Agency (P&S / L&L) Flashcards
(144 cards)
1
Q
What is the difference between purchase and sale / leasing and letting?
A
P&S relates to how the property is valued with the goal of achieving the highest price
L&L relates to how the property is marketed to achieve the clients objectives.
2
Q
What are required in agency terms of engagement?
A
Firstly consider “Am I competent?”
The terms must then contain:
- Basis of instruction
- Rights of the agency
- Fee
- Expenses and disbursements
- Confirm no conflict
- Money laundering checks
- Timetable for fees and disbursements
- Complaints procedure
Signed and returned before marketing.
3
Q
What is the purpose of the Estate agents act 1979?
A
Seven key principles:
- Honesty and accuracy
- Clear terms of engagement (S18)
- Liability of costs
- Clarity regarding personal interests (S21)
- Discrimination
- Obligation to inform client of offers
- Client money handling
4
Q
What is the consequence for breaching the Estate Agency Act 1979?
A
Could be:
- warning order
- prohibition
- fine
5
Q
What are the two key section in the Estate Agents Act 1979 and what is their purpose?
A
S18 - Specify all costs in writing, in advance of an instruction. Costs should be itemised. Also covers basis of agency and agency rights.
S21 - need to declare personal interests and connected parties, in writing. Must also be on particulars and HoTs. If impartiality threatened, should step away.
6
Q
Do personal interests or connected parties prevent agents from acting on an instruction?
A
No. However there must be the same business arrangement as with any other independent instruction. Even if there is no fee agreed between the parties, conflict checks and terms of engagement etc. are required. If impartiality threatened, don’t act.
7
Q
What is the purpose of The Consumer Protection for Unfair Trading Regulations 2008 (CPRs)? Please outline what they cover. (IMPORTANT ONE)
A
Relates to the WHOLE agency process.
Extends agents duty of care to consumer.
Requires the surveyor to give accurate info and declare everything known. Reasonable DD. If info found later, declare
Offenses include undue pressure, omissions, hiding information, misleading information. Examples include misleading CGI in brochure etc.
Policed by trading standards
8
Q
What is the purpose of Misrepresentation Act 1967?
A
Governs where a false statement of fact or misrepresentations in pre-contractual negotiations, either knowingly or unknowingly, which has the effect of inducing the party to purchase.
- Agent has obligation to check info is reliable.
- Disclaimer clauses can protect agent who has done sufficient DD.
Caveat Emptor - Let the buyer be aware
9
Q
How do CPRs and BPRs differ from the Misrepresentation Act 1967?
A
CPRs and BPRs govern unfair treatment and misleading info THROUGHOUT THE WHOLE marketing process eg. a misleading CGi in a brochure or plan. You have a duty of care to the purchaser. Criminal offence.
A misrepresentation is a statement of fact that is incorrect, either knowingly or unknowingly, which induces a transaction eg. Lying about a tenants rental payments. Civil offence.
10
Q
If a question is asked which the agent does not know, after doing reasonable research, are they liable?
A
No. If the agent has done sufficient research and responded saying “not to the best of my knowledge”, that’s okay.
11
Q
What are the different agency rights? How do they differ?
A
Sole Agency Rights - remuneration payable if purchaser was introduced or negotiated with by the agent during their appointed period. No fee if LL sells himself.
Sole / Joint sole Selling Rights - remunerations paid if property exchanges during period which agent was appointed, even if agent didn’t find the purchaser.
12
Q
What is a ‘ready, willing and able purchaser clause?’
A
If client pulls the plug at the last minute, you will get an abortive fee.
13
Q
Why are the EPC requirements in agency marketing?
A
A valid EPC is necessary before marketing. It should be included in any brochure so to not waste time, later finding the property is illegal to let under MEES
14
Q
What properties do not require an EPC?
A
Places of worship
Listed buildings
Medical practices
Stand alone buildings with usable floor are less than 50 sq m
15
Q
What is the general process of selling a building when you receive a new instruction?
A
- Competent?
- Conflict check
- Terms of engagement
- Inspect property
- Measure
- Valuation
- Report (Value, marketing etc.)
- Market
16
Q
What are the methods of sale?
A
- Private treaty
- Informal tender
- Formal tender
- Auction
17
Q
What is private treaty, it’s pros and it’s cons?
A
An open market offering with free negotiation. A private matter.
Pros: control of process, no obligations, inexpensive, confidential.
Cons: Gazumping, gazundering, withdrawals.
18
Q
What is informal tender?
A
Best bids. Give a date time limit. Client under no obligation to accept best offer. Used when there is good interest in the property as part of the private treaty process.
19
Q
What’s is formal tender?
A
Often used by statutory body to show they got the highest price. Vendors draw up terms of sale with binding contract. Seals bids. No ability for parties to amend bids. Usually set that highest bit wins. Bids opened in front of client and witness.
20
Q
What are the pros and cons of auctions?
A
Pros: Quick, final, wider bid exposure, good for unusual assets.
Cons: cost, lack of certainty, blight, short marketing period.
21
Q
What regulates board sized?
A
Town and County planning regulations 2007.
- Flat = 2.0 sq m - V board = 2.3 sq m
Cannot protrude more than 1.0m from buildings
Cannot be more than 4.6m from ground
From deal completion, Max 14 days to remove
22
Q
What can a client do to prevent a purchaser pulling out of a sale at the last minute?
A
Submit a notice to complete
- buyer pays for
- if passes agreed date, LL can keep deposit and remarket
- Specific performance claim
23
Q
What do you consider when advising your client on offers received?
A
Price Source of funds Timescale Conditions Track record Repetitional damage
24
Q
What are the implications of selling a property that is VAT elected?
A
Purchaser would need to find an extra 20% to pay the VAT unless the purchase is via a VAT elected vehicle or it is a ‘Transfer of Going Concern’. Legal advise recommended on this.
25
Why would a LL elect a building for VAT?
They can claim back the VAT for any works etc.
26
What tenants cannot claim back VAT?
Banks, financial institutions, charities, medical practices.
27
When would you decline a sale instruction?
Not competent
Conflicted
Terms of engagement can’t be agreed
AML CTF
PII wont cover
28
What RICS core materials are available for an agency instruction? Please give some detail as to what it’s about.
RICS PS ‘Commercial Estate Agency, 2016’
This sets 12 mandatory core principles such as acting honestly, due diligence, clear terms, no discrimination.
Advice on:
- securing instruction
- marketing
- methods of sale
29
Are you aware of any potential new legislation regarding the purchase and sale of property?
Public Register for Overseas Property Owners in the UK
- a register proposed by Gov to assist in understanding the beneficial owners
- this is with the aim of reducing money laundering
30
How do Business Protection Regs differ from Consumer Protection Regs?
They are fundamentally the same however, they relate to business to business activities rather than vendor to consumer.
31
What are the potential penalties for breaching CPRs or BPRs?
Could be:
- unlimited fine
- prohibition
- compensation
- Max. 2 yrs imprisonment
32
What is Caveat Emptor ?
“Let the buyer beware”
This means the buyer is ultimately responsible for checking the quality and suitability of the property before purchase.
- An agent is responsible to provide sufficient info, and anything the discover later.
- agency can’t be blamed for issue in property found at a later date, assuming agent did proper DD.
33
What is the key legal case to establish whether damages are owed under the Misrepresentation Act, 1967?
Henley Byrne & Co. v Heller and Partners:
1. Foreseeability of damage
2. Proximity of relationship
3. Fairness of actions
34
What is the penalty for a breach of the Misrepresentation Act, 1967?
Civil offence:
- Sued for damages
- Contract rescinded
35
What are the key elements of the Consumer Rights Act, 2015?
Agents must clearly display a summary of charges online and in writing.
- All about unfair terms in a business contract
- creates new rights and forms of remedy
36
Are you aware of any new potential regulation regarding agency?
The Regulation of Property Agents
- Proposed independent body to regulate agents
- new code of practice
- transparency of charges and disclosing conflicts
No date set…
37
When would planning permissions be required, should you want to install a board?
```
The following:
- Listed buildings
- illuminated signs
- larger signs
—> flat boards over 2.0 sq m
—> V boards over 2.3 sq m
```
38
What is SDLT and what are it’s commercial bands?
A tax on the purchase of a freehold or long leasehold interest over a certain value. The commercial brackets are:
—> sub £150k = zero
—> £150k to £250k = 2%
—> over £250k = 5%
Note: any purchase gets £150k exemption and the £100k between £150k and £250k at 2%.
39
What is a capital allowance?
A form of tax relief on capex for construction or the purchase of commercial property. Can relate to fit out, plant, machinery etc.
40
What act governs the Registration of property in the UK?
The Land Registration Act, 2002
41
What are the requirements on agents under the Land registration act, 2002?
Must register the sale of any freehold, and letting of any leasehold (over 7 yrs) with the land registry. This must now include a land registry compliant plan.
42
What are the key elements of a land registry compliant plan?
1. Scale
2. Bar
3. Scale locational map
4. Full address
5. North point
6. Demise outline in red (on inside edge)
43
What considerations would a sales agent have in deciding how best to market a property?
1. Client objectives
2. Market conditions
3. Type of property
4. Target market
5. Timing requirements
44
What are the differences between formal and informal tender?
Informal / formal
Often further negotiation / no negotiations
Not always highest bid / usually highest bit
Not immediate sale / can be immediate sale
Mechanism to invite parties / final process
Part of private treaty / independent
45
What would you advise to be included in any formal or informal tender process?
A caveat that “the vendor is not obligated to accept the highest, best, or any bid”. This gives the client more control and they can chose not to sell, without consequence.
46
What are the different formats that an agent can be instructed to market a building?
1. Sole agency = one agent
2. Joint agency = two or more splitting one fee
3. Multiple agency = any number but successful agent gets the fee
47
What case law is there relating to oral terms of engagement in agency?
Wells v Devani, 2019 which allowed an oral agreement of terms to be held as legally binding.
48
What might you advise your client to serve to protect them against a purchase who you fear might delay?
Serve a notice to complete. This sets a deadline to complete the deal, and will be paid for by the proposed purchaser to show their intent.
Should the deadline be passed without sale, vendor can keep the deposit, re-market the property and even sue for damages (Specific performance)
49
When acquiring a property for a client, what is the general process should you go through?
1. CIT
2. AML
3. Understand objectives
4. Measure / value viable options
5. DD
6. Check arrears
7. Share covenant data with vendor
8. Negotiate
9. Instruct sols
10. Exchange
50
What are the various types of purchase vehicle?
1. SPV - company formed for purchase of property to reduce SDLT obligations
2. Offshore Trust - Tax reasons
3. REIT - listed UK property investment co. who’s business is in excess of 75% property investment
4. JV
51
What is the key RICS core material relating to leasing and letting?
RICS Professional Statement ‘Code for leasing business premises, 2020’
- aim to promote quality and fairness in negotiations
- efficiency of legal process
- Min requirements of HoTs
52
What are some of the minimum requirements for HoTs under the Code for Leasing Business Premises, 2020?
- location and extent of premises, w/ plan
- terms and LTA protection
- break rights
- guarantor / rent deposit details
- rent, frequency, exc. business rates?
- incentives
- RR frequency and basis
- sc / insurance liability
- alienation
- repair
- use
- alteration
- conditions
53
What are the sections of the code for leasing business premises, 2020?
1. Introduction
2. mandatory requirements
3. Best practice
4. Appendices (HoTs and Guide for LL/T)
54
What are a letting agents obligations under the Code for Leasing business premises, 2020?
1. Lease negations must be constructing and collaborative
2. I represented parties must be informed of the code, it’s guidance and advised to get representation
3. Conform to the Min HoTs requirements
55
Why is advising you client on Tenant selection important?
A good tenant will be less time intensive to manage. However, the more important point relates to value. The stronger the covenant of the tenant, the greater value this will add to the clients property.
56
How would you assess the covenant strength of an incoming tenant?
1. Bank account and two trade references
2. Reference from previous LL
3. Three years audited accounts
4. Business plan
5. Credit checks
6. Profits test = net profit three times the annual rent for three years.
57
How would you implement a rent deposit?
A rent deposit is personal to the tenant and cannot be passed via alienation. You should:
1. Legally document it in a ‘rent deposit deed’
2. Hold the deposit in a separate bank account
3. Agree the terms for the release of money
4. Can include ‘top up’ provision at RR
58
What should you consider when implementing a break clause?
1. Time of the essence?
2. Mutual or one party?
3. Notice date?
4. Notice format?
5. Penalty?
6. Personal break?
7. Conditions
- repair
- rent
- VP
59
To complete a letting, what documents are required?
1. Lease
2. Licence for alteration
3. Plans
4. Guarantee / deposit deed
60
What’s an example of a conflict of interest a letting agent might come across?
You have previously acted for an interested party
You have acted for a tenant on the street
You have a personal interest on the street
61
How are agents remunerated?
Industry standard in a letting is 10% of the initial rent and maybe 15% for joint agency.
Industry standard in a sale is 1% of the sale price.
62
How does a personal interest differ from a conflict of interest?
A conflict of interest means you have to offer to stand down unless both sides are happy for you to proceed with informed consent. This is because it could have a detrimental impact on one party.
A personal interest (Under S21 EAA) relates to the connection of friends, family etc.
63
What act governs EPCs?
The Energy Act, 2013
64
What are the instances where an EPC is required?
When a property is:
- built
- sold
- rented
- refurbished
65
What does an EPC include?
Information on:
- properties energy use
- recommendations to save
- the energy rating of the property
66
What changes are coming to MEES and when are they happening?
In April 2023, MEES will apply to all commercial leases, regardless of whether it is the continuation of an old lease. It will therefore make outstanding leases below “E” illegal.
67
What are the penalties for breaching MEES?
Less than three months rented
—> 10% RV (max £50k)
More than three months rented
—> 20% RV (max £150k)
For not including EPC in brochure
—> 12.5% RV (max £5k)
68
What are the three means of lease disposals?
- surrender
- assignment
- subletting
69
How could you advise a client wanting to dispose their leasehold interest?
Can you do a surrender?
—> premium
—> reverse premium
```
If not, can you do an assignment?
—> premium
—> reverse premium
—> permission
—> AGA
```
If not, subletting?
—> profit rent
—> loss reduction
—> permitted
70
Is there still a contractual relationship between the landlord and tenant after completing an assignment?
If there is an AGA, yes. Although you might not be paying or obligated by the terms of the lease, if the assignee were to fall away, you become liable again.
If no AGA, no relationship remains
71
How would you advise your client if they were looking at accepting a tenant with a poor covenant strength?
I would fits do a D&B check, secure LL references and apply the profits test.
If the client still wanted to proceed, I would recommend requiring a guarantor in the agreement to covert the tenants rental payments should the default.
72
How would you advise a client looking to let a high street shop regarding their marketing campaign?
I would recommend initially that a board be installed and a marketing brochure be drawn up. The brochure should be put on my company website and other popular databases like CoStar and Realla.
If the client wants to let the property sooner, more expense can be incurred on:
- estates gazette
- postal marketing
- higher value brochure
- high value photography
- independent website
73
What is the general information that needs to be included in a brochure?
- Photo
- Location
- Floor areas
- Lease Terms
- LTA protection
- Amenities
- EPC
- Rates
- Contact Details
74
What are the penalties for non-compliance with the Estate Agents Act 1979? How does this differ from CPRs 2008 and Misrepresentation Act 1967?
EA 1979 = Civil offence. Warning, fine, prohibition
CPRs = Criminal offence. Prohibition, fine, compensation, prison
Misrep Act 1967 = Civil offence. Contract rescinded and damages.
75
Tell me about a marketing campaign you have been closely involved in?
Office in the City to sublet
- External high quality brochure
- Own website
- Open day
76
When would you recommend a client to sell by either formal or informal tender?
When there is a high level of interest in the property.
77
What are the main lease terms which impact market value?
Break clause, rent review provision, alienation
78
Why would you include a Misrepresentation Act 1967 disclaimer on marketing particulars?
To protect you against any unknown errors in your statements of fact regarding the property which were not found after undertaking sufficient due diligence.
79
What is the difference between sole selling rights and sole agency rights?
Sole selling = you get a fee if the property is sold during your instruction, regardless of who introduced the purchaser.
Sole Agency = you get a fee if you introduced the purchaser, but no fee if the landlord found the purchaser themselves.
80
What are the planning controls in place regarding agents boards?
Town and country planning regulations 2007
81
What are the main provisions of the code for leasing business premises 2020?
Collaborative negotiations, recommend advice / PS to unrepresented parties, min. requirements for heads of terms.
82
How could you increase the quality of a tenant's covenant?
Deposit or guarantor
83
What is an AGA and when are they used?
Authorised guarantee agreement. Used in assignments to protect the landlord should the assignee default. Assignor remains liable.
84
How do you decide what fee to use for agency work?
Consider the scope of work involved and the fee appropriate in the market. Generally 1% for sale and 10% first years rent for lettings.
85
What would you do if you found out information given in the marketing campaign was incorrect?
Update the potential purchasers with the new information immediately. This is a mandatory requirement of the CPRs 2008.
86
What marketing techniques would you advise for the sale of a secondary office with vacant possession?
Recommend private treaty marketing with a board and brochure for some time. If no interest, take the property to auction.
87
What marketing techniques would you recommend to a client looking to minimise costs?
Simple brochure and boards.
88
How would you deal with a late, high bid when dealing with formal tender?
I would inform them they have submitted the bit too late in the process. Therefore their offer will not be considered.
89
How would you find out is a property has a flooding history?
Check the environment agency website for floor risk assessments. I would also speak to the property manager or owner.
90
What would you request as part of an informal tender offer?
```
Source of funding
AML Checks
Timescales
Track record
Conditions
```
91
How long does a notice to complete last?
Whatever is set in the contract
92
What were the alienation provisions in your Horsham subletting?
Prohibited assignment and allowed subletting on an open A1 basis
93
What was the remaining term on the lease in Horsham? How long were you looking to sublet the unit for?
52 years remaining so we were looking to sublet the space for as long as possible.
94
Why did you opt to sublet the unit in Horsham?
Assignment was not available
95
On what basis did you measure the property in Horsham?
NIA following the Code of Measurement Practice, 6th, 2015
96
What was your floor area and ITZA in Horsham?
3,400 sq. ft. and 1,360 ITZA
97
What was the ERV you calculated in Horsham?
£70,000 pa (£50 ZA)
98
What did you consider in calculating your Horsham ERV?
Location, hard frontage, quantum, specification
99
What do you include in a brochure?
Floor areas, Terms, EPC, Plan, Photographs, Contact Details
100
How did you calculate your ERV in Basingstoke?
Location, Quantum, Masking
101
What did you include in your offers schedule in Basingstoke?
Rent, term, break, LTA protection, rent free, timings
102
What were your client's requirements in Basingstoke?
Rent around £100k, max. term, min. flexibility, outside the act.
103
How did you market the unit in Nottingham?
Board, brochure and online databases.
104
What was your measurement of the Hampstead unit? What was this when zoned?
520 sq. ft. NIA
450 ITZA
105
What adjustments did you make in calculating your ERV in Hampstead?
F-D and flexibility.
106
Why did you recommend quoting £60k in Hampstead? What did this reflect ITZA?
Over 10 vacant units marketed reflecting £160ZA. We were slightly off prime so I recommended £60k pa (£135 ZA)
107
How did you persuade your client to reduce their quoting rent in Hampstead?
Highlighted number of vacant units and the time it could take to let.
108
How did the two standout offers align with your client's terms and flexibility requirements in Hampstead?
5 year leases with three year breaks outside the act
109
What did you consider in drafting your heads of terms in Hampstead?
RICS Code for lease business premises, 2020
110
Was the tenant you were dealing with in Hampstead represented? If not, what did you direct them to?
No, so I recommended they sought professional advice. I also directed them to the how to rent guide in the code for leasing business premises 2020.
111
What was the EPC in Hampstead?
C 72
112
What was the scale of the ongoing liability in Nottingham?
£1.5m
113
How long was left on your clients lease in Nottingham?
9.4 years
114
What was the passing rent in Nottingham and what did you advise was a suitable quoting rent?
£100k pa but ERV was £70k pa. On particulars, just invited offers.
115
What was your marketing campaign and what was the marketing period in Nottingham?
Board, brochure, databases. marketing period was five months.
116
What were your client's objectives in you Nottingham subletting?
Max rent, let for full term, ASAP.
117
How did you advise your client on what the best offer was in Nottingham?
Equally high rent but looking to exchange quickly. Decent covenant strength.
118
What made the landlord's evidence poor in Nottingham?
Asking rents or pre covid evidence.
119
What was the EPC in Nottingham
C 57
120
Why did you use private treaty in Wood Green
Cheap way of assessing interest in the property on an informal basis
121
How did you determine the market was slow in Wood Green?
Many sale boards
Many vacant units
Few sales comps
Agents
122
What alternative methods of sale could you have used to sell the property quickly and why didnt you in Wood Green?
Auction but didnt due to the costs
123
How did your client's desire to sell the property quickly influence your negotiation in Wood Green?
Still aimed for max price but didnt push as hard in negotiations as for other properties.
124
What was the marriage value uplift achieved in Wood Green?
£50k
125
What was your basis of agency in Wood Green?
Sole selling rights
126
Why did you use informal tender in Dartford?
Various parties expressed interest so wanted to bring them all to the table with offers to compare.
127
What was your opinion of value in Dartford? How did you calculate it?
£1.5M. Calculated by comparison method and verified with residual valuation.
128
How long was your client's lease in Dartford? What were they paying?
42 years remaining paying £35k pa.
129
Who was your client in Dartford?
Private company but as I was acting for both my client and the adjacent landlord, the adjacent landlord also became a client of sorts.
130
What did you include in your Dartford brochure?
Description, floor areas, EPC, contact details
131
Why did you have a short marketing period in Dartford?
Good level of interest shown in the property so used informal tender to draw interest and start negotiating.
132
What conditions were you considering in your offers at Dartford?
Subject to planning offers. Client did not want to accept these. Wanted unconditional.
133
Why did one offer stand out in Dartford?
Highest price, unconditional, proven track record, proof of funds.
134
What is the rule regarding EPCs and improvements?
7 year pay off period
135
Do you have an additional example of leasing and letting?
Peterborough
136
Do you have an additional example of purchase and sale?
Blackheath
137
How does the sale of a long lease differ from the sale of a freehold?
Negative impact on the sale price achievable. Have to pay insurance, peppercorn etc.
138
What did you learn on your CPD on purchase and sale?
Learnt about the key legislation in agency, the penalties involved and the methods of sale.
139
How does the sale of an occupied property differ from a vacant property?
Occupied often has an increased focus on investors. Vacant can have a wider market of investor, owner occupation, repurpose.
140
What areas have specialist regulations for boards?
Hampstead High Street, Westminster etc.
141
What are CPSEs?
Commercial Property Standard Enquiries. Provide information on the property such as works, floods, fire management plan, asbestos register.
142
Talk me through your KYC process when you've found a buyer or tenant?
Use work system called vigilance. We input information and it sends requests for information from the parties. Then checked by compliance.
Person = home address, ID, current businesses etc.
Business = registered address, certificate of inception, directors, beneficial owners.
With tenants, we have no KYC for a rent under £50k pa.
143
What is the significance of the landlord and tenant act 1988?
Old leases without "not to be unreasonably withheld" are assumed to have this provision.
144
What is the significance of the landlord and tenant covenants act 1995
New and old leases.
