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APC Flashcards > Purchase & Sale > Flashcards

Purchase & Sale Flashcards

1
Q

New-build benefits?

A
  • the environmental impact of buildings
  • efforts to reduce carbon emissions
  • the use of innovative forms of construction
  • evolving Building Regulations requirements
  • improved specifications
  • incentives and
  • what are described as ‘first-owner benefits’.
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2
Q

UK Finance disclosure form, what should be collected?

A

Initial information - details of vendor and purchaser, verification of address, plot number and postcode of the subject property.
The Property - type, style, location, surrounding, services & amenities, nearby sites, commercial units, ground conditions, flooding, invasive plants.
Construction - type, stage, completion date, sustainability, features, materials, inspection.
Legal - tenure, term, rent, service/estate charges, purchase schemes, resale restraints, warranties.
Pricing - agreed price and date, incentives, stage release and purchaser profile (whether the owners are occupiers/investors, first-time
buyers, downsizers, etc).
Comparables - type, date, location, special features/specification, incentives, tenure, schemes such as Help to Buy or part-exchange and lender activity: it may be important to note which lenders are active on site to ensure that your lender client does not become overexposed affordable housing.

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3
Q

What RICS guidance relates to agency work?

A

RICS UK Residential Real Estate Agency Professional Statement 2017 (Blue Book)

RICS Global Real Estate Agency and Brokerage Professional Statement 2016

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4
Q

What legislation relates to agency work?

A

Estate Agents Act 1979
Misrepresentation Act 1967
Money Laundering Regulations 2017
Consumer Rights Act 2015
Consumer Protection from Unfair Trading Regulations 2008
Business Protection from Misleading Marketing Regulation 2008
Town and Country Planning Regulations 2007

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5
Q

What is the RICS Real Estate Agency and Brokerage PS 2016?

A

A mandatory professional statement that outlines the principles for fairness and transparency in agency.
Includes information on ethics, securing instructions, acting for the seller (marketing), acting for the seller (agreeing the sale or lease), acting for the buyer, ending an instruction.

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6
Q

What do you understand about your general duty of care?

A

Under Global Agency and Brokerage PS, Ethics section.
Duty of care to seller and buyer throughout the period of your instruction. Must carry out work with reasonable skill, care and diligence.
- Aim to achieve the best possible outcome for client
- Not release or misuse client’s confidential info without their permission
- Not to appoint sub-agent
- Ensure proper staff training
- Not the accept instruction beyond field of experience

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7
Q

What RICS agency guidance is there for Residential agency?

A

Separate PS applies – UK Residential Real Estate Agency PS 2017, or the Blue Book
Contains more property management/statutory requirements for letting resi property like gas/elec certificate

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8
Q

What is the Estate Agents Act 1979 and who does it apply to?

A

Applies to disposal or acquisition of an interest in freehold property, leasehold property and land.

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9
Q

What are the principles of the EA Act 1979?

A

7 principles

  1. Honesty and accuracy
  2. Clarity on TOEs, incl. type of agency sec.18
  3. Agreement on prospective liabilities/costs in advance
  4. Transparency regarding personal interests sec.21
  5. No discrimination
  6. Tell client about all offers received in writing
  7. Keep client’s money separate
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10
Q

What are the key sections in the EA act 1979?

A

s. 18 – agree TOEs / liabilities

s. 21 – disclosing a personal interest

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11
Q

What is the redress/penalty system under the EA Act 1979?

A

Act policed by local authorities Trading Standards Office.
Penalties include:
- Negative licensing (right to be an agent revoked)
- Warning order (less punitive, usually for first offence)
- Prohibition order (stops an agent practising)

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12
Q

What are the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and what do they apply to?

A

They replaced the Misdescriptions Act.
They prohibit unfair Business to Consumer trade practices.
Apply to all lettings and sales.
Duty owed to ‘consumers’ = ACTUAL buyers and vendors (clients), and POTENTIAL clients, viewers, buyers.
Duty to: give accurate and necessary material – good and bad - and not make any misdescriptions, not exert undue pressure, make no omissions.

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13
Q

What are the penalties for breaching the CPR 2008?

A

Policed by local authorities TSO.

Unlimited fine, prohibition order, compensation up to £25k.

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14
Q

What changes did the Consumer Rights Act 2015 introduce?

A

Lettings agents must display summary of fees in their office and on their website.

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15
Q

What is ‘caveat emptor’?

A

Principle in common law – ‘let the buyer beware’. The buyer alone is responsible for satisfying themselves on all matters relating to the property.

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16
Q

What is the Misrepresentation Act 1967? Who has a duty of care?

A

Relates to misrepresentation of information during pre-contractual enquiries to induce the party to purchase. The vendor and/or agent can be sued for damages – it is a civil offence and a form of negligence.
The Agent has a duty of care to check all info is reliable.

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17
Q

What are the 3 types of misrepresentation?

A

Fraudulent, negligent and innocent

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18
Q

Explain the key differences between the Misrep Act 1967 and the CPR 2008?

A

The CPR are a criminal offence if breached, whereas the Misrep Act is a civil offence.
CPR cannot be limited by a disclaimer (exclusion clause), Misrep can.

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19
Q

What rules are there around marketing signage?

A

Town and Country Planning Regulations 2007.
Planning consent required for boards over a certain size, PDR for anything below.
Must not project more than 1m.
Must be removed 14 days after completion of transaction.
Size limits: Commercial: 2sqm (flat), 2.3sqm (V-board). Resi: 0.5sqm (flat), 0.6sqm (V-board).
Must get consent from owner to erect.
Planning needed for: illuminated boards, listed building / conservation areas.

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20
Q

VAT

A

Specialist advice.

Some occupiers cannot register for VAT, such as charities.

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21
Q

What are capital allowances?

A

The practice of allowing a company to get tax relief on tangible capital expenditure by allowing it to be expensed against its annual pre-tax income

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22
Q

What is the Land Registration Act 2002?

A

Registration with Land Registry is required when:
- Freeholds transferred
- Legal lease over 7 years are granted
- Legal lease with more than 7 years to run are transferred
Introduced ‘squatters rights’ - anyone who occupies registered land without permission from the owner and treats it as his own for 10 years is entitled to apply to be registered as owner
Introduced electronic conveyancing

23
Q

What are the four methods of sale?

A
  1. Private treaty (most common in England and Wales)
  2. Informal tender
  3. Formal tender
  4. Auction
24
Q

What are the factors to consider in choosing which method of sale to use?

A 
Client’s objectives
Public accountability
Current market conditions
Likely level of demand
Timing requirements
25
Q

What is private treaty? What are its advantages and disadvantages?

A

Parties are free to negotiate in their own time, without commitment in the open market.
Private = confidential negotiations.
Advantages: Flexible, parties control the process, vendor under no obligation to sell until exchange, confidential
Disadvantages: can be late decisions not to proceed, associated abortive costs, potential for gazumping/gazundering

26
Q

What is informal tender? What do you include on sales process letter?

A

Usually used when good level of interest prior to/at beginning of marketing.
Best and final bids used to conclude negotiations, with a prescribed timescale.
Any bids received after deadline must be reported, but advise unethical and not to accept.
Not legally binding until contract.
Inviting best and final bids must include:
- Bid deadline (date and time)
- Applicant solicitor details
- Financing arrangements
- Details of any conditions
- *Statement that variable bids (e.g. escalator) will not be considered
- *Statement that vendor reserves right not to accept highest, or any, offer made

27
Q

What is formal tender?

A

The process of sealed bids; parties bid blindly and there is no opportunity for further negotiation or changes to bids.
Full marketing and legal pack must be provided in advance.
Letter must be provided to parties setting out the information required in their bid.
Binding on both parties, unless statement that vendor reserves right not to accept highest, or any, offer made
Often used by statutory bodies to exercise control, accountability and provide transparency.

28
Q

What are the differences between informal and formal tender?

A

Single bid vs. multiple.
Cannot change bid vs. further negotiations and BAFOs.
Could lead directly to a sales contract vs. cannot.
High level of accountability vs. usually less onerous terms

29
Q

What are the advantages and disadvantages of selling at auction? When is it normally used?

A

Usually used for unusually property that is hard to accurately value. Used when likely a high level of interest to drive bids
Advantages: quick disposal, certainty of sale (subject to reserve figure achieved), useful for unusual properties with high interest levels, bids are legally binding at the hammer fall.
Disadvantages: High costs of promotion, no confidentiality, cannot select purchaser, intensive marketing period.

30
Q

What are procedures required by the auctioneer prior to the auction?

A
  • Conflict check and sign TOEs in advance
  • Money laundering checks on vendor and proposed purchasers
  • Clarity on auctioneer’s rights to refuse bids, accept proxy bids, and regulate bidding increments
  • Agree reserve price
  • Full DD prior to sale; provide all relevant documents prior to sale
31
Q

What are procedures required by the purchaser prior to the auction?

A
  • Provide ID for money laundering checks
  • View the property and consider surveys
  • DD and legal advice
  • Read notice to prospective purchasers
  • Arrange a 10% deposit for exchange (which is the hammer fall)
32
Q

What are the 3 bases of agency? Describe each

A

Sole agency; only one agent

  • Joint agency; two or more agents share a fee on a pre-agreed basis
  • Multiple agency; any number of agents but only the successful agent is awarded the fee
33
Q

What is the timeline for a sales instruction?

A
  1. Receive instruction
  2. Check competence and conflict check
  3. Issue agency TOEs and TOBs
  4. Complete money laundering checks
  5. Gather information
  6. Undertake due diligence on information
  7. Check VAT position
  8. Inspect and measure
  9. Confirm fixtures and fittings with vendor
  10. Research market and collect/analyse comparable evidence
  11. Value freehold interest
  12. Prepare marketing report with recommendations
  13. Obtain written approval of marketing particulars (Consumer Protection Regs, Misrep Act)
  14. Undertake agreed marketing campaign
  15. Negotiate sale and HOTs
  16. Instruct lawyers, assist with legals
  17. CPSEs (Commercial Property Standard Enquiries)
  18. Issue invoice on completion
34
Q

Why do you require agency instruction agreements (TOEs)? What must you include?

A 
Require by law under the Estate Agency Act (s.18 and 21).
Must set out (under the RICS UK Commercial Real Estate Agency, 1st edition):
- Identity of client
- Agency basis
- Agency rights (e.g. sole selling or letting rights)
- Marketing costs and disbursements
- Conflict of interest
- Money laundering requirements
- Complaints handling procedure
- Proposed fee
- Timescale for fee payment
- Cooling off period (14 days)
35
Q

Can terms of engagement be agreed orally?

A

In law they can be – Wells vs. Devani, the Supreme Court ruled that an agreement made over the phone was legally binding due to parties subsequent behaviour.

36
Q

What are sole selling rights?

A

A clause that means fee payable if contracts exchanged even if purchaser not found by the agent, during period of sole selling rights. Also applies beyond the sole selling rights period if sold to a party that was originally introduced by the agent during the sole selling rights period.

37
Q

What are sole agency rights?

A

Fee only due if agent intro’d purchaser within term of instruction. Less advantageous for an agent as no fee if client finds buyer.

38
Q

What is a ‘ready, willing and able purchaser’? How does this impact a sale?

A

Under the Estate Agent Regulations 1991 the definition is:
“if the purchaser is prepared and is able to exchange unconditional contracts for the purchase of your property”. Clause is included so that if the client decides to withdraw despite there being a ‘ready, willing and able’ purchaser, they are liable to abortive fees to the agent.

39
Q

What can you do if a purchaser is failing to complete a transaction?

A

Serve a Notice to Complete, which gives a deadline.

If the deadline passes, vendor can rescind contract and deposit can be retained.

40
Q

What kinds of purchase vehicles are there?

A

Special Purchase Vehicles (SPVs) – company specifically formed to buy a property to reduce SDLT
Joint ventures (JVs) – between the two parties, usually bringing two different characteristics to the transaction e.g. finances vs. expertise and resources
Offshore Unit Trusts e.g. Jersey Property Unit Trust
Real Estate Investment Trusts (REITs) – listed on the stock exchange and has at least 75% business in property investment

41
Q

What legal requirements are there for marketing a property?

A 
Estate Agents Act 1979
Misrepresentation Act 1967
CPR 2008
BPR 2008
Consumer Rights Act 2015
42
Q

What caveats do you include on your marketing particulars??

A

Misrepresentation Act statement; particulars are in good faith, believed to be correct but should not be relied upon as statements of fact, do not constitute any part of an offer or contract.
Copyright - All Rights Reserved

43
Q

What does the Equality Act 2010 cover?

A

Makes it illegal to discriminate, whether directly or indirectly, against individuals with protected characteristics.

44
Q

What are the 9 protected characteristics under the Equality Act 2010?

A

Age, disability, gender reassignment, sex, marriage, pregnancy, race, religion, sexual orientation

45
Q

What is indirect vs direct discrimination under the Equality Act 2010?

A

Direct;a person is treated less favourably because of a protected characteristic
Indirect; a company’s policies, procedures and rules put people with protected characteristics at a disadvantage

46
Q

Do you have to carry out AML checks on purchasers?

A

Yes you are LEGALLY required to under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. Must carry out AML checks on anyone you have a “business relationship” with - specially includes purchasers. Confirm identity of purchaser and source of funds before contracts exchanged.

47
Q

What is an easement?

A

A permanent right to access or use over someone else’s land. Held by either a specified individual or for the benefit of adjoining land. They don’t grant any ownership rights. Usually remain in perpetuity, but can also have an explicit expiration period.
Attached to the Deed.

48
Q

What are the 4 main categories of easements?

A

Right of way, rights of light and air, rights of support and rights relating to artificial waterways.

49
Q

What is a right of way?

A

Are a type of easement for the right to pass through the land.

50
Q

Walk us through what a notice to complete entails?

A

One party – either vendor or purchaser – in breach of its obligations under the contract. The other party will wish to claim damages for the loss incurred.

51
Q

Difference between sole agency and sole selling rights?

A

Sole agency rights: Fee only due if agent intro’d purchaser within term of instruction. Less advantageous for an agent as no fee if client finds buyer.
Sole selling rights: A clause that means fee payable if contracts exchanged even if purchaser not found by the agent, during period of sole selling rights. Also applies beyond the sole selling rights period if sold to a party that was originally introduced by the agent during the sole selling rights period.

52
Q

In accordance with the blue book, what is the Real Estate Agency code?

A
  1. Conduct business in HFT manner.
  2. Carry out work with SUK & ensure staff are trained.
  3. ToEs are fair and clear.
  4. Avoid COIs
  5. Not to discriminate
  6. Communication is CTT
  7. Advertising & marketing is HDT.
  8. Client money is held separately and appropriately.
  9. PII Cover is adequate
  10. Scope of obligations
  11. Realistic assessment of likely selling price, using best professional judgement.
  12. Inspections and Viewings carried out in accordance with clients requests. (safety and security for all parties)
53
Q

What is a personal right

A

Enforceable only against specific individuals, or discernable category of persons. (Between persons) Could only sue a person with the right (lesser power than real rights)

54
Q

A real right?

A

Enforceable and can be asserted against the world. (A person and a thing) Could sue whoever who infringed.

APC Flashcards (12 decks)

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