Questions 3 Flashcards
What is the difference between Honesty and Integrity ?
Honesty is being truthfully and transparent.
Integrity is adhering to a strong moral code and principles
What’s the difference between a formal tender and informal tender?
An informal tender often can be used during a private treaty negotiations to obtain a best offer.
• further negotiations can follow from the outcome of this process
• usually less onerous terms / conditions are prepared
• the informal tender will not lead direct to a contract for sale
• the vendor does usually state that they don’t have to accept the highest or any bid
A formal tender provides a purchaser with a single chance to bid on a property - best and final bid.
• high level of accountability
• detailed terms / conditions and comprehensive legal pack before offer
• highest figure is accepted
• it’s possible for a formal tender to lead directly to contract of sale
What is “a ready able and willing purchasers” clause?
If a ready able and willing purchaser pulls out of a deal late an agent might charge an abortive fee
“The vendor is under no obligation to accept the highest, best or any bid” is used with what methods of sale?
Informal and formal tender
What are the break down of Purchasers costs in an investment sale?
Stamp Duty - 5%
Agency fee - 1%
Legal fee - 0.5%
Agency Instruction Agreement, conduct of a.18 of estate agents act what needs to be clearly set out?
•Agency basis (sole / joint agency)
• proposed fee
• marketing costs
• no conflict of interest s.21
• money laundering regulation requirements
• timescale for the payment of the fee
• details of CHP
How did Russia Vs Ukraine affect the property market?
• cost of living crisis
• inflation
• high interest rates
What are Balance sheets?
A statement that shows the assets, liabilities and Shareholders equity for a snapshot in time
What is a profit and loss statement?
Accounts that show the revenue and expenses over a specific period
What should you take on inspection?
• phone - charged
• laser measurer - calibrated within 6 months
• PPE if necessary
• floor plans
• camera
• pen / paper / dictate
Inspection - what to consider before, external and internal?
Before inspection
- location, local facilities and public transport
- contamination, environmental hazards, flooding
- comparable evidence / local agents / local boards
External
- method of construction
- repair and condition
- car parking access
- defects / structural movement
Internal
- layout
- repair and maintenance
- defects
- statutory compliance, fire safety, asbestos, equality act 2010
What are 3 common types of defect?
- Water
- Movement
- Deterioration of building material
What are 3 types of movement defects and describe them?
Subsidence - caused by loss of support beneath the buildings foundation causing a vertical downward movement
Heave - is expansion of ground beneath or all of the building
Horizontal cracking - in brickwork, may indicate cavity wall tie failure
Name 3 types of Damp…
- Wet rot
Wet and soft timber, high damp meter reading, visible fungal growth and musty smell
- Dry rot
Signs include fungus - white fluff and orange mushroom bodies, strong smell and cracked paint work
- Rising damp
Usually stop around 1.5m above ground level
What does Japanese Knotweed do, what does it look like and how can you get rid of it?
•It’s an invasive plant which can cause damage to surfaces such as foundations
•not easy to control and expensive to eliminate
•to be disposed of legally such as using chemical treatment
•purple/green hollow-stemmed with green leaves
What is the current situation with MEES?
There were plans to implement a minimum of C rating and above for all new tenancies by 2025 and all properties to have it by 2028. However this has been scrapped and RICs are in discussions with the government about making it more achievable
How can you verify data?
By using the triangulation method, collecting different sources of information material, such as interviews, observation pieces
What are some ways to safely store data?
•Disk encryption
•regular back ups off site
• password protection
• fire walls
What is UK GDPR and DPA (2018)
It aims to empower individuals to take control of how their data is used by third parties.
It gives people the right to be informed on how their data is used.
What are 3 principles of the GDPR?
Must be proccessed lawfully, fairly and in a transparent manner for the individual
Adequate, relevant and kept to what is limited
Accurate and where necessary kept up to date. In accurate data must be erased
Net yield
The resulting yield adjusted for purchasers costs
Define yield.
A measure of investment return expressed as a percentage
If you were to value a bunker how would you do it?
I would adopt the Depreciated Replacement Cost (DRC) method of valuation.
- Value of land in its existing use
- Add current cost of replacing the building plus fees
- Less a discount for depreciation and deterioration
What is the Investment method of valuation?
Used when there is an income stream to value. The rental income is capitalised to produce a capital value.
Rent received/market rent x years purchase = market value
What is the Hardcore layer method?
Used for over rented properties.
Income flow is divided horizontally.
Top slice = rent passing less market rent until lease event
Bottom slice = market rent
• higher yield applied to the top slice to reflect additional risk.
What is the Term and Reversion?
Used for reversionary investments when under rented.
Term capitalised until next lease event at an initial yield
Reversion to market rent valued in perpetuity at a reversionary yield.
What are the five VPS in Red book?
VPS1 - Terms of Engagement
VPS2 - inspections and investigations
VPS3 - Valuation Reports
VPS4 - Basis of Value
VPS5 - Valuation Approach
What is IPMS1 used for?.
Used for measuring the area of a building including external walls Ona. Floor by floor basis (similar to GEA)
What is IPMS2 used for?
Used for measuring the interior of an office to include all areas available for direct use measured to the internal dominant face (IDF)
What is an Internal Dominant Face?
The inside finished surface comprising more than 50% of the floor ceiling height for each IDF section
What is IPMS 3 used for?
• Used for measuring the occupation of floor areas in exclusive use using some assumptions as IPMS2
• measured to the IDF on a floor to floor basis
• the floor area available on an exclusive basis to an occupier
• exclude standard facilities providing shared or common facilities such as stairs, lifts, WC”s
What is IPMS All Buildings?
• This document will supersede all standards previously published by the IPMS.
• it aims to establish a consistent methodology for measuring all buildings
• it includes all building classes into one set of standards
• RICs have not yet adopted it
What is the differences between IPMS3 and NIA?
• perimeter measurements are taken to the Internal Dominant Face
• no exclusions for a restricted height of 1.5 metres
• all columns included
What’s included and excluded from GIA?
Included: Columns, mezzanines that have terminate access and WC’s
Excluded: Fire escapes and covered ways
What is included and excluded from NIA?
Included: built units or cupboards occupying useable areas, kitchens, open circulation areas and entrance halls
Excluded: WC’s, stairwells and plant rooms
What is an eaves height?
Ground to lowest part of the roof - used in Industrial measurements
What is the Bichard Review? And what are 3 key points?
Following the Levitt Review which was an independent review of internal governance failings within RICS, RICs commissioned the Bichard review.
Key points:
- Maintaining self regulation
- Increased focus on Diversity and Inclusion
- showing greater leadership on issues that matter such as sustainability and climate change
When is the Profits method used and how does it work?
Used for valuations of a property that depends on the profitability of its business (pubs, petrol stations)
Annual turnover
less costs / purchases
Less reasonable working expenses
Less operators remuneration
= net profit
What is a net frontage and gross frontage?
Net frontage is the overall frontage of the shop line measured between the internal face of the external walls
Gross frontage is the overall external measurement in a straight line across the front of a building from the outside of the external walls
What is the difference between a lease and a licence?
- A lease provides an occupier with an estate in the relevant land
- A lease can be assigned - not a licence.
- A lease cannot be terminated until it expires or break. A licence can be revoked anytime
What is a licence?
• a right to enter a property
• a personal arrangement between licensor and licensee
• can be terminated by either party anytime
For example a right to park a car
What are the four requirements of a lease?
- Exclusive posession
- Payment of rent
- Duration of a sepcified term
- If more than 3 years, the terms must be in writing
Street vs Mount (1985)
Sets out the differentiation between a lease and licence
What is a section 24?
At the end of a fixed term inside the act, the tenancy will not come to an end if the tenant remains in occupation (holding over)
What is Section 25 and what are the 2 relevant notices?
LL serves notice to no more than 12 months and no less than 6 months from the end of the tenancy.
Where a landlord is prepared to grant a new lease (non hostile)
Where a landlord opposes a new lease (hostile notice), the grounds for this must be stated
A new lease of 15 years can be granted by the county court, however parties can agree an extension
What contents are included in a section 25?
• Name and address of LL
• address of property
• notice of the date to end the tenancy (hostile or friendly notice)
• strong recommendation to see professional advice
• if the Landlord opposes the tenancy he must give his reasons
What is Section 26 notice?
• Tenant serves notice requesting a new tenancy beginning with a date no more than 12 months and no less than 6 months before the end of the tenancy.
• must be in prescribed form
• LL opposes then he must serve a counter notice within 2 months
What is section 27?
When the tenant doesn’t want the lease to continue beyond the original term.
Tenant can just exit the lease at the end of the term or serve a section 27 notice to the LL 3 months before
Grounds for Refusal of a new lease
Fault based
• breach of repairing covenant
• persistent delay in paying rent
• other substantial breach
Non - fault based
• provide suitable alternative accommodation
• uneconomical subdivision
• demolition or Reconstruction
• owner occupier ( LL must have owned the property for more than 5 years)
What is section 28?
Where the LL and tenant agree for a grant to the tenant for a future tenancy - extension outside the act
What is your businesses strategy?
Focus on Environmental, Social, Governance - ESG
Expand our company, new hires new work more diversity
What is asbestos?
Insulating material that can cause severe healthy problems and can be fatal
What types of asbestos are there and when were they banned?
Brown, Blue and white
White asbestos was banned in 1999 and the others 1985
What are the two types of asbestos survey?
Management Survey
- to locate assess and advise on its management
Refurbishment survey
- samples of materials are analysed
- recommendations are made regarding their management
What are the five steps of an asbestos survey?
- Duty holder must assess if asbestos in the building
- Assess the risk - what needs to happen (manage/remove)
- Produce an asbestos register
- Make this available to all parties
- Review the register regularly
What is the mandatory Proffesional Standard for Leasing & Letting?
RICs Proffesional Standard for leasing business premises 2020.
It sets to improve the quality and fairness of negotiations on lease terms
What are some considerations for a break option?
• is it mutual
• do you need to serve notice if it’s in the act
• what is the required notice period
• is there a penalty
What documents must be attached to an AFL?
• the lease
•licence to alter
• specifications and plans
• warranties
What are key principles of the Estate Agents Act 1979?
- Clarity on Term of Engagement s.18
- Honesty and accuracy
- Agreement and liability of costs
- Disclosure of personal interests S.21
- Absence of discrimination
- Legal obligation to report offers received to clients
- Keep money separate
What are some mandatory requirements of the RICs professional Standard: Code for leasing business premises 2020?
• negotiations over the lease must be approached in a constructive manner
• a party that is not represented by RICs must be advised by the other party or its agents about the code and recommend seeking professional advice
• the terms of the lease must be recorded and in the HOTs with subject to contract
What is section 28 in the landlord and tenant act 1954
A landlord and tenant can terminate an existing lease if they agree on a new one
What is the equivalent of a Calder bank in a lease renewal
Part 36 offer
What is the section of the L&T act that is relevant for interim rent
Section 24A
What is the service charge and rates payable for Wembley case study?
Service charge - £3,500
Business rates - £25,000
What is the zoning distance for some central London locations?
9.14m
What is the Internal Dominant Face ?
When a window or something takes up 50% of a wall you measure from this
How do you document a rent review when finished ?
Rent review memorandum
What would you do if you received a cash payment of £20,000
My company doesn’t take cash payments, however if you must then we can take €10,000 euroes as cash and the rest as a bank transfer
What must you continue to follow as a RICs member
Rules of conduct
Cpd
What is the difference between IPMS 3 and NIA?
• measurements taken from Internal Dominant Face
• all columns are included
• no exclusions for restricted height of less than 1.5 m
What is a a private Treaty and what are the pros and cons?
Private treaty is a the most popular method of sale in England and wales. Parties are free to negotiate in their own time and there is no commitment to the open market.
Pros
• confidential
• vendor not obliged to sell
• flexible
Cons
• abortive fees
• late decision not to buy
• GAZdumling and GAZundering
What is the bribery act 2010
Makes it an offence for a UK national or a person located I. The Uk to receive a bribe directly or indirectly
What are the 6 principles of the Bribery Act?
Think rollercoaster
- Proportionate
- Top level comittment
- Risk assessment
- Due dilligence
- Communication
- Monitoring and review
How big can a marketing board be on a non residential building?
2 sq. m (flat) and 2.3 sq m (v board)
What disclosures are under a marketing particular ? CPRs BPRs
Consumer protection from unfair trading regulations 2008
Business protection against misleading marketing regulations 2008
What is included in a Rent review memorandum?
- Name of Landlord and tenant
- Address of the property
- Date of the lease and RR
- New rent agreed
- Signed and dated by both parties
What is PACT and what’s it for?
Professional Arbitration on Court Terms - for lease renewal disputes
What are some assumptions and disregards of a rent review?
Assumptions
• property available to let on the open market by willing tenant and willing landlord
• property is fit and available for a tenant
• all covenants observed by LL & T
• property may be used for purpose set out in lease
Disregards
• any effect of goodwill on tenants obligation
• any goodwill
• tenants improvements
In a rising market acting for a landlord would you use an arbitrator or independent expert?
Arbitrator
What prevents rising damp?
How many millimetres?
Damp proof course - 150mm above external site
What does damp caused by condensation look like?
Black mould
How would you undertake an Anti Money Laundering check?
• Request ID
• check the sanctions list
• where’s the money coming from? Their solicitor will have done a KYC
What is the new rateable value multiplier?
0.546
When faced with an obstacle to access for disabled persons, the act requires the service provider to…?
• remove or alter the feature
• provide reasonable means of avoiding the obstacle or reasonable alternative access to the service
When are interim Rents triggered?
After the service of a S.25 or S.26 notice.
What are the dispute resolutions for lease renewals?
• Court Determination
• PACT - Professional Arbitration on Court Terms
What is PACT?
Professional Arbitration on Court Terms.
• Both parties must agree.
• decision is binding
Benefits
• faster
• cost saving
• flexibility
What are some Red flags for money laundering?
• unwillingness to provide identity documents
• changes to parties involved in transactions
• unusual transaction features such as unexpected urgency required by parties
• payment of fees in unusual currencies
How must firms deal with Money Laundering and Terrorist Financing ?
• not be complicit in ML or TF
• have systems in place to comply with laws
• report suspicion
• use third party reliance for checks
• verify the client with ID checks
