SOE QUESTIONS Flashcards
What are the red book global standards?
It sets a global set of standards, creating a framework for best practice for members
PS1 - compliance with standards
Ps2 - ethics (toe & coi)
VPS1 - TOE
VPS2 - inspections and investigations
VPS3 - valuation reports
VPS4 - basis of value and assumptions
Also provides definitions on key terms such as market value and market rent
What is the estate agents act 1979 and what are the key principles?
It ensures agents act in the clients best interest and treats buyers and sellers honestly and fairly.
- Clarity on the terms of the agency (s.18)
- Honesty and accuracy
- Agreement for liability if costs
- Openness regarding conflicts of interest (s.21)
- Absence of discrimination
- Legal obligation to tell client about offers received
- Keep clients money seperate
What’s the penalties for breaching MEES?
For less than 3 months £5k or 10% RV up to £50k
For over 3 months £10k or 20% RV up to £150k
What constitutes a conflict of interest?
When a member or firms impartiality is compromised due to the existence of a conflict between two clients
Starting a RICs firm, what do you need to do as RICs compliance?
RICs compliance
- Inform RICs of your new practice and complete firms details form
- Appoint a reasonable principle for RICs communication
- Register with RICs for registration
- Arrange PII
- Set up client money handling
- Use a logo kit from RICs
- Setup complaints log
- Appoint a Complaints handling officer
- Ensure completion of CPD is logged each year
Setting up a firm, what statutory obligations must you do?
- Disclose business name
- Disability discrimination compliance (Equality Act)
- Bribery Act 2010 compliant
- Appoint a money Laundering officer
- Health and safety compliance - Health and Saftey act 1974
- Asbestos register
- Fire safety compliance
- Register for data protection
- Estate agency compliant - estate agents act 1979, misrepresentation act
- Inform HMRC and Vat and tax reg
What is a conflict of interest?
Arises when a member or firm impartiality is comprimised due to the existence of a conflict between two clients
What are the three types of conflict?
Party conflict - relating to work on the same instruction
Personal conflict - relating to personal interest
Confidential information conflict - relating to work between two parties that’s confidential
Red book - what is special value?
Special value is given to a property that has unique significance such as a historical building
When can a tenant serve a section 27?
3 months prior to the lease expiry
What makes ancillary space?
Sales Space blocked by structural wall
What is section 28 of the LL & T act?
The section of Legislation is where the LL & T agree for a future tenancy to take place until a specified date. It should not continue past that date
What is fair value? (IFRS13)
The price that would be received to sell an asset or paid to transfer liability in an orderly transaction between market participants at the measurement date
What is market value?
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arms length transaction after proper marketing and where the parties have acted knowledgeably and without compulsion
What is market rent?
The estimated amount of which an interest in property should be leased on the valuation date, between a willing lessor and lesser on appropriate lease terms in arms length transaction after proper marketing and where both parties have acted knowledgeably and without compulsion
What are the different types of yields?
All risk yield - growth implicit yield that takes into account all the risks and rewards
True yield - assume rent is paid in advance and not arrears
Nominal yield - initial yield assuming rent is paid in arrears
Gross yield - yield is not adjusted for purchasers costs
Net yield - yield that takes into account purchasers costs
Equivalent yield - average weighted yield when a reversionary property is valued using an initial and reversionary yield
Initial yield - simple income yield for current income and current price
Reversionary yield - market rent divided by current price on an investment let at a rent below the market rent
Running yield - the yield at one moment in time
What affects a yield?
• prospects of rental and capital growth
• quality of location and covenant
• use of property
• lease terms
• voids
What is the structure of the RICs Red Book Global 2021?
- Introduction
- Glossary
- PS - Professional standards
- VPS - Valuation technical and performance standards
- VPGA - Valuation Applications
- IVS - the international valuation standards
PS1 of the RICs Red book global?
Focuses on when a valuation has to be Red Book compliant
5 exceptions
What details are included in the VPS 1?
Focuses on the terms of engagement and scope of work
- Identification of valuer and client
- Currency
- Purpose of valuation
- Basis of value
- Assumptions and special assumptions
- Confirmation of Red book compliance
- Fee basis
What is an assumption and what is a special assumption?
Assumptions are made where it is reasonable for the valuer to accept that something is true without the need for specific investigation
A special assumption is a supposition that is taken to be true and accepted as fact even though it is not true
What is the difference between VPS 1 and VPS3?
VpS1 is regarding terms of engagement and scope of work
VPs3 - relates to valuation reporting
What is investment value?
The value of an asset to a particular owner for individual owner for an investment
• may differ from market value
• sometimes used as a measure of worth to reflect the value against the clients own Investment criteria
What are the key changes of the Red book from the previous edition?
Terms of reference must be clear and unambiguous in that valuations are red book global compliant or not.
Sustainability and ESG factors
- definitions of both as they relate to assets
What are the guidance notes for arbitrators and independent experts?
RICs guidance note - surveyors acting as arbitrators in commercial property 2013
RICs guidance note - surveyors acting as independent experts in commercial property rent reviews 2014
What is the difference between an arbitrator and an independent expert?
COLDNEA
Costs - arbitrators have power over costs IE has no power
Outcome - Arbitrators call and award, IE call a determination
Law - arbitrator acts within the statutory framework in accordance with the Arbitrator Act 1996, IE appointment governed by contract not statute
Disclosure - arbitrator has power of disclosure, IE has no powers of disclosure
Negligence - arbitrator is not liable for negligence. IE in theory can be liable for negligence
Evidence - Arbitrators act in the evidence provided (fact and opinion). IE has duty to investigate to discover facts and use their knowledge and expertise to reach a decision
Appeal - arbitrators have a limited right to appeal to the high court. IE has no right of appeal.
What is section 28 of the LL & T act 1954?
Renewal of tenancy by agreement
What are the various ways to terminate a lease?
Forfeiture
Surrender and negotiation
Break clauses
Lease expiry and notices served under the LL&T act
What are some facts under the CPR?
- Agents have a duty of care to clients and interested parties
- Agents must declare all facts about a property good or bad
- Agents must not exert pressure on potential buyers
- If any information is discovered during the agency process then it must be passed on to all interested parties
What is the penalty of a breach to CPRs and also the Misrepresentation act?
CPRs can impose an unlimited fine.
Misrepresentation act is a civil offence actionable as tort not criminal. Can be sued for damage or contract rescinded
What are the pros and cons of private treaty?
Pros
• flexible
• the parties control the process
• vendor doesn’t have to sell
• confidential
Cons
• the potential for gazumping and gazundering
• late decisions to buy
• associated abortive costs
What are some factors that should be considered when deciding a method of sale?
• clients objectives
• public accountability
• current and likely market conditions
• level of demand
• timing
When is an informal tensor used and what is the process?
Used when there is a good level of interest on a property.
All bids to be opened in front of the client.
Agent invites all parties to submit their best and final offer.
This will include:
• required date and time of the written offer
• name and address of the applicants solicitor
• confirmation of the finance arrangements
• conditions
What are the pros and cons of an auction?
Pros
• achieving a short timescale for the disposal
• certainty of sale
• useful method of sale for an unusual property
• used for a property which will likely generate strong amounts of interest
Cons
• cost of promotion and publicity
• lack of confidentiality
• vendor cannot choose the purchaser
• intensive nature of a short marketing period
What are the three types of agency for purchase and sale?
Sole agency - only one agent
Joint agency - two or more joint agents sharing a fee in a pre-agreed basis
Multiple agency - any number of agents but only the successful agent gets a fee
What is “able and willing purchasers clause”
Defined in the estate agents act 1979
Often included so that when an applicant is ready and able to proceed with the purchase but then decides to withdraw an abortive fee may be charged by the agent
What is included in an agreement for lease?
• The lease
• licence for alterations
• specifications and plans
•
What must you comply with when a closing a firm?
• inform RICs of your closure and de-register
• ensure clients are informed at the earliest opportunity and hand over arrangements made to a new firm
• return any money held by clients to their own accounts
• inform insurers and get PII run off cover for a minimum of 6 years (minimum £1mil)
• retain a copy of the clients files and records for a minimum of 6 years
What are the minimum levels of PII insurance?
£100,000 turnover or less = £250,000
£100,000-£200,000 =£500,000
£200,000 or more = £1,000,000
What is the maximum levels of uninsured excess required by RICs?
Up to £10m = greater sum of 2.5% of the sum insured or £10,000
Over £10m = no set limit
How would you spot a concrete or steel frame building?
Concrete frame - relies on reinforced concrete for its structural frame. It’s bulkier and more rigid.
Steel frame uses steel beams and columns as its primary support
Where would you find the use class of a building?
Planning portal of local council website
If a tenant is removed under a hostile s25 under certain grounds, can the tenant receive compensation?
Yes, the tenant can receive:
If in occupation for 7 years - 13 years 1x RV
14 years or more - 2x RV
What is fair value?
Estimate of what an asset is actually worth taking into account factors beyond just current market conditions
What is hope value ?
The potential increase in value beyond the existing use value based on the expectation of future development or a more valuable use
What is marriage value?
Combination of two or more assets or interest where the combined value is more than the sum of the separate values
How long must a owner have owned a premises before he can claim owner occupier?
5 years
Current president of RICs
Nick Maclean
How many bylaws are there?
10
- Contribution of funds. Members pay fees
- Conduct. Members comply with RICs
- Designation - members can call themselves MRICS
What is the current inflation rate and interest rates
Inflation - 2%
Interest rates - 4.5%
What must firms do?
- Publish CHP
- Ensure correct PII is in place
- Have procedures in place if a sole principle is absent or dies
- Corporate with RICs
- Provide information to RICs
What are the changes to the Rules of Conduct?
- Simpler structure
- Clear examples
- Focusing on diversity and inclusion
- Tackling global challenges
- Understanding evolving technology
What is a regulatory compliance order?
For low level breaches of the Rules. It is a written document which states the terms upon which the member or firm must take or desist from taking certain actions for a period of time and pay a fine
What are the 6 ethical principles of RICs?
Honesty
Integrity
Competence
Service
Respect
Responsibility
What action can be taken by the disciplinary panel?
Head of regulation may:
- Issue a regulatory compliance order
- Reprimand
- Fine
- Expulsion
What is the initial investigation stages?
- Serve a fixed penalty notice
- Make a regulatory compliance order
- Refer the matter to the regulatory tribunal
- Refer the matter to the disciplinary panel
What is a fixed penalty?
Procedure used for breaches of the Rules. May consist of a fine or a caution
What is the definition of a bribe?
Offering, promising or giving to another person with the intention of inducing a favourable performance
Is subletting good evidence in a rent review?
Yes if in the alienation clause it’s only at market rent then it can be.
How is service charge proportioned?
Per sq ft
What is the legislation surrounding authorised guarantee agreements?
Part of Landlord and Tenant Covenants act 1995
What is good business planning?
Look at opportunities and risks
Fee forecasting
Budgets and cash flow
What is in a tile plan?
Watermark
North south east west location plan
What’s in a land reg doc?
Address
Ownership
Date of purchase
Where can I find guidance on conflicts of interest?
RICs professional standard conflicts of interest
How do you act with integrity
I wouldn’t accept a bribe
What are th other types of conflict of interest
Personal
Financial
Acting for both sides
Commercial relationship
What is the legislation surround negligence?
Limitations act 1990
What are measurement tolerances?
- What’s the purpose ?
- What am I measuring?
- What’s the condition?
How can you improve an EPC?
Energy efficient lighting
Improved cooling and heating systems
What is deeming provisions
This is when a tenant doesn’t get back to a Landlord so that the terms are accepted
What are the dimensions of a board?
What properties would need planning permission for a marketing board?
Planning consent for anything over 2 sq m
Also illuminated boards
Remote boards
Boards on listed buildings
Must be removed after 14 days of completion
What are the key principles in RICs Code for leasing business premises?
- negotiations over the lease must be approached in a constructive manner
- parties that are not represented by RICs must be advised by agents to seek professional advice
- terms of the lease must be written in the heads of terms with subject to contract
What are the anti money laundering requirements for these firms:
Public limited company
Publicly accountable body
Private limited company
Private individual
London stock exchange listing
Government ownership
Certification of incorporation and list of directors and shaareholders
Copy of I’d and bills
