Things I forget Flashcards
What is Professional Indemnity Insurance?
- Mandatory insurance that protects clients, surveyors and third parties against negligence where a duty of care is breaches
- All members must ensure they have adequate and appropriate insurance in place for each construction
- PII must be underwritten by an RICS approved insurer
What is Professional Indemnity Insurance?
to in the preceding year MIN PI COVER
- <100,000 250,000 cover
- <100,001 – 200000 500,000 cover
- <200,001 1 million cover
o Buy from specialist insurer recommended by RICS (e.g., Miller Insurance
* Services)
o Assigned Risks Pool – short term cover provided by RICS for regulated
* members who are unable to gain cover elsewhere.
o On each claim basis
o Retroactive claims made basis
o Run off cover (6 years)
o Full civil liability
Uninsured Excess
Firms Turnover Max uninsured Excess
Up to 10 mill Greater of 2.5% or £10k
Over 10 mill no set limit
What is the Bribery Act, 2010?
- Legislation covering bribery policed by the Serious Fraud Office
- SIX key principles:
1. Proportionality
2. Top level commitment
3. Risk assessment
4. Due diligence
5. Communication
6. Monitoring and review - 4 offences:
o Giving a bribe
o Receiving a bribe
o Bribing a foreign public official
o Failing to prevent bribery - Maximum of 10 years’ imprisonment and/or an unlimited fine.
- In 2016 Sweett Group were fined £2.25m in 2016 for failing to prevent a bribe in relation to their activities in the UAE. Additionally fined by RICS for £125,000.
Tell me about Terms of Engagement?
- Terms of engagement are a written agreement of the client’s acceptance of proposed fee basis, payment of expenses and that a complaint handling procedure can be made available upon request
- There are THREE steps to follow for ToEs:
o Check professional competence
o No conflicts of interests or personal interest
o Confirm terms of engagement in writing and get written approval for the client BEFORE starting work
What is included within terms of engagements for a valuation? (VPS 1)
- The minimum inclusions that must be in terms of engagement issued PRIOR to commencing a RBG valuation are:
o Identification and status of valuer (internal, external)
o Identification of client
o Identification of any other intended users/parties (ex. Client needs valuation to provide to lender?)
o Identification of asset to be valued (if portfolio, consider lotting assets)
o Currency
o Purpose of Valuation (Loan Sec, Tax Return, Financial Reporting)
o Basis of value (market, cost, income)
o Extent of investigation (did you inspect and measure or desktop)
o Nature and source of information to be relied upon (from client etc.)
o Assumptions and special assumptions (Assuming VP or planning permission at date of valuation.) Special assumptions are assumptions taken to be true and accepted as fact, even though not true and must be agreed in writing at commencement of instruction.
o Format of report
o Restrictions for use, distribution and publication
o Confirmation of compliance with RBG and IVS
o Fee basis
o Complaints handling procedure to me made available
o Statement that the valuation may be subject to compliance by the RICS
o Limitation on liability agreed
What are the types of conflict of interest?
- There are three types of conflicts of interest
- A ‘Party Conflict’ – working on the same instruction for two different parties
- An ‘Own Interest Conflict’ – relating to a personal interest
- A ‘Confidential Information Conflict’ – relating to work between parties that is confidential
What is a balance sheet?
- Statement of financial position of a company showing its assets and liabilities at a given date, usually the end of a financial year
- Assets can include cash, property, debtors and other investments held
- Liabilities can include borrowings, overdrafts, loans and creditors
- Balance sheet provides a snapshot of how effectively a company is using its resources
What is a profit and loss account?
- A summary of the business’ income and expenditure transactions, prepared usually on an annual basis
- Provides information on whether a company can generate profit by increasing revenue and reducing costs or both
What is a cash flow statement?
- A cash flow statement shows all the actual receipts and expenditure to include VAT
- Shows cash flow from operations, investment and financing
Data Protection Act 2018 – why was this introduced? What do you do to ensure good practice at work?
- The EUs GDPR no longer applies in the UK, but was almost entirely transcribed into the UK GDPR.
- UK GDPR is supplemented by the Data Protection Act 2018. This combined regime replaces the Data Protection act 1998 and relates to personal data.
- It aims to create a single data protection regime affecting business and empower individuals to take control of how their data is used for third parties.
- It gives people rights to be informed about how their personal information is used.
Data Protection Act 2018 – 6 Principles of Data Protection
- P – Processed Fairly & Lawfully
- L – Not kept Longer than necessary
- A – Adequate and limited to what is necessary
- A – Accurate & up to date
- R – Relevant
- S – Kept Securely
What is BREEAM?
- The building research establishment environmental assessment method
- Covers:
o Energy and water use
o Health and wellbeing
o Pollution
o Transport
o Materials
o Waste
o Ecology and management processes - Rates buildings on a scale of ‘Pass, good, Very Good, Excellent and Outstanding’
Types of Damp
- Wet rot – caused by damp and timber decay, a high meter reading visbal fungal and musty snell.
- Dry Rot – caused by fungal attack. Mycelium, fluffy white strands and large orange mushroom like floating bodies. Strong smell and red spores cracking paintwork and cuboidal cracking/crumbling of dry timber which can destroy timber and masonry.
- Rising damp – stops around 1.5 meters
- Condensation – caused by lack of ventilation and background heating. Signs include smell mould and streaming windows on inside of windows
Explain the Hierarchy of evidence?
- Open market lettings
- Lease renewals
- Rent reviews
- 3rd party determinations
- Sale and Leasebacks
- Intercompany transactions
Yields
- ARY = yield that reflects all risks attached to the investment
- True Yield = assumes rent paid in advance
- Nominal Yield = assumes rent is paid in arrears
- Gross Yield = yield not adjusted for purchaser’s costs
- Net Yield = yield adjusted for PC’s
- Equivalent Yield = average weighted yield when a reversionary property is valued using an initial and reversionary yield
- IY = current income and current price
- RY = Market Rent divided by current price
Running Yield = a yield at any moment in time.
What are Heads of Terms?
- A document outlining the key points of a lease to be negotiated or agreed between a landlord and prospective tenant prior to agreement of any formal legal missives and signing of a lease
- HoTs are not legally binding
- Contents are important as they shall dictate the provisions within the lease
What might be included in a typical set of Heads of Terms for a lease?
- Landlord entity
- Proposed Tenant
- Solicitor’s details for both parties
- Agent’s details for both parties where applicable
- The subject property/demise
- Size of property – if this is accepted or to be verified via measurement/joint
measurement - Rent
- Incentive
- Deposits
- Service Charge
- Insurance
- LBTT & Registration fees
- Business rates
- Any additions such as parking or storage
- Alienation
- Alteration
- Permitted use
- Date of Entry
- Legal Costs
- Any necessary approvals (LL board approval)
- Writing (Scotland) Act 1995 – rules about which rights may be constituted orally and which require writing
What things do you consider when assessing the strength of a tenant’s covenant?
- Usually request the past 3 years’ audited accounts
- Bank account information and trade references
- Previous landlord’s reference where applicable
- Credit check
What do you use to check credit of a tenant?
- My firm primarily use Dunn and Broadstreet software which assesses a potential tenant’s, accounts and assigns a financial strength rating 5A, 4A, 3A, 2A, 1A, A, B ,C , D,E , F, G , H.
- It also assigns a risk rating between 1 and 4 with 1 being the lowest (minimal risk) and 4 (significant level of risk).
What do you look for when reviewing a prospective tenant’s accounts?
- Use the profits tests:
o Net profit of the business is 3 times the annual rent for 3 consecutive years
o Net asset value of the business is more than 5 times the value of the rent
Do you need planning permission for a board advising sale/let; what size of boards are allowed
- As per the Town and Country Planning (Control of Advertisements) 1984
o Size – planning permission is required for flat boards over 2 sq m and for v angle boards over 2.3 sq m
o One board per building
o Must not project out more than 1 metre and not more than 4.6m above the ground
o Planning required for illuminated boards, remote boards and those on listed buildings and in conservation areas
o Must be removed 14 days after completion
o Must have owner’s permission to erect
o Policed by local planning authority - Boards can be installed without permission:
- flat boards – 5x4 ft
- V angles – 3 x 4 ft
- Boards under 4.5m height
Development Appraisal vs Residual Valuation
DA – Calculations to establish the viability of a scheme. Generally using investor specific inputs. Not RB compliant. GDV – TDC – Finance costs – Land value = Profit
RV – Uses market assumptions to establish site value, form of dev appraisal, one point in time. Formal val used in accordance with RB. GDV – TDC – Finance Costs – Developers Profit = Land Value
Finance
Bank of England increased the base rate to 5.25% in August 2023.
Choice of interest rate can include:
* The current SONIA rate (Sterling Overnight Index Average)
* Bank of England Base Rtae plus a premium
* Rate at which the developer can borrow the money.
Was 5-6% however with the rise in interest rates this has went up and have used 7% in the two examples I have
RICS Rules of Conduct 2021
5 Rules of Conduct
1) Act with Integrity – be honest and comply to personal and RICS obligations
2) Maintain Professional Competency – ensure individuals are competent and experienced
3) Provide good quality and diligent service
4) Treat others with respect – encourage diversity and inclusion
5) Take responsibility – be accountable for your actions and be prepared to act if necessary. Prevent harm and maintain public confidence
Mandatory Professional Obligations
- Appendix A Rules of Conduct – sets out professional obligations
RICS Members must:
- Comply with CPD requirements (min. 20 hours per year, 10 hours must be formal)
- Cooperate with RICS
- Promptly provide all necessary information reasonably requested by the Standards and Regulation Board
Mandatory Professional Obligations
RICS Regulated firms must:
1) Publish complaints handling procedure, inc. alternative dispute resolution and maintain a complaints log
2) Have adequate professional indemnity insurance (PII)
3) If a sole principal, make appropriate arrangements for their professional works to continue to the event their incapacity, death or absence
4) Cooperate with RICS
5) Promptly provide all necessary information reasonably requested by the Standards and Regulation Board
6) Designation on business literature that they are RICS regulated
7) Report to RICS any matter under Rules for the Registration of Firms
Rationale for developing new Rules of Conduct
- A simpler structure – easier to understand
- Clear examples – shows real life applications
- Focuses on respect, diversity, and inclusion
- Understanding evolving technology
- Tackling global challenges – sustainability development
Terms of Engagement
Must state:
- Proposed fee basis
- Payment of expenses (and how calculated)
- Firms complaints handling procedure available on request
3 steps to follow:
1) Check professionally competent
2) No conflicts of interest or personal interests
3) Confirm Terms of Engagement in writing prior to the commencement of works
Agency work complies to:
1) Section 18 of the Estate Agents Act 1979
2) Money Laundering Regulations, 2017
3) Consumer Rights Act, 2015 – cooling off period of 14 days from the date of agreement
Starting a new practice
RICS Compliance
- Inform RICS
- Appoint a Responsible Principal for all RICS communication
- Register with RICS
- Arrange PII and get approval from RICS
- Set up procedures e.g. client handling money
- Register for RICS Valuer Scheme (VRS) if undertaking valuations
- Obtain RICS approval for CHP
- Set up a complaints log
- Appoint a complaint handling officer
- Use a logo kit from the RICS for all practice material to comply with the designation ‘Regulated by RICS’
- Log CPD on RICS CPD Management system
- Complete RICS annual return each year
Closing a Practice
RICS Compliance
- Inform the RICS
- Ensure the clients are informed at the earliest opportunity and hand over arrangements made to the new firm
- Return any monies held by clients to their own accounts
- Inform your insurers and procure professional indemnity run off cover for a minimum of 6 years
- Retain a copy of files and record for a minimum of 6 years
Bribery Act 2010
- Aims to reduce bribery in businesses
- A bribe can be giving, offering, promising, or receiving of an advantage e.g. payment or gift
Based on 6 key principles:
1) Proportionality
2) Top level commitment
3) Risk assessment
4) Due diligence
5) Communication
6) Monitoring and review
Money Laundering, Terrorist Financing and Transfer of Funds Regulations,2019
- Money laundering is when proceeds of criminal activities are disguised or converted and then realised as legitimate assets
Key Provisions of the Regulation:
- Written money laundering and terrorist risk assessment
- Implement systems, policies, controls, and procedures
- Staff training
- New customer due diligence requirements
- Comply with the requirements relating to politically exposed persons (PEPs)
- Ensure appropriate record keeping, policies and procedures
- AML checks to confirm identity of purchaser and check source of funds
- To include additional high-risk factors when assessing the need for enhanced due diligence