Questions 2 Flashcards
Who is the current Chief Executive Officer of the RICS?
Justin Young
Who is the current president of the RICS?
Tina Pailett FRICS
Who governs the RICS?
The Royal Charter
When was the RICS founded?
1868, Royal Charter in 1881
What is the role of RICS?
Promotes and enforces the highest professional standards.
3 keys roles:
• Maintain High Standards and training
• Protects consumers
•leading source of information for Real Estate
How many current qualified and trainee members of the RICs are there?
140,000
What major challenges are the RICs currently facing and recent initiatives?
In June 2022 the Bichard Review was published, 7 keys areas, 3 of which are:
1. Reviewed and increased focus on public interest
2. Maintaining self-regulation
3. Increased focus on diversity and inclusion
What governs a lease?
The 1954 Act
What governs a rent review?
The Rent Review clause
What information is required by the RICS for Registration?
- Type of business and staffing details
- Name of responsible principles
- Statutory regulated activities
- Nature of clients
- CHP records
- PII details
- Whether the firm holds clients money
What the RICs rules for regulation of firms?
•if 50% of principles of a UK firm are RICs members then it has to be regulated
•if 25% of more then I can be regulated
One example of a Rule of Conduct and an example of when you have adhered to it?
Members and Firms must provide a good-quality and diligent service.
When instructed by Savers to new opportunities in Putney, I made sure to further the search to Wandsworth, Easfield and Tooting to be diligent in my search.
What are the CPD requirements for someone who is qualified and a graduate?
48 hours per year for a graduate - 50% must be formal.
20 hours a week for a qualified surveyor 50% must be formal.
Ethics training every 3 years.
What is the penalty for a breach of data?
4% of the total firms turnover or £17,500,000 or whatever is greater.
Who would you notify if there was a breach of data?
Inform my firms Data Protection Officer, and the affected party of any breach to investigate.
Where breaches have occurred and there is a risk of harm to individuals it should be reported to the Information Commission’s Office (ICO) within 72 hours.
What is a conflict of interest?
A conflict of interest occurs when an individual or entity is involved in multiple interests or relationships that could potentially compromise their ability to act ethically or in the best interest of one or more parties involved.
5 benefits of being a RICs member?
KARSN
Knowledge
Advantage (market)
Recognition
Status network
What are the minimum levels of PII cover?
PII cover is based on the firms annual turnover
Up to £100,000 turnover - £250,000
£100,001-£200,000 - £500,000
£200,000 + - £1,000,000
Estate agents act - what are the 2 mains sections and what are they for?
Section 18 - terms of engagement
Section 21 - conflict of interest
How do you handle a conflict of interest?
Firstly decline the instruction and make every party aware of the conflict.
If all parties are happy for you to proceed get it in writing, get informed consent.
Next manage the conflict with an information barrier
What might you find in a marketing brochure?
Photos and details of the property, agent details and contact, EPC details, Disclaimer, Consumer Protection from unfair trading regulations 2008. Business protection from unfair marketing regulations
Are you aware of any RICs guidance on the use of social media?
There is a Rics guidance note in the use of social media
What is a covenant and why is it important?
Covenant can be used to asses a tenants ability to pay rent. You can access a business’s financial strength and risks. Dunn and Bradstreet.
What are key negotiating points in a lease?
Term, rent, repair clause, break date, rent free
Why is a schedule of dilapidations important?
A schedule of condition documents the condition of a property after the tenant has vacated. This can help:
•disputes regarding necessary repairs of deposits
•facilitate negotiations
•help with claims
What might you do during a void period/ who would you notify?
•Ensure insurers - important if you have a break in that you are covered
•ensure that the local authority has been informed and relevant parties I.e property or building manager
•police if the property is at risk of attracting criminals/ squatters
Typical rent free periods?
1-1.5 months per year term certain
What is a calling off period?
Period of 14 days where a client may chance their mind and not instruct an agent, in accordance with consumer rights act 2015
What are the 7 key points of the Estate agent act 1979?
Ensure all agent act in the best interest of their client and they are treated honestly fairly and promptly.
•Clarity in TOB - agents must give all information to clients before acting. (S.18)
•honesty and accuracy
•agreement and liability of costs
•disclosure of personal interests/conflicts (s.21)
•no discrimination
•all offer received in writing to client
•keel money separate
What is the definition of market rent and market value?
Market rent is the price/rent that can be achieved on the open market, on the valuation date, with willing parties, fair terms, in an arms length transaction, after marketing with all parties acting knowledgeably and without compulsion.
How would you prepare for a negotiation?
•Agree clients objectives / strategy
•detailed research and preparation
•decide on points you can concede on non negotiable
•understand other parties position
•know when to walk away
What types of dispute resolution are there?
- Negotiation
- Mediation
- Arbitration
- Expert determination
- Litigation
Costs for arbitrator vs independent expert
Independent expert ability to determine costs is determined by the contract with the parties
Arbitrators have the power to award costs
What is the bitchard review and what is its purpose?
The Bitchard Review was published in 2022 following the Levitt Review. This was an independent review commissioned by the RICs with a focus on the purpose, governance and strategy of the RICs
What are the 7 keys points of the Bitchard review?
- A renewed focus on public interest
- Main rating self-regulation
- Increased focus on diversity and inclusion
- Independent review of the RICs governance every 5 years
- Showing greater leadership in issues that matter to society
- A simplified clear governance structure
- Empowering and enabling member through greater support
What is the term for a RICs president?
1 year
PII run off cover?
6 years - 1 million aggregate
What is your firms complaints handling procedure?
Stage 1 internal investigation
1. Request that the complaint is in writing to the correct correspondance - Kate Colsen
2. Once received, we will respond in writing within 7 days to inform the complainant of our understanding of the circumstances leading to the complaint
3. We will consider the complaint as quickly as possible, provide a full response or if that is not possible an update within 28 days
4. If happy with the outcome of Kate Costen’s investigation the matter will conclude
Stage 2 - external independent redress
- If the complain cannot be resolved this will be taken to the final stage of the CHO sleuth details provided
When do Heads of Terms become binding?
Heads of Terms are not binding. The lease is binding.
What consents and certificates requires to let a property?
•EPC minimum E or above
•planning consent required
• building regulation approval
•landlord consent if required - for subletting / assignment
•fire risk assessment
•gas safety requirement
•asbestos certificate
What are limitations of using a disto?
•Inaccuracy over 200m
•can’t use for measuring small areas
•do not work in sunlight
•may be out of charge
What are the benefits of measuring on a dual basis?
•allows you to report using either NIA or IPMS 3.
•improved accuracy
•Supports decision making
When would you use the profits method of valuation?
Shen the value is based on the turnover the business I.e pubs/car park. Business annual turnover less costs / purchasers less working expenses
What is the definition of market rent?
•The rent achievable int he valuation date
Between willing parties
Appropriate lease terms
•in an arms length transaction
•after proper marketing
•with parties acting knowledgable and without compulsion
What are the five methods of valuation?
•comparable
•investment
•profits
•residual
•depreciated replacement costs
How do Consumer Protection from Unfair Trading Regulations effect letting transactions?
The regulations protect consumers from unfair trading and practices that could mislead tenants or influence their decision making.
How do business protection from misleading marketing regulations 2008 effect letting transactions ?
The regulation protects business from misleading advertising or marketing.
All marketing material and advertisements must be accurate, truthful and not misleading.
What are the assumptions and disregards In a Rent review?
assumptions
1.Available to let on the open market by willing tenant and willing LL for a term of years as states
2. Vacant
3. Fit for purpose
Disregards
1. Tenant improvements with LL consent
2. Goodwill
What is the difference between the Consumer Protection Act 2008 and the Misrepresentation Act 1967?
• The consumer protection act is a piece of legislation that protects consumers from any unfair/ misleading activity in all commercial transactions - Protection throughout the whole process
• the Misrepresentation Act 1967 focuses on protecting consumers in a contractual agreements and provides remedies for parties who have been mislead by false information during negotiations. Protection during pre - contractual enquiries and negotiations
What is the difference better the Consumer Protection Act 2008 and Consumer Protection from Unfair trading regulations?
• The Consumer Protection Act is a piece of legislation that protects consumers from any unfair/misleading activity in all commercial transactions.
• the Consumer Protection from unfair trading regulations aims to target unfair practices that could deceive or mislead a consumer in purchasing decisions
What is the difference between an IRI and FRI lease?
FRI lease the tenant is responsible for all internal and external repairs, maintenance and insurance if the property for the duration of their lease.
How do you hold clients money? These are RICs guidelines - Handling Clients money 2020 1st edition
There is also new guidance published in March 2024 for firms using third party transaction service provider to hold clients money.
•all clients money held separately
•held in a client money account where the firm has exclusive control
•All client money should be held separately with adequate insurance
•it must be immediately available to the tenant even at sacrifice of interest
•confirm the bank operating conditions in writing of the bank that holds the clients money
What options are available for a Landlord to recover arrears?
- Payment plans
- Rent deposit / guarantors \ if sublease then (AGA)
- Charges on unpaid rent
- Forfeiture
- Commercial Dent Arrears Recovery (CRAR)
- Legal action
What is the impact of Commercial Rent Coronavirus Act 2022?
The protected companies in times of uncertainty in the pandemic. Protection in place for tenants unable to pay rent - landlord unable to forfeit a lease for 3 months or less on non- payment of rent
What do you look for when inspecting a retail unit?
When arriving on inspection l, I firstly inspected the surrounding areas and external parts of the building m, looking out for any defects, leaks damages. When inspecting the internal parts of the building, I looked for any internal damage to the ceiling, damp, endured all fire exits were clear, correct signage was in place. I also ensured that the demised area was per the plan I had taken with me to inspect.
What is Legionella?
A water bourne disease that can cause harm to health. Bacteria carried in water can cause harsh forms of pneumonia
How could you improve an EPC rating?
•Improving insulation
•new boiler
•double glazing
•new LED lighting
What insurance is needed by a firm?
•professional Indemnity insurance
•general liability insurance
•employers liability insurance
•contents insurance
•buildings insurance
What is the difference between a hazard and a risk ?
A hazard is. Substance or activity that can cause harm or damage to something or someone.
A risk is the likelihood of the hazard causing harm
Can you undertake work for free?
Yes but the Terms of Engagement have to be in place
What does a firm do if it can’t afford PII cover / run off cover?
The Assigned Risk Pool is open to all Uk RICs regulated firms that are unable to obtain PII.
The firm will have to apply for coverage to the run off pool. The firms insurance broker should provide further information on insurance requirement.
What is the purpose of the Red Book?
The Red Book is a Global Mandatory guidance for all RICs valued providing consistency quality and professionalism across countries and regions
What is the Bribery Act 2010?
The Bribery Act provides principles to follow for bribery prevention and aims to reduce bribery in business in the UK and abroad.
What is a conflict of interest and when does it arise?
Arises when a firms independence and impartiality is threatened due to the existence of a conflict between two clients.
What would you need to setup your own practice in terms of RICs compliance?
•Inform the RICs of my new company and complete a firms detail form
•appoint a responsible principle to deal with all RICs communication
•Register with the RICs for regulation of the firm
•Arrange a PII cover and send details to RIcs
•set up procedures for handling client money
•obtain RICs approval for CHP and set up a complaints log and appoint a Complaints handling officer
•Ensure CPD logged online on the rICs management system
•ensure completion of an online RICs annual return at the end of the year
By Law what must you comply with when starting a firm?
•Disclose business name
•disability discrimination compliance in line with the equality act 2010
•bribery act 2010 compliance
•appoint a money laundering reporting officer
•health and safety compliance - health and safety act 1974 as amended
•asbestos register
•fire safety compliance
•register for GDPR - General Data Protection Regulation and Data Protection 2018
•Estate Agency compliance - Estate Agents act 1979, Consumer Protection Regulation 2008, Misrepresentation Act 1967
•inform HMRC for VAT and Tax registration
What must you comply with when closing a firm or retiring?
•inform RICs of your retirement\ closure and deregister
•ensure clients are informed asap
• return any client money to their account’s
•inform insurers and maintain PII run off cover for a period of 6 years
•Retain a copy of client files and records for a minimum of 6 years
What is unconscious bias and how can you prevent it?
Associations we hold that are deeply ingrained
•recruitment techniques
•inclusive language
•training programmes aimed at increasing awareness and inclusivity
5 Rics Rules of Conduct?
• M&F must be honest and act with integrity
• M&F must maintain their professional competency and ensure they are competent and have the necessary expertise
• M&F must ensure they provide HQ service by working diligently
•m&F must promote D&so and treat others with respect
•M&F have a duty of care to the public and must take accountability for their actions
What rights does GDPR give?
• right to be informed
•right of access
•right of erasure
What is BREEAM?
Building Research Establishment Environment Assessment Method
Environmental assessment of buildings
- Outstanding
- Excellent
- Very Good
- Good
- Pass
How can you avoid negligence?
• understand clients objectives and confirm instructions
•Ensure you are competent
•keep up to date with market knowledge
When dealing with an Ethics Issue what can you refer to?
Ethics Decision Tree - walks you through an ethical dilemma
Difference between a Cash Flow, Balance Sheet and Profits and Loss statement?
Balance Sheet and P&L share similar information, Balance Sheets record the assets liabilities and shareholder equity at a specific time whereas P&L summarise a companies revenue costs and expenses during a specific period
When is GEA used?
Build cost estimations,
Town planning or ratings
What are the following sections in the Landlord and Tenant Act 1954?
•Section 24
•section 25
•section 26
•section 27
Section 28
S24- at the end of a lease a business tenancy will continue until its terminated by one of the prescribed methods
S25- LL serves to terminate existing lease by proposing a new one
S26- allows tenant to request a new lease
S27- served by tenant to end lease at the end of term
S28- agreement between T & LL that the tenancy will continue but outside the act
What is the difference between an assignment and a sublease?
An assignment is a legal transfer of the lease to a third party. The original tenant is no longer liable under the original lease.
A sublease, the original tenant is legally bound to the lease for the remaining period of the tenancy.
What are Terms of Engagement and what’s included in them?
Terms of Engagement creates a formal relationship between you and your client.
- Check professionally competent
- No conflicts of interest
- Confirm Terms of Engagement in writing and get approval from the client.
What are the three types of misrepresentation under the Estate Agency Act 1979?
- Fraudulent Misrepresentation
- Negligent Misrepresentstion
- Innocent Misrepresentation
What is the Fire Risk Management Regulatory Reform Order (FRMRRO) 2005?
Based on risk assessment with emphasis on fire prevention.
Applies to non-domestic property.
The ‘Responsible Person” is the employer or occupier and owner of vacant
Reasonable fire precautions could include:
•fire detection and warning alarm systems
•fire-fighting equipment
•safe exit routes
•emergency lighting and signage and suitable fire doors
What is a Risk Assessment and what are the 6 stages?
A legal document for organisations of 5 or more employees to carry out documented health and safety risk assessments to assess potential and existing hazards.
- Identifying a hazard
- Identify the people at risk
- Evaluate the risk
- Record the findings on a suitable form
- Review the risk assessment
- Advise all the affected of the outcome of the risk assesment
What must RICs firms ensure they provide in regards to Surveying Safely 2018?
•safe working environment
•safe systems of work
•competent staff
•advice on mental health and well being
•legal considerations and duties for employees for advice on asbestos
•fire safety
What is the penalties for not meeting MEES?
•Less than 3 months - up to £5,000 or 10% RV up to £50,000 whichever higher
•more than 3 months - £10,000 or 20% RV up to £150,000
Property’s exempt from MEES?
•places of worship
•tenancy’s of less than 6 months
•where I can be proven it would devalue the property by more than 5%
•exemptions need to be pre-registered on the Local Authority Private Rented Sector Exemptions register and reviewed every 5 years
What is EBITDA?
Earnings before interest, taxes, depreciation and amortisation
What is IFRS16, and how is it used in accounting?
Requires publicly listed companies to include on their balance sheets all leasing contracts with a term longer than one year
Tell me the Governing pyramid for RICS
Royal charter
Governing Council
Delegates responsibility to the RICS board
Ensure effectiveness of standards and regulations
What is the RICs Charity and what do they do?
Lion heart - Support RICs members and firms and their families. Also provide RICs APC support
What would you do if you encountered Bribery?
- make management aware
- wouldn’t accept
- look at our firms gift policy
What is your firms gift policy?
- Is the gift before the instruction?
- refuse gift
- is it proportionate - no more than £100
- is it maintaining the relationship or improving it?
-mark it in the gifts register
- make management aware
What is the recent legislation surrounding fire safety?
Fire safety act 2021
- who is responsible
- who is accountable?
What are the 3 types of conflict?
- party conflict
- personal conflict
- confidential information
What is the difference between management accounts and audited accounts?
Management accounts - internal use only
Audited accounts - created by a chartered accountant
Why is data protection important?
- Safe from corruption
- Controlled access
- Ensure privacy and protection
What is Copyright, who governs it ?
Set of rights given to an original author.
Crown Copyright
What does the Freedom of Information Act (2000) do?
right to request personal data by public bodies
What are the four types of discrimination?
- Direct
- Indirect
- Harassment
- Victimisation
What is Public Liability Insurance?
All risk liability - insurance must be taken out before work is instructed
What are 3 principles of GdPR?
- Processed lawfully, fairly and in a transparent manner in relation to individuals
- Adequate, relevant and limited to what is necessary, kept up to date
- Processed in a manner that is that ensures appropriate security of the personal data
What is a NDA?
Protects Sensitive and confidential information between 2 parties and is legally binding
What is Money Laundering?
Illegally obtained money that is disguised as legitimate assets
What is the legislation surrounding Money Laundering and what are the keys aspects?
Terrorist Financing and Transfer of Funds Regulations 2017
- Firms to provide training
- Firm has policies in place
- AML checks on purchasers
What are the benefits of using a PDF?
Can’t manipulate
Easy to view on mobile
What are the two types of Defects?
Inherent Defect - visible defect
Latent Defect - not obvious on a reasonable inspection, therefor not the tenants responsibility
How do you check the expiry of PPE?
Date inside the helmet
What are the 3 reasons of inspection?
Property management
Agency
Valuation
How would you undertake a valuation report?
- Stop and think are you competent?
- Independence - check for conflicts
- Terms of engagement
• Set out in writing your full confirmation of instructions to the client prior to starting work.
• confirm competence
•you must state extent of limitations as a valuer
What is some Due diligence that can be done before valuing ?
• asbestos register
• planning history
• EPC rating
• legal title / ownership
Give me a timeline of a valuation report…
- Receive instructions from the client
- Am I competent
- Conflict of interest check
- Terms of engagement - signed by client
- Gather documents - leases, title docs, floor plans
- Due dilligence - will anything effect my valuation
- Inspect or measure
- Research - comps
- Undertake valuation
- Draft report
- Check report with another valuer
- Finalise and finish report
- Report to client
- Issue invoice
