold transactions
32
Q

What are the penalties for non-compliance with the Misrepresentation Act 1967? (2)

A
  • Sued for financial damages
  • Contract rescinded
33
Q

How can an agent limit their liabilities under the Misrepresentation Act 1967? (2)

A
  • Checking that the advice, information, or opinion is reliable
  • Disclaimer clause at the bottom of the marketing
34
Q

What test does the Misrepresentation Act 1967 have reference to? (1+3)

A

Test of Reasonableness:
1. Foreseeability
2. Proximity
3. Fairness - fair for a duty of care to arise

35
Q

What is the leading case for the Misrepresentation Act 1967 and what did it show? (2)

A

Hedley Byrne & Co Ltd v Heller & Partners, 1964
Test of reasonableness

36
Q

What are the three types of misrepresentation? (3)

A
  1. Fraudulent
  2. Negligent
  3. Innocent
37
Q

When does the Consumer Protection Regulations 2008 apply?

A

During the entire agency, sales, and lettings process

38
Q

What is the offence under the Consumer Protection Regulations 2008? (3)

A
  • Criminal offence
  • Not treating customers fairly
  • Providing misleading marketing information
39
Q

What are the penalties for non-compliance under the Consumer Protection Regulations 2008? (3)

A
  • Unlimited fine
  • Prohibition order
  • Prison up to 2 years
40
Q

What are some of the key principles within the Consumer Protection Regulations 2008? (4)

A
  • Policed by the Trading Standards Office
  • Agents have a duty of care to clients and all interested parties
  • Agents must declare everything known about a property
  • Agents must not exert undue pressure on potential buyers
41
Q

What does Caveat Emptor mean? (2)

A
  • ‘Let the buyer beware’
  • Means that the buyer should satisfy itself on all matters relating to the property
42
Q

What does your firm’s disclaimer clause say? (4)

A
  1. Assume no responsibility for any statement made within the particulars
  2. Any areas or measurements are approximate
  3. Savills haven’t tested any services or equipment
  4. Purchasers should satisfy themselves by inspection
43
Q

What is the document surrounding estate agent’s boards?

A

Town and Country Planning (Control of Advertisements) Regulations 2007

44
Q

What are the rules for advertising boards under the Town and Country Planning Regulations 2007? (5)

A
  • Planning consent is needed for non-residential boards over 2 sqm (flat) and 2.3 sqm (v-board)
  • Must not project more than 1m from the face of the building
  • Must not be above 4.6m from the ground in a safe condition
  • Must be removed 14 days after completion
  • Planning consent also needed for listed buildings, within conservation areas, remote/illuminated boards
45
Q

Which occupiers cannot register for VAT? (3)

A
  • Financial institutions
  • Charities
  • Medical practitioners
46
Q

What are the requirements for a plan? (7)

A
  • Drawn to a metric scale
  • Have a scale measurement bar
  • Have the scale noted on the plan
  • Include a 1:1250 scale location map
  • Full address including postcode
  • A north point
  • Demise in red outlined on the inside edge of the property
47
Q

What does the Land Registration Act 2002 require?

A
  • Requires all freeholds and leases granted for terms over 7 years to be registered with the Land Registry with a compliant lease plan
48
Q

What is included in an auction pack? (6)

A
  • Title register/title plan and any other pertinent documents
  • Local authority searches
  • Environmental searches
  • EPC
  • CPSE forms
  • Notice to Prospective buyers (T&Cs of the auction
49
Q

What is a restrictive covenant?

A

Is a clause that prevents the actions of a person or entity named in a contract

50
Q

What is an overage?

A

An agreement whereby a purchaser of land agrees to pay the seller an additional sum of money following a future event that enhances the value of the land.

51
Q

What was the process for acquiring the commercial site in the West Midlands? (11)

A
  • Checked conflict of interest and competence
  • Undertook AML checks on client
  • Agreed Terms of Engagement
  • Understood the client’s search parameters and objectives
  • Agreed techniques for finding and reporting
  • Conducted due diligence (whilst in conversation with the planning team)
  • Measured and valued
  • Came up with an offer
  • Negotiated Heads of Terms
  • Instructed solicitors
  • Completion
52
Q

Why were you in consultation with the planning department for the West Midlands acquisition?

A

The site was a different planning use class to what it needed to be (e.g. Sui Generis), therefore,

53
Q

What use class would have been needed for this automotive site?

A

Sui Generis

54
Q

Why would your client transfer the piece of land for the consideration of £1? (4)

A
  • My client wanted to get rid of the liability of it
  • My client was asked if they would be willing to sell it back to the original owner to ‘tidy up the freehold titles’
  • My client hadn’t been maintaining the land, had no use for it, and was essentially landlocked
  • Also wouldn’t have had any use to any other party
55
Q

What were included within the Heads of Terms for the transfer of land in Cromer? (5)

A
  • Subject to Contract
  • Buyer and seller’s details (plus solicitor’s)
  • Amount (e.g. £1)
  • Conditions attached to the sale such as restrictive covenant and easement
  • Fees
56
Q

What opex costs would there have been for vacant land? (3)

A
  • Landscaping costs
  • Fees for inspecting the land every year
  • Legal fees
57
Q

In what way can you get proof of funds when selling a property? (4)

A
  • Proof of funds letter: letter issued by a commercial bank to provide confidence to the seller. Includes a bank statement, bank-certified financial statement, signed by an authorised bank employee
  • Mortgage in principle for residential
  • Bank statement of deposit or cash amount
  • Brokerage account
58
Q

How is an easement documented?

A

As a deed of easement

APC Spring 2024 (17 decks)

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