Purchase and Sale

Question 1

How did you carry out a conflict of interest check?

Answer 1

Sent a companywide email, verified the instruction on our internal conflicts software, against both the client and the building.

Question 2

What is included in Terms of Business?

Answer 2

Required as part of Estate Agents Act, alongside Terms of Engagement.
CHP
Money Laundering Procedures
Calculation of Fees
Timing of payment
Limitation of Liability
Health and Safety
Anti-Corruption
Data Protection
Equality Act compliance

Question 3

Why is it important to outline the scope of works?

Answer 3

A requirement of RICS RoC and Estate Agents Act 1979 (Sections 18 + 21). Case of Wells v Devani 2019 - made by ohone and interpreted in context

Question 4

What is the required AML regulation?

Answer 4

Money Laundering, Terrorist Financing and Transfer of Funds Regulations, 2017 (amended 2022)

Question 5

What is the RICS Professional Statement relating to purchase and sale?

Answer 5

UK commercial market investment agency, 2017. Came into effect 1st January 2018

Question 6

What does it ensure?

Answer 6

Deals with Dual agency – illegal, multiple instructions, incremental advice, Personal/Own interest conflict

Question 7

Define Book Value

Answer 7

The value of a security or asset as entered in internal financial statements

Question 8

Define ‘net sale proceeds’

Answer 8

The amount received minus all costs and expenses deducted from the gross proceeds.

Question 9

What is a Transfer of Going Concern?

Answer 9

Where the property is sold as a business

Question 10

VAT exemption?

Answer 10

Default position - commercial property exempt for VAT purposes. Where the VAT exemption applies, the purchaser or tenant does not have to pay VAT. This means they are unable to recover VAT incurred on related costs.

Question 11

VAT election?

Answer 11

An owner can elect or opt to charge VAT when selling or leasing property. Benefit - That the LL can also recover VAT incurred on costs relating to property. Eg. refurbishment. But, some businesses unable to recover VAT incurred on costs. Eg financial services, insurance, health

Question 12

What is a transfer of Going Concern?

Answer 12

Where the purchaser intends to continue to let the property then, assuming certain conditions are satisfied, the transfer is a TOGC. Here, no VAT is charged on the purchase price which is clearly attractive for most purchasers.

Normally, where a property subject to an option to tax is sold with tenants in place or with the benefit of an existing lease, then the vendor will usually need to charge VAT at the standard rate.

Question 13

What is included in a Request for Bids letter?

Answer 13

Bids deadline, request for the following:
ID of purchaser/purchase price/Funding details/timescale/deposit/DD/data room request/surveys/approvals/conditions/AML

Question 14

What is a mutual break clause?

Answer 14

Enabling either landlord or tenant to terminate a lease at anytime during the term.

Question 15

What notable restrictions would have an adverse impact on value?

Answer 15

Use restrictions, titular

Question 16

What is alienation?

Answer 16

Right granted in a lease for a tenant to assign, sublet or share occupation of demise.

Question 17

What is included in Class E usage?

Answer 17

Commercial, business and service tenants

Question 18

What is a defect?

Answer 18

An inherent issue with the building. Eg structural

Question 19

Define Market Value?

Answer 19

Estimated amount for which an asset or liability should exchange on the valuation date, between willing buyer and seller, at arm’s length, after proper marketing, where both parties have acted knowledgeably, prudently and without compulsion

Question 20

What is the hierarchy of evidence?

Answer 20

Category A – direct comparables of contemporary
Category B – general market data that can provide guidance
Category C – other sources

Question 21

What are the benefits of the auction technique?

Answer 21

Allows for quicker process, shorter period of DD, can offer more targeted marketing approach. Contracts exchange at the fall of the gavel.

Question 22

What is included in the Estate Agents’ Act

Answer 22

7 key principles:
Clarity as to terms of agency
Honesty and accuracy
Cost liability agreement
personal interests exposure
Absence of discrimination
Legal obligation to tell client about offers received
Keep clients’ money separate

Question 23

Describe Private Treaty

Answer 23

-Parties free to negotiate in own time and without commitment to open market
Advantages include:
- Flexibility, control, vendor not under any obligation to sell
- Confidential
Disadvantages include:
- Potential for gazumping, late decisions not to buy, abortive costs

Question 24

Describe Informal Tender? (best offers or bids)

Answer 24

Used either at beginning of marketing campain or to bring to conclusion
-not legally binding, can withdraw at any point up to contract
-best and final bids request

Question 25

Describe Formal Tender? (Sealed bids)

Answer 25

Often used by statutory bodies to give control and transparency over marketing process High level of public accountability No opportunity for purchaser to change or increase bid after submission of offer Blind bids without knowledge of what other parties are bidding No immediate exchange of contracts upon opening of highest bid.

Question 26

Differences between informal and formal tender?

Answer 26

Formal - Provides single chance to bid - High accountability - Terms/conditions of sale published in advance with offer to bid letter - Highest figure accepted (unless vendor states beforehand) Informal - Used during private treaty negotiations to obtain best offer from applicants - Further negotiations can follow on from outcome of process - Less onerous terms/conditions prepared - Won’t lead direct to contract for sale - Used as negotiation mechanism to invite all parties to bid - Vendor does usually state that under no obligation to accept highest or any offer received

Question 27

What are assignable measured and building surveys?

Answer 27

Surveys that can be assigned to the new owner when it is transferred

Question 28

What do you mean by searches?

Answer 28

Local property, water, drainage, environmental, flood search

Question 29

What are CPSEs?

Answer 29

Commercial Property Standard Enquiries – provide prospective buyer/tenant with essential information about the leased property via pre contract enquiries. There are 7 forms of CPSE.

Question 30

What was included in your heads of terms for your case study?

Answer 30

Details of purchaser Details of Landlord Property, Tenure Lease term and commencement Ground rent Premium Funding details Landlord’s conditions – Subject to contract, subject to final IC approval Tenant’s conditions – provision of full info with clearing all regulatory and compliance requirements Proof of cash funds Subject to contract Subject to final IC approval Timetable Taxation Costs Exclusivity Confidentiality

Question 31

What is a green lease?

Answer 31

Contain additional provisions that oblige LL and tenant to manage and reduce environmental impact of a property. Eg. Energy efficiency measures, waste reduction

Question 32

Can it add value?

Answer 32

Yes, can futureproof leases against future regulation and statutory requirements Achieve greater energy and resource efficiency to reduce cost CSR compliance

Question 33

What are key provisions of Misrepresentation Act (1967)

Answer 33

Ensure parties have an action against misrepresentation – false statement of fact which prompts an individual to enter into a contract on the basis of that false statement.

Question 34

What is included in freehold heads of terms?

Answer 34

Property name, tenure, demise, tenancy, vendor, purchaser, purchase price, funding, timetable, deposit, VAT, vendor’s conditions, purchaser’s conditions, exclusivity, confidentiality, costs, agents and solicitor details

Question 35

What are sole selling rights to a fee?

Answer 35

Agent will be paid if contracts are exchanged in a period when sole selling rights exist, even if the purchaser is not found by the agent. Fee also due after sole selling rights period ends when the property is sold to a purchaser who was introduced by the firm during period of the sole selling rights contract.

Question 36

What is a 'ready, able and willing purchasers' clause?'

Answer 36

Defined by estate agents act 1979. Included so that when applicant is ready and able to proceed with a purchase but client (disposal) decides to withdraw, abortive fee can be charged by agent.

Question 37

What is a Notice to Complete?

Answer 37

Vendor serves on proposed purchaser giving deadline to complete. Legal costs are paid by proposed purchaser. If deadline passes, vendor can rescind contract ad remarket property. Can also keep the deposit

Question 38

Name some different forms of purchase vehicle?

Answer 38

Special Purchase Vehicle (SPV) Offshore unit trusts such as JPUTs (Jersey Property Unit Trusts) REITSs - company tax resident in uk listed on Stock Exchange JV

Question 39

What actions might you take in property acquisition?

Answer 39

COI AML check agreement of ToE Understand objectives and parameters Measurement/valuation/check planning use/consent/conditions/any proposed developments in planning register DD exercise regarding asbestos, title, contamination Rent/SC arrears check Neg and instruction of solicitors Conditional contracts can be agreed for various conditions to be satisfied post exchange

Question 40

What did you do on AML checks?

Answer 40

Question 41

Who governs the Estate Agents Act 1979

Answer 41

The National Trading Standards Office, The Estate Agency and Lettings Team

Question 42

What are the penalties for not conforming with estate agents act??

Answer 42

Prohibition Order Warning Order Unlimited fine

Question 43

Consumer Protection from Unfair Trading Regulations (2008)

Answer 43

False and misleading statements, omission of info, failure to provide or hiding info. Policed by national trading standards

Question 44

Why typically would someone want to achieve the highest price in formal tender?

Answer 44

because lots of the sales that use this method are from governing bodies. They must be seen to achieve the highest price for their shareholders/interests

Question 45

Is formal tender legally binding

Answer 45

Not until exchange

Question 46

Section 18 of estate agents act

Answer 46

Clarity with regard to the terms of the agency. Including all costs and fees highlighted in advance, and the type of agency (Sole Selling Rights for example).

Question 47

What Does Section 21 of the Estate Agents Act 1979 say?

Answer 47

Transparency regarding any personal interests that may affect your work in estate agency. Disclosure of any ‘connected persons’ who may be set to financially gain from the transaction.

Question 48

What does the Misrepresentation Act of 1967 refer to?

Answer 48

to false statements or mis-statements that induce the acquisition of a property during pre-contract enquiries. The vendor or agent can be sued for negligence and the contract rescinded

Question 49

What must clearly be set out in agreement?

Answer 49

Agency basis, rights, proposed fee, marketing costs and disbursements, confirmation of no clonflicts, AML regulations, timescales for fee payment, CHP details

Question 50

Soho - what pre sale DD did you undertake?

Answer 50

Title plan, understand the lease, any planning applications, checked the EPC

Question 51

How did you calculate the property's wault?

Answer 51

Multiply the current rent by the remaining lease term for each of the tenants Sum the total of results from step 1 Divide the result from step 2 by the sum of current rent for each of the tenants

Question 52

Victoria - what was your client's requirement for acquisition?

Answer 52

Core Plus asset, that was reversionary so they would be able to drive value through increasing the rents in line with Victoria's strong rental growth story

Question 53

What is investment value?

Answer 53

The value of an asset to a particular owner for individual investment or operational objectives

Question 54

Foley St - What method of sale did you use?

Answer 54

Private Treaty with informal tender

Question 55

Soho - What financial appraisals did you run?

Answer 55

DCF

Question 56

Soho - Take me through both scenarios:

Answer 56

1 - VP be achieved at the earliest opportunity in 9 months at the block date. Refurb and re-let 2 - Lettings completed on the two remaining vacant floors and current tenants renewed at expiry with a light touch refurbishment to their demise. Assume a longer term hold on that basis with rental growth

Question 57

Why would the 1st scenario give you better result

Answer 57

Higher IRR, better growth

Question 58

What is a report on title?

Answer 58

Report drawn up by a lawyer that has every legal element of the property drawn up. Not mandatory

Question 59

WHy is it important to state that valuation is not red book?

Answer 59

No reliance, no liability

Question 60

What is included in terms of engagement for a P&s instruction?

Answer 60

Date Confirmation of COI/AML completion Name of client Name of property PII and negotiated liability cap Disposal strategy Marketing strategy Timings Personnel

Question 61

What are capital allowances?

Answer 61

Deductions to value that businesses can claim for certain capital expenditure, such as purchase of equipment, machinery, business vehicles

Question 62

In your case study, what do you mean by a strategic review?

Answer 62

Following inspection of the property, inspected the leases, assessed the likely profile of purchaser, EPC, analysed how best to conduct the sales process

Question 63

What is Class E use?

Answer 63

Commercial, Business and Service. employment, business, health, shops and services

Question 64

Why did you choose private treaty?

Answer 64

-Parties free to negotiate in own time -Without commitment to open market -Gives flexibility, control -No obligation to sell -It is confidential

Question 65

What is a report on title?

Answer 65

The report on title is the document that the purchasers' solicitors produce after they have done all the searches and checks against the property

Question 66

What are penaties for not complying with estate agents act?

Answer 66

Prohibition Order, Warning Order, Unlimited fine

Question 67

What are the principles of the RICS Professional Statement UK Commercial Real Estate Agency (2016)?

Answer 67

this professional statement sets out clearly the responsibilities of commercial property agents to ensure they are working to the highest ethical and professional standards. This statement outlines the principles that shape the culture of fairness and transparency that underpin all activities undertaken by real estate agents within whichever country of practice.

Question 68

What are sole agency rights?

Answer 68

The agent will only be entitled to its fee if it introduces, or (if the contract permits) has negotiations with, the eventual buyer while the agent's agreement is in force.

Question 69

What would you do if you received a bid following/coinciding with the first round of bids?

Answer 69

I would present my bid to the client in line with the legal obligation to tell clients about offers received presented in the Estate Agents Act 1979

Question 70

What are the 7 key principles of the Estate Agent Act 1979?

Answer 70

Clarity as to terms of agency (S18) Honesty and accuracy Agreement and liability for costs Openness regarding personal interests (S21) Absence of discrimination Legal obligation to tell the client about offers received Keep clients' money separate

Question 71

What RICS guidance would you have regard to in a sales instruction?

Answer 71

RICS Professional Statement: Conflicts of Interest 2022: An RICS member or regulated firm must not advise or represent a client where doing so would involve a Conflict of Interest or a significant risk of a Conflict of Interest; other than where all of those who are or may be affected have provided their prior Informed Consent RICS UK Commercial Real Estate Agency (2016): Supports the RICS Rules of Conduct: 1 Conduct business in an honest, fair, transparent and professional manner. 2 Carry out work with due skill, care and diligence and ensure staff are competent. 3 Ensure clients are provided with clear and fair terms of engagement. These should meet all legal requirements and relevant codes of practice including reference to complaints-handling procedures and, where it exists, an appropriate redress scheme. 4 Do the utmost to avoid conflicts of interest and, where they do arise, to deal with them openly, fairly and promptly. 5 Not discriminate. 6 Ensure that all communications (both financial and non-financial subject matters) are fair, clear, timely and transparent. 7 Ensure that all advertising and marketing material is honest, decent and truthful. 8 Ensure that all client money is held separately in appropriately designated accounts and is covered by adequate insurance. 9 Have adequate and appropriate professional indemnity insurance or equivalent in place that complies with the RICS Rules of Conduct. 10 Ensure that it is made clear to all parties with whom you are dealing the scope of your obligations to each party. 11 Where provided as part of the service, give a realistic assessment of the likely selling, buying or rental price, associated cost of occupancy or of the likely financial outcome of any issues, using best professional judgement. 12 Ensure that all meetings, inspections and viewings are carried out in accordance with the client’s lawful and reasonable wishes, having due regard for the security and personal safety of all parties.

Question 72

If your Terms of Engagement aren't signed, can you proceed?

Answer 72

You can carry out background due diligence, however you cannot advise.