The legal processes needed to complete a sale/purchase Flashcards

1
Q

What are the requirements for Agency Instruction Agreements under the RICS ROC, 2007 and the Estate Agency Act 1979 (Sections 18 and 21)?

A

Must clearly set out the following information:
- Agency basis (sole/joint agency)

  • Agency rights (sole selling or sole agency rights)
  • Proposed fee
  • Marketing costs and disbursements
  • Confirmation of no conflicts of interest
  • Money laundering Regulation requirements
  • Timescale for the payment of fees & disbursements
  • Details of the practice’s CHP
  • Must be signed & returned to the agent before marketing can commence

(Do not confuse agency ToE with requirements of the Red Book for valuation work. This is a common error!)

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2
Q

What is the difference between sole selling rights and sole agency rights?

A

Typical clause = sole selling rights = fees payable if contracts are exchanged in period when sole selling rights exist, even if purchaser is not found by the agent but by another party

Fee also due after sole selling rights period ends when property sold to a purchaser who was introduced by the firm during the period of the sole selling rights contract

Alternatively sole agency rights can be agreed which means a fee is only due if the agent introduced purchaser within term of instruction agreement

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3
Q

What is a ‘ready able and willing purchasers’ clause?

A

As defined by the Estate Agents Act 1979

Clause often included so that when applicant = ready and able to proceed with purchase but client then decides to withdraw, an abortive fee may be charged by the agent

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4
Q

What are the 3 types of agency?

A

Sole agency - only one agent

Joint agency - two or more joint agents sharing a fee on a pre-agreed basis

Multiple agency - any number of agents but only the successful agent gets a fee

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5
Q

What is the timeline of an investment sale instruction for an agent?

A

Receive instructions from the client

Check competence (Skills, Understanding, Knowledge - SUK)

Check independence so no COI / personal interests

Issue agency instruction agreement to the client

Receive agreement signed by the client - s18 of the Estate Agents Act 1979

Complete and record money laundering checks (Money Laundering Regulations, 2007)

Gather info - inspection details, leases, title documents, planning information, OS plans, floor Mans, warranties etc.

Undertake due diligence - RTL(s), environmental, planning, legal, contamination, tenant covenant status and other statutory enquiries to ensure nothing detrimental to sale of property

Check VAT position of vendor and whether the sale has Transfer of Going Concern (TOGC) status

Inspect and measure property taking detailed notes / photographs

Confirm position for fixtures and fittings with vendor

Research market and assemble and analyse comparables

Undertake valuation of freehold interest (not Red Book)

Prepare marketing report to vendor with full recommendations

Obtain written approval of the contents of marketing particulars (Property Misdescriptions Act 1991 and Misrepresentation Act 1967 et al)

Undertake marketing campaign as agreed

Negotiate sale, draft HOTs and instruct lawyers

Liaise with vendor’s lawyer in respect of Commercial Property Standard Enquiries (CPSEs)

Assist with any queries during legal formalities

Issue invoice upon completion of the transaction and retain file

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6
Q

Can you tell me what the different Commercial Property Standard Enquiries (CPSEs) are?

A
CPSE1 – general enquiries
Supplemental
CPSE2 – commercial tenancies
CPSE3 – grant of a lease
CPSE4 – assignment
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7
Q

What are the steps to be taken in a property acquisition for an agent?

A

Check for COI and competence

Agreement of terms of engagement (CIT)

Undertake a money laundering check

Understand client’s objectives and agree search parameters

Consider techniques to find properties - cold calling/advertising/websites etc.

Measurement and valuation

Check planning use/consent/ conditions/any proposed developments

Undertake due diligence: asbestos, legal title, contamination, tenant’s covenant check and flooding

Arrange for a structural survey to be completed

Covenant approval information to be supplied to the landlord / vendor

Negotiation and instruction of solicitors

Any forms of purchase vehicles

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8
Q

What are the different forms of purchase vehicles?

A

Special Purchase Vehicle (SPV) company = subsidiary created by parent company to isolate financial risk = tax-efficient way of landlords holding a portfolio of buy-to-let properties

Offshore unit trusts such as JPUTs (Jersey Property Unit Trusts)

REITS - a company tax resident in the UK which is listed on a Stock Exchange and has >75% business in property investment.

Joint ventures

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9
Q

What happens when the transaction fails to complete?

A

Vendor can serve Notice to Complete on proposed purchaser giving them a deadline to complete

Legal costs for this work = to be paid by proposed purchaser

If deadline = passed, vendor can withdraw contract and remarket the property

Any deposit can be retained by vendor

Additionally, vendor may be able to sue for damages for any loss in value following sale of property to another party at lower sale price

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10
Q

What are Conditions Precedent?

A

A legal term describing a condition / event that must come to pass before a specific contract is considered in effect

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11
Q

What are the RICS Valuation Global Standards 2020 (Red Book) requirements for Agency Work?

A

Valuation procedures not required for ‘certain agency or brokerage work’

Instead covered in RICS Real estate agency and brokerage guidance, 3rd edition (2016)

RB not required for ‘advice given in respect of disposal / acquisition of an interest on the anticipated price payable /achievable or advice as to whether an offer should be accepted or made’ or ‘in preparation for or during negotiations’

BUT a Red Book valuation required for purchase reports for acquisitions of property that include a valuation

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12
Q

What is the difference between the Misrepresentation Act 1967 and the Consumer Protection from Unfair Trading Regulations 2008?

A

Misrepresentation Act = protect consumers from false / fraudulent claims encouraging you to buy something / entering a contract. It also allows you to claim damages.

Consumer Protection from Unfair Trading Regulations protects consumers from unfair or misleading trading practices and ban misleading omissions and aggressive sales tactics

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13
Q

What is Exchange?

A

Exchange = exchange of contracts and makes matter legally binding between buyer and seller

At exchange, need to pay an exchange deposit to seller = usually 10% of property price and might be different to mortgage deposit

If 10% = too much because, e.g. you’re buying with a 95% mortgage and only have 5% available before your mortgage completes, your solicitor should usually be able to negotiate the exchange deposit down to 5%

Exchange deposit = to show seller you’re definitely going to buy the property. If you pull out the deal after exchange, the seller can sue you to keep the exchange deposit.

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14
Q

What is Completion?

A

Completion = date parties physically move and transfer legal ownership of the property

When you exchange contracts, solicitors will agree a completion date. As legal firms can be sued if they fail to meet this date, they have a strong incentive to meet the deadline.

Completion dates = often set 2 weeks after exchange, but just a guideline. If no one in the chain is in a hurry to move, you can ask for more time

Completing on a Friday = popular because it gives you the weekend to settle into the property, but Fridays’ popularity does also mean that conveyancing and removals firms tend to book up fast

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15
Q

Tell me about the legal processes in a commercial purchase/sale

A

Negotiate the sale, draft HOTs and instruct lawyers

Title documents obtained by solicitor - assuming the property is registered at Land Registry

Contract drafted and title info prepared – your solicitor will send to the buyer’s solicitor the contract package, including draft sale contract, title documents, EPC and replies to Commercial Property Standard Enquiries (CPSEs)

Solicitor will conduct appropriate searches on the property

Assist with any queries during legal formalities

Instruct exchange of contracts (take deposit money)

Completion of sale after completion money has been paid

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16
Q

Take me through the conveyancing process in a residential purchase/sale

A

First select and instruct conveyancer (solicitor)

Before the exchange of contracts, seller to complete questionnaires

Draft contract and solicitor negotiations using questionnaires

Pay off your mortgage: request redemption figure from your mortgage company = how much you pay upon completion of sale

Exchanging contracts

Between exchange and completion: should receive the buyer’s deposit – usually 10% of the property price

On completion day: hand over the keys

You / your conveyancer/solicitor receive outstanding balance of sale price, hand over legal documents proving ownership and pay off mortgage with proceeds of the sale

After completion: pay solicitor/conveyancer and estate agent

17
Q

What are the main questionnaires to be completed in a residential sale?

A

TA6 = general questionnaire on boundaries, disputes and complaints (e.g. boundary disputes), known proposed developments (like motorways or railways), building works, council tax, utilities, sewerage

If you do not own the freehold you should give more information on either the leasehold (TA7) or commonhold (TA9)

TA10 = details of which fittings and fixtures are included with the property

TA13 = details including arrangements to hand over keys, how and where you will complete, and ensuring house is free of all mortgages and liability claims

18
Q

What solicitor negotiations take place during in a residential purchase / sale?

A

Date of completion (usually 7-28 days after the exchange of contracts)

What fixtures and fittings will be included in sale price

How much buyer will pay for other fixtures and fittings

Who will fix any issues raised in buyer’s survey / update sale price

19
Q

What are the NINE searches a solicitor will undertake?

A
  1. Local authority search (LAS): info on any nearby road schemes, contaminations / planning works
  2. Planning search: details of any existing planning consents / applications within a 250-metre radius of property
  3. Drainage and water search: where all drainage systems are around property and any risks
  4. Environmental search: any flood risk, subsidence risk, previous uses of land and cover you for environmental issues within 500 metres of property
  5. Flood risk search: if property = near to water
  6. Coal mining and mining searches: old tunnels may run beneath a property = property at risk of subsidence
  7. Chancel repair search: Most people don’t know certain properties have liability to local parish for church for repairs
  8. Land registry pre-completion search: will reveal if individual selling property = legitimate owner = ensures that property is legally safe to buy
  9. High-speed rail (HS2): search will check if property is affected by planned and extensive works which will cover 25 destinations and serve over 30 million people
20
Q

What could you typically expect to find on a data site?

A

Data sites provide all necessary and relevant information with regards to a property being sold

Typically this is organised in a number of ways including:

  • Title documents - Title deed/lease plan
  • Property management documents
  • Lease documents - Leases/license for alterations
  • Survey documents - Asbestos/building surveys
  • Other/miscellaneous - tenancy schedule/Argus file
21
Q

What would you expect to find on a land registry compliant lease plan?

A
Drawn to metric scale – 1:100 or 2:200
Northpoint
Scale location plan – 1:1250
Demise line in red – internal wall
Address in full
Scale measurement bar
Scale noted on plan