Purchase & Sale Flashcards
What are the key principles of the Estates Agency Act 1979?
- Clarity as to the terms of agency (Section 18)
- Honesty and accuracy
- Agreement and liability for costs
- Openness regarding personal interests (Section 21)
- Absence of discrimination
- Legal obligation to tell the client about offers received
- Keep Clients money separate
What is in a Terms of Engagement? (For a sales agent)
- Agency Basis
- Agency Rights
- Proposed Fee
- Marketing costs and disbursements
- Confirmation of no conflicts of interest
- AML and KYC regulatory requirements
- Timescale for the payment of fees and disbursements
- Period of instruction
- Process for termination
What are the penalties for failing to comply with the Estate Agency Act 1979?
Governed by the National Trading Standards Estate & Letting Agency Team (NTSEAT)
- An agents licence can be revoked
- Warning Order
- Fine
What is a Transfer of Going Concern (TOGC)?
- Applies to property sales for investment purposes (when a lease is in place)
- Not treated as a supply of goods or services for VAT purposes
- If the property is VAT registered and the rent is subject to VAT, than no VAT is charged on the sale price
What are the three types of estate agency?
- Sole Agency: Only one agent
- Joint agency: two or more agents sharing a pre-agreed fee
- Multiple agency: any number of agents but only the successful agent gets a fee.
Wha are sole selling rights?
A fee will be due to the agent under the following circumstances
- Exchange of contract occurs during the period where sole selling rights exists to a purchaser even if they are not found by the agent (including the client).
- Exchange of contracts occurs after the sole selling period ends to a purchaser who was introduced by the agent or whom the agent had negotiations with.
Estates Agents Regulations 1991
What are the 4 methods of sale?
- Private Treaty: Parties are free to negotiate in their own time without commitment in the open market
- Informal Tender: Call for best bids
- Formal Tender: Sealed bids
- Auction: Open bidding on an asset where contracts are exchanged once the gavel goes down
What are the advantages and disadvantages of a private treaty sale?
Advantages:
- Flexibility
- The parties control the process
- Vendor is not
Disadvantages:
1. Potential of gazumping (higher offers while in negotiation with another party)
2. Abortive costs
3. Less certain completion timescales
What is an informal tender?
- Used when there is a good level of interest in a property
- Interested parties receive written notification to submit ‘best and final’ offers
- The vendor reserves the right not to accept the highest, or any, offer made
- Bids are not legally binding
- Bids should be opened in front of client or an independent witness
What is a formal tender?
- Used by a statutory body to give control and transparency of the marketing process
- Bidders are given a comprehensive marketing, legal pack in advance and criteria for bidding
- Applicants bid blindly in a prescribed form without knowing that other parties are bidding.
- All bids should be opened in front of the client or independent witness
- No opportunity for the prospective purchaser to change their bid after submission
- Allows the vendor to select the best bidder based on bids received
What is an auction?
An auction is a method of sale that involves an auctioneer seeking bids from a list of registered bidders for a property post a wide marketing process.
Walk me through the auction process.
- Terms of engagement must be agreed in writing in advance
- Conflict of interest checks undertaken prior to instruction
- Clarity on Auctioneer’s rights to refuse bids, accept telephone bids
- Full Due Diligence (Legal pack, inspection etc.) must be completed before offering the property for sale
- General auction conditions, Memorandum of Sale and special auction conditions are to be published by the auctioneer
- Reserve price (minimum sale price) pre-agreed with vendor and auctioneer
- Auctioneer Particulars must be accurate and in line with the Consumer Protection Regulations 2008 and Misrepresentation Act 1967.
- Exchange of contract and 10% deposit once gavel is down
Summarise the April 2025 RICS Auction Practice alert?
- RICS members and firms must be familiar with regulations that protect buyers (No bait advertising, guide price etc.)
A. Estate Agency Act 1979: Disclose any conflicts of interest
B. Adhere to the MLTFTF Regulations 2017 (Money Laundering etc.)
C. Bait advertising and misleading guide prices are prohibited
D. Sale of Land by Auction Act 1867 and Fraud Act 2006 - jail term of 10 years if collusion to trick a buyer to pay a higher price. - Fees are clearly outlined in the special auction conditions and or sale particulars
- Accurately reporting the results of an auction where a property is unsold
What environmental due-diligence was needed for the Petrol Filling station?
- Petrol Leakage survey
- Looks at the fuel tank at the start of the year (T1) vs the amount of fuel sold in a given year (S1)
- The amount remaining in the fuel tank at the end of the year should be equal to the T1 minus S2 (T2)
- If there is a significant leak the difference between the amount sold and amount at the end of the year (tolerance of 1-5%), then further investigation is needed.
What are the key details of the Askern Petrol Filling station sale?
- Sold for £2.7m / 7.5% NIY (August 2024)
- Later chipped to £2.65m (for the purchaser to take on past environmental liability)
- Sold to local forecourt operator
- 6.0% IRR & TR
- Sold due to PFS sector, Over-rent, Increased retail competition
Walk me through the Gloucester Sale?
- Sold in September 2024 for £3.7m (10.4% NIY)
- Gloucester City Council the ultimate freeholder
> -1.0% IRR and -0.8% TR over hold - Sold due to weak occupational demand and special purchaser with redevelopment interest
What is marriage value?
Refers to the additional increase in value when two or more assets or interests are combined, resulting in a higher overall value than the sum of their individual values.
(RICS Red book)
