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APC > Purchase & Sale (Good Questions) > Flashcards

Purchase & Sale (Good Questions) Flashcards

1
Q

What RICS guidance do you follow when undertaking a disposal / acquisition?

A
  1. RICS Professional Statement - UK Commercial Estate Agency (2016)
  2. RICS Rules of Conduct
  3. RICS Professional Standard on Countering Bribery and Corruption, Money Laundering and Terrorist Financing.
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2
Q

What is your understanding of the RICS Professional Statement - UK Commercial Estate Agency?

A
  1. Sets out mandatory standards for RICS members.
  2. Sets out TWELVE core principles which agents must observe.
  3. Statement provides advice on key areas of estate agency such as:
  • Acting Ethically
  • Securing instructions
  • Marketing the Property
  • Implementing the disposal
  • Acquisition of Property
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3
Q

What are the twelve core principles set out in the RICS Professional Statement - UK Commercial Estate Agency 2016?

A
  1. Act honestly / fairly / transparently / professionally
  2. Carry out work with due skill, care, diligence and ensure all staff have necessary skills.
  3. Ensure clients are provided with terms of business that are fair and clear, with details of the firms CHP.
  4. Do the utmost to avoid COI and deal with them openly and fairly.
  5. Not to discriminate unfairly in any dealings.
  6. All communications with clients are fair, decent, clear, timely and transparent.
  7. Advertising and marketing material is honest and truthful
  8. Client money is held separately and covered by adequate insurance.
  9. Hold appropriate insurance.
  10. Make it clear the identity of your client.
  11. Give realistic assessments of selling prices / rents / financial costs. Have regard to market evidence and use best professional judgement.
  12. Ensure all meetings / inspections / viewings are carried out in accordance with client’s wishes with due regard to safety and security.
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4
Q

What RICS guidance covers UK Residential Real Estate?

A

RICS Professional Statement - UK Residential Real Estate Agency (2017)

Provides a summary of code of practice in all aspects of property marketing for residential property. Does not relate to commercial property.

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5
Q

What is some key legislation you are aware of that covers estate agency?

A
  1. Misrepresentation Act
  2. Consumer Rights Act 2015
  3. Consumer Protection from Unfair Trading Regulations 2008
  4. Estate Agents Act 1979
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6
Q

What does the Estate Agents Act 1979 apply to?

A
  1. Disposal / acquisition of an interest in land.

Can be Freehold / Leasehold / Land as well as buildings

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7
Q

What are the principles behind the Estate Agents Act 1979?

A
  1. CLARITY as to the terms of the agency (section 18)
  2. HONEST & ACCURACY
  3. AGREEMENT & LIABILITY for costs
  4. OPENNES regarding personal interest (section 21) COI
  5. ABSENCE of DISCRIMINATION
  6. Legal OBLIGATION to tell the client about offers recieved.
  7. Keep CLIENTS MONEY seperate.
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8
Q

Walk me through your understanding of the Estate Agents Act 1979?

A
  1. Applies to disposals and acquisitions
  2. Promotes 7 key principles.

The most important points are:

  1. Follow RICS rules r.e handling clients money and COI.
  2. Disclose interests and declare COI on HoT’s
  3. Can only tell truth regarding offers received.
  4. Advise clients of any services available to applicant i.e financial advice.
  5. Specify nature of agency and selling rights.
  6. Itemise all payments.
  7. Specify all costs/fees in advance in ToB (Section 18).
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9
Q

What penalties are associated with the Estate Agents Act 1979?

A
  1. Prohibition order stops agent practicing.
  2. Warning order
  3. Costs can be awarded

CAN BE USED AGAINST INDIVUAL OR PRACTICE

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10
Q

Who polices the Estate AGENTS aCT?

A

National Trading Standards Estate & Letting Agency Team (NTSEAT)

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11
Q

What is the key principle of the Estate Agents (Undesirable Practices) Order 1991?

A
  1. Agents must inform clients at the same time as they are informed about their terms of business as to any services to be offered to prospective purchasers (unless free of charge).
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12
Q

What information should be supplied to a client?

A
  1. Service to be provided
  2. Renumeration

(Estate Agents (Provision of Information) Regulations 1991)

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13
Q

How long is a cooling off period?

A

Clients have 14 days to change their minds in line with current consumer protection regulation

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14
Q

What is your understanding of the consumer rights act 2015?

A
  1. Amends existing consumer protection and gives new rights and remedies.
  2. Consolidates law relating to unfair terms and contracts
  3. If holding client money firm must publish statement stating if member of client money scheme and details.
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15
Q

Who polices the consumer rights act 2015? What penalties are there?

A

Policed by the local authority - up to £5000 per breach

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16
Q

What does Caveat Emptor mean?

A

Let the buyer beware

Buyer should satisfy itself on all matters relating to the property.

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17
Q

What is your understanding of the Consumer Protection from Unfair Trading Regulations 2008?

A
  1. Relate to Business to Consumer
  2. Offer broader, non-specific consumer protection for agents
  3. Regulations principle based
  4. Duty extended from clients to also potential clients, buyers, viewers, actual buyers to giver accurate / necessary information.
  5. Regulations apply to lettings, sales and online agency
  6. CPR’s prohibit unfair business to consumer commercial practices.
  7. All agency processes/ systems must be demonstrated with due diligence audit trail.
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18
Q

Who polices the Consumer Protection from Unfair Trading Regulations 2008? What are the penalties associated with the legislation?

A
  1. Trading Standards Office of LA
  2. Maximum penalty is unlimited fine and/or prohibition order.
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19
Q

What is your understanding of the Misrepresentation Act 1967?

A
  1. Act relates to a misrepresentation / false statements which cause party to purchase.
  2. Vendor / Agent can be sued for damages and contract rescinded.
  3. Civil offence - form of negligence. Actionable as tort.
  4. Agent has duty of care to check that advice / info / opinion is reliable.
  5. Misrepresentation can be fraudulent, negligent or innocent.
20
Q

How can a vendor / agent protect themselves from misrepresentation?

A
  1. Exclusion / disclaimer clauses if fair and reasonable.
21
Q

What case relates to misrepresentation?

A

Hedley Byrne & Co LTD v Heller & Partners (1964)

22
Q

What is your understanding of the case Hedley Byrne & Co LTD v Heller & Partners (1964)?

A
  1. Relates to liability to negligent statements and refers to test of reasonableness

Created three tests to decide agents liability:

  1. Foreseeability
  2. Proximity
  3. Fairness

Case applies to professional opinions and third party advice.

Court held that no duty of care was owed by a bank to the plaintiff relying on advice as to the customers creditworthiness.

23
Q

What is your understanding of the Regulation of Property Agents (ROPA)?

A
  1. Will apply to estate agents across the UK and managing agents in England.
  2. All qualifying agencies will have to be licenced and abide by new code of practice.
  3. Transparency of charges / CoI / Service charges are priorates.
  4. Regulator will take responsibility for redress schemes and CMP schemes.
  5. Report from House of Lords recently - no date for proposed legislation.
24
Q

What legislation is related to marketing signage?

A

Town & Country Planning (Control of Advertisements) Regulations 2007

25
Q

When do you need planning consent for marketing signage?

A

If over 2sqm (flat) and 2.3 sqm (V board)

Must not project more than 1m from the face of the building and not above 4.6m from ground in a safe condition.

and

  1. Illuminated board
  2. Remote board
  3. Board erected on listed building / conservation area.

a. Must be removed 14 days after transaction completed
b. Must have owners approval

26
Q

Who polices marketing signs?

A
  1. Local Planning Authority - can issue fines and order costs
27
Q

Can you summarise some key estate agency legislation?

A

Misrepresentation Act 1967

Applies to mis-statements / false / fraudulent statements / misrepresentations made by vendor / agent. Freehold / leasehold transactions.

Civil Offence - actionable by tort. Can be limited by effective disclaimer clause. Penalties include sued for financial damages and/or contract rescinded.

Estate Agents Act 1979

Applies during the sale or purchase of freehold / leasehold properties. S.18 relates to terms of business and S.21 relates to declaration of personal interest.

Offence to act dishonestly / not provide clarity to ToE or personal interest / Not telling client about offers recieved. Penalties include warning / prohibition order and/or fine.

Consumer Protection Regulations (2008)

Applies during entire agency sales & lettings processes.

Criminal offence to not treat customers fairly and/or provide misleading info. Fines include unlimited fine / prohibition order and prison up to two years.

28
Q

What is your understanding of the Land Registration Act?

A
  1. Provides framework for electronic property conveyancing.
  2. All freeholds & new leases granted for terms over 7 years or existing leases with 7 years + to run must be registered with compliant lease plan.
  3. Introduced new regime for adverse possession - claimant must prove 10 years of use.
29
Q

What is your understanding of a ‘‘Land Registry’’ Compliant plan?

A

Must contain the following 7 details:

  1. Drawn to a metric scale (1:100 / 1:200)
  2. Have a scale measurement bar
  3. Have scale noted
  4. Include a 1:1250 scale location map
  5. Full address including post code
  6. North point
  7. Demise in red outlined on the inside edge of the property.
30
Q

What is a TOGC?

A

Transfer of Going Concern

  • Not treated as a supply of goods or services for VAT
  • Can reduce liability
  • Property must be registered for VAT and rent must be subject to VAT
31
Q

What are the four methods of sale?

A
  1. Private treaty
  2. Informal tender
  3. Formal tender
  4. Auction
32
Q

What should you consider when recommending a method of sale?

A
  1. Client objectives
  2. Public accountability
  3. Market conditions
  4. Level of demand
  5. timing requirements
33
Q

What is Private Treaty?

A
  1. Both parties free to negotiate in their own time and without commitment.

Advantages:
a. Flexibility
b. Parties control process
c. Vendor not under obligation to sell
d. Confidential

Disadvantages:
1. Potential for gazumping or gazundering
2. Late decisions not to buy
3. Associated abortive costs

34
Q

Tell me your understanding of informal tenders?

A
  1. Used when good level of interest
  2. Best bids procedure - not legally binding.
  3. All bids should be opened in front of client or an independent witness
  4. Can be used during private treaty to obtain best offer.
  5. Usually less onerous terms/ conditions are prepared.
  6. Further negotiations can follow from the outcome of this process.
  7. Negotiating mechanism - will not lead direct to a contract.

Private Treaty -> Informal tender -> negotiation -> sale

35
Q

What details do you need to include in a informal tender letter?

A
  1. Name / address of solicitor
  2. Required date of written offer
  3. Details of any conditions
  4. Confirmation that offers of a variable nature will not be considered.
  5. Vendor reserves right not to accept any offer made - IMPORTANT COULD BE COME BINDING.
36
Q

What is your understanding of formal tenders (sealed bids)

A
  1. Often used by statutory body to give control / transparency over the process.
  2. Provides high level of public accountability.
  3. Can state no obligation to accept highest bid.
  4. Must include full marketing material: Incl. Legal pack and a clear letter sent to all prospective purchasers setting out the information required accompanying the written offer.
  5. Applicants bid blindly and all bids should be opened in front of client / IE
  6. No opportunity for prospective purchaser to change / increase bid.
  7. Usually no immediate exchange of contracts.
37
Q

What is the difference between a formal and informal tender?

A

FORMAL TENDER
1. Provides purchaser single chance to purchase - no further bids.

  1. High level of accountability.
  2. Detailed terms / conditions prepared by vendor.
  3. Highest figure is accepted (unless vendor reserves rights)
  4. Possible for formal tender to lead directly to contract.

INFORMAL
1. Can be used during private treaty to obtain best offer. Further negotiations
2. Less onerous terms / conditions prepared.
3. Will not lead direct to a contract for sale.
4. Negotiating mechanism.
5. Vendor usually states no obligation to accept.

38
Q

What are the advantages and disadvantages of auctions?

A

Advantages:
1. Achieve sale in short timetable.
2. Certainty of sale.
3. Useful method of sale for unusual property which is hard to accurately value.
4. Used for property likely to generate strong interest.

Disadvantages:
1. Cost of promotion & publicity.
2. Lack of confidentiality over the price achieved.
3. Vendor cannot choose the purchaser.
4. Intensive nature of a short marketing period.

39
Q

What actions are required by a purchaser before sale day?

A
  1. View property & consider structural survey
  2. Take legal advice and complete due diligence
  3. Read Notice to Prospective Buyers
  4. Arrange a deposit of 10% & insurance for exchange.
  5. Provide ID for money laundering procedures.
40
Q

Walk me through an auction?

A
  1. Agree TOE in advance.
  2. Undertake COI and Money Laundering Checks
  3. Complete due diligence
  4. Prepare all relevant documentation regarding property.
  5. General Conditions of Sale / Memorandum of Sale and any notices to be published prior.
  6. Reserve price needs to be agreed with vendor.
  7. Contracts exchanged at fall of gavel.
41
Q

What are the three types of agency?

A
  1. Sole Agency (single agent)
  2. Joint agency (2+ agents sharing fee)
  3. Multiple Agency (successful agent gets fee)
42
Q

Walk me through the timeline of a sales instruction?

A
  1. Receive instruction.
  2. Check competence & COI
  3. Issue instruction agreement to client.
  4. Receive agreement (s.18 of Estates agent Act 1979)
  5. Complete & Record money laundering checks.
  6. Gather information (leases, planning, inspection etc)
  7. Undertake due diligence
  8. Check VAT position and TOGC status.
    9.Inspect / measure
  9. Confirm position of fixtures and fittings.
  10. Comparables
  11. Value
  12. Prepare marketing report with recommendations
  13. Obtain written approval of the contents of marketing plan.
  14. Undertake marketing campaign
  15. Negotiate sale / draft HOT’s and instruct lawyers.
  16. Liase with lawyers in respect of CPSE’s.
  17. Assist with queries during legal formalities.
  18. Issue invoice upon completion of transaction and retain file.
43
Q

What should agency instruction agreements contain?

A
  1. Agency basis & rights
  2. Proposed fee
  3. Marketing costs & disbursements
  4. Confirmation of no COI
  5. Money Laundering Regulation requirements
  6. Timescale for the payment of fees & disbursements
  7. Details of CPH.

MUST BE SIGNED & RETURNED BEFORE MARKETING.

44
Q

Difference between sole selling rights to a fee and sole agency rights to a fee?

A

Sole Selling Rights = remuneration will be payable if contracts exchanged

Sole Agency Rights = agent must introduce purchaser.

45
Q

What are some forms of purchase vehicles?

A
  1. SPV - Reduces payment of SDLT
  2. Offshore units - E.G JPUT (Jersey Property Unit Trust)
  3. REIT
  4. JV
46
Q

Walk me through a property acquisition?

A
  1. Check COI and competence.
  2. Money laundering check
  3. Agree ToE
  4. Understand objectives
  5. Measurement and valuation
  6. Due Diligence
  7. Check for rent / SC arrears.
  8. Covenant approval information
  9. Negotiation & instruction of solicitors
  10. Conditional contract?

APC (18 decks)

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