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APC TH > Purchase & Sale > Flashcards

Purchase & Sale Flashcards

1
Q

What are the main methods of sale?

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

What factors should you consider when choosing a method sale?

A
  • Clients objectives
  • Public accountability
  • Current and future market conditions
  • Likely level of demand for property
  • Timing requirements
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3
Q

What is private treaty?

A

Parties free to negotiate in own time without commitment

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4
Q

What are the positives and negatives of Private Treaty?

A

Advantages
- Flexibility
- Vendor control (No obligation to sell)
- Confidential

Disadvantages
- Potential gazundering
- Not guaranteed to sell + associated abortive costs

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5
Q

What is a formal tender?

A

A formal tender is known as sealed bids, the applicants bid blindly in a prescribed form without knowing what the other parties are bidding.

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6
Q

When is formal tender used and why?

A

Its often used by statutory bodies and gives control over the marketing process. It provides high level of public accountability, or when there may be strong interest in a property

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7
Q

What marketing information must be included for a formal tender?

A

A comprehensive legal pack & T&Cs

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8
Q

Can you increase your bid for a formal tender?

A

There is no opportunity to increase bids after the initial offer

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9
Q

What is the Caveat Emptor?

A

Buyer should satisfy itself on all matters relating to the property, Consumer Rights Act 2015 goes beyond this

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10
Q

What is an informal tender?

A
  • Marketed for finite period of time,
  • Not legally binding
  • Either can withdraw at any point prior to contract
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11
Q

When is informal tender most used?

A

When good interest or to bring the proceedings to a close

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12
Q

How should bids be opened?

A

In front of the client or independent witness or line manager

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13
Q

Does the Vendor have to accept the offer for formal/informal tender?

A

No

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14
Q

What needs to be included in the bid letter?

A

· Date and time of the written offer
· Name and address of applicant’s solicitor
· Source of funds
· Details of any conditions attached to the offer
· Price
· Party detail

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15
Q

What is a formal tender / sealed bid?

A
  • Single chance to bid
  • High levels of accountability
  • Detailed T&Cs for sale prepared ahead
  • Can lead to immediate exchange of contracts
  • Marketing material contains includes full legal pack
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16
Q

What is undertaken prior to an auction?

A

ToE, Conflict, AML, DD, Legal Pack, Reserve Price agreed, this means contracts can exchange at fall of gavel

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17
Q

What are some pros and cons to auctioneering?

A

Advantages
Short timescale
Certainty of sale
Unusual property hard to accurately value
Strong level of interest

Disadvantages
Cost
Lack of confidentiality
Short marketing period

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18
Q

What is included in HOTS?

A

Date, Subject to contract, Vendor/purchaser, Both agents/solicitors details, Price, Funding/cash, Any conditions, measured survey, Timescales

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19
Q

What is a typical timeline of a sales instruction?

A
  1. Instructions from client
  2. CIT (competence, independence, ToE)
  3. Money laundering
  4. Info and due diligence
  5. Check VAT position - TOGC
  6. Inspect and measure
  7. Undertake valuation (not Red Book)
  8. Prepare marketing report
  9. Written approval of marketing particulars
  10. Undertake marketing campaign
  11. Negotiate sale
  12. Liaise with lawyers - CPSEs
  13. Issue invoice, Retain file
20
Q

What are the agency rights?

A

Sole selling - get paid even if don’t find purchaser
Sole agency - only get paid if you find the purchaser

21
Q

What are the three bases of agency?

A

Sole agency - only one agent
Joint sole selling - shared fee, pre-agreed
Multiple agency - only successful agent gets a fee

22
Q

What is included in an agency instruction agreement?

A
  1. Agency basis and rights
  2. Fee and costs
  3. Conflicts of interest
  4. Money laundering
  5. Timescales
  6. Complaints handling
23
Q

Can you still charge a fee if the client withdraws the property from the market?

A

‘Ready, able and willing purchasers’ clause’ within Estate Agency Act 1979

24
Q

What is the timeline of a acquisition instruction?

A
  1. CIT (competence, independence, ToE)
  2. Money laundering
  3. Understand client objectives
  4. Consider techniques find properties
  5. Measure, inspect, valuation
  6. DD & Negotiation
  7. Agree HOTs
  8. Instruct lawyers. SPV? reduces SDLT
25
Q

What should be recommended regarding VAT?

A

Specialist advice should always be recommended

26
Q

Which occupiers cannot register for VAT?

A

Financial institutions, charities, medical practitioners

27
Q

What does transfer of going concern mean?

A

Purchase not treated as an asset, i.e. when a property is let

28
Q

Can a LL elect to charge VAT?

A

Yes - if it is tenanted

29
Q

What are capital allowances?

A

Tax relief for capital expenditure for construction or purchase of commercial property

30
Q

What are some examples of capital allowances

A

Purchase of equipment and machinery etc

31
Q

What are the main differences between formal and informal tender?

A

Formal - single chance to bid, high level of accountability, detailed terms in advance, can lead directly to contract for sale, may be obligated to accept highest bid
Informal - can be used during private treaty, further negotiations possible, less onerous terms, no obligation to accept highest bid, won’t lead directly to contract

32
Q

What can be used to bring a transaction to a close?

A
  • Serve notice
  • Deadline given
  • Deposit retained by vendor
  • Can sue for damages if resulting sale at lower price
33
Q

Is agency work red book compliant?

A

No - red book valuation only required for purchase reports (that include valuation report)

34
Q

At what size is planning permission required for marketing boards?

A

2 sq m (flat) and 2.3 sq m (v board)

35
Q

When must a marketing board be removed?

A

14 days after completion

36
Q

When is planning consent also required for boards?

A

Illuminated boards, remote boards, listed buildings/ conservation areas

37
Q

When can an agent start marketing?

A

Only when they have received signed TOE

38
Q

What are special purchase vehicles?

A

Legal entity = purchase and manage property investments, often buy-to-let properties

39
Q

What is another form of purchase vehicle?

A

Real Estate Investment Trusts (REITS) - listed on Stock Exchange and at leats 75% of business in property

40
Q

What is the key case law regarding purchase and sale?

A

Fleurets v Dashwood 2007

41
Q

What does Fleurets v Dashwood 2007 entail?

A

Agency rights - purchaser introduced by Fleurets (sole selling rights) bought property after being reassigned to other agents, agents now have clause in ToE and can claim fee

42
Q

How would you check proof of funds?

A

Request a bank statement

43
Q

What may a purchase be conditional on?

A

Subject to planning, completion of works, building surveys

44
Q

What act dictates marketing board requirements?

A

Town and Country Planning Act

45
Q

What should you do if you receive a late bid in a formal tender?

A

Inform your client, recommend next steps e.g. reject or set a new bidding date

APC TH (15 decks)

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