Purchase and Sale Flashcards
(74 cards)
1
Q
What are the different Methods Of Sale?
A
Private Treaty, Formal Tender, Informal Tender, Auctions.
2
Q
What is Private Treaty?
A
Property is marketed and seller negotiates directly with potential buyers.
Once agreed a suitable offer, terms are agreed and contract made.
Used: most common method of sale - mostly residential.
3
Q
What is Formal Tender?
A
It is an invitation to tender - invite bidders to submit sealed bids by a deadline.
Sealed bids are submitted and then opened simultaneously - usually in the presence of an independent witness.
The seller then reviews all bids and selects the most favourable.
Used: often for high profile / high value properties to ensure best possible price
4
Q
What is Informal Tender?
A
It is when a property is marketed with a guide price and potential buyers submit offers by a deadline.
Offers are submitted in writing - can be more than one bid.
The seller can then enter into negotiations with the bidders off the back of the offer.
Used: often to bring a private treaty sale to a close by requesting best and final offers.
5
Q
What is an Auction?
A
It is when a property marketed and auction date set.
Potential buyers bid against one another (in person or online).
Highest bid at the end of the auction wins and the sale is usually completed quickly.
Used: mostly for unique properties or those in disrepair or if sellers want to complete quickly.
6
Q
What are the pro’s and cons of selling at Auction?
A
- Fees can often be around circa 2.5%.
- Advantages include:-
o The best price available is secured.
o The process is quick and transparent.
o Auctions are often used for mortgage repossessions or distressed properties that have proven hard to sell. - Disadvantages:-
o Fees are higher.
o All information is disclosed.
o Failure to sell can blight the property.
7
Q
What are the pro’s and cons of selling via Private Treaty?
A
- Advantages include:-
o Increased flexibility as parties can negotiate in their own time which provides the opportunity to acquire more information and have surveys carried out.
o It is relatively inexpensive.
o There is no obligation on the seller or purchaser until contracts are exchanged.
o It is a confidential process. - Disadvantages:-
o There may be a decision to pull out of the deal by either party resulting in abortive costs.
o The asking price may be under or over stated creating added risks for the buyer and seller.
o It can be much slower than other methods with protracted negotiations and an uncertain completion date.
8
Q
What is the difference between Sole Agency and Sole Selling Rights?
A
Sole Agency: In this arrangement, a single estate agent is appointed to market the property. The agent earns their fee only if they introduce the buyer or negotiate the sale during the agreement period. If the seller finds a buyer independently, the agent does not receive a fee.
Sole Selling Rights: This agreement gives the estate agent exclusive rights to sell the property. The agent earns their fee regardless of who finds the buyer or negotiates the sale during the agreement period. Even if the seller finds a buyer independently, the agent is still entitled to their fee
9
Q
What do you do if you receive two identical bids for a property you are marketing?
A
Recommend advancing to a 2nd round of bids.
10
Q
What are the permitted board sizes on a building?
A
- This is stipulated under the Town & Country Planning Regulations 2007.
- For residential properties:
o Flat Boards – 0.5 sq m.
o V Boards – 0.6 sq m. - Commercial:
o Flat Boards – 2 sq m.
o V Boards – 2.3 sq m. - Planning permission is required if located in conversation areas or if the building has listed status.
11
Q
What are the current Stamp Duty Bands for Commercial &
Residential Property?
A
- Commercial:
£150,000 or less = 0% , £150,001-£250,000 = 2%, above £250,0000 = 5%. - Residential:
£250,000k or less = 0%, £250,001-£925,000 = 5%, £925,001 - £1,500,000 = 10%, above £1,500,000 = 12%. - Residential from 1st April 2025:
£125,000 or less = Zero
£125,001 to £250,000 = 2%
£250,001 to £925,000 = 5%
£925,001 to £1.5 million = 10%
above £1.5 million = 12%
12
Q
What are Rates?
A
- Business Rates are a local tax that is paid by the occupiers of all non-domestic & business property, in the same way that council tax is applied on domestic property, this applies on properties such as:-
o Shops.
o Offices.
o Pubs.
o Warehouses.
o Factories.
13
Q
How are the rates calculated?
A
- The rateable value is assessed by the Valuation Office Agency.
- A property’s rateable value is an assessment of the annual rent the property would rent for if it were available to let on the open market at a fixed valuation date.
14
Q
What properties are exempt from Business Rates?
A
- Exemptions include:
o Agricultural land.
o Places of public religious worship.
o Public highways and parks.
o Property used for the disabled.
o Unoccupied listed buildings.
o Crown owned buildings.
o Persons entitled to diplomatic privileges.
o Vacant industrial property.
15
Q
What is a schedule of condition?
A
- A Schedule of Condition is prepared in order to serve as a detailed record of a property’s condition.
- This is normally retained by the occupier and building owner in order to use at a future date to determine the previous condition of the premises.
- The schedule of condition is typically included within the lease to limit the Tenant’s obligations to repair the condition of the property at the end of the lease term.
16
Q
What is the scope of the Estate Agents Act 1979?
A
- The Estate Agents Act 1979 applies to employers, employees and sub-agents.
- The act governs the work carried out by estate agents and compliance with the Act helps to ensure that
sellers and buyers are treated honestly and fairly. - The Act covers the duties estate agents owe to their clients and third parties including:
o The information agents must pass to clients before agreeing to act (fees and charges).
o Estate agents must also declare any personal interest they hold within a transaction.
o A copy of the Estate Agents’ T&Cs must also be provided.
o Requirements are also set out for handling negotiations, offers received and record keeping.
o Estate agents must not mislead buyers or sellers in any way.
o Estate agents must refrain from discriminating against potential buyers who do not want to use their services (for example refusing to pass on information to a potential buyer who does not wish to use their mortgage advisory service).
17
Q
What do you do if you receive two identical bids for a property you are marketing?
A
- I would discuss this in detail with my client and determine if one bid is more advantageous than the other.
- For example one buyer may be in a more proceedable position and hold sufficient funds to purchase the property outright in comparison to a buyer who may need to raise funds via other means.
- If no difference between bids can be established I would recommend to the client that they proceed to a 2nd round of bids.
18
Q
What would you make reference to in your Section 18 letters? (Estates Agent Act)
A
- Section 18 of the Estate Agent Act requires that Estate Agents provide particulars for the circumstances in which the client will become responsible for the Estate Agents’ fees.
- Section 18 states that this must be done in writing and must be provided before the client is committed to any liability to the Estate Agent.
- Estates Agents are obligated to provide:
o Terms Of Engagement.
o Costs and confirmation of when the client would become liable to pay their fees.
o Other services the Estate Agent intends to offer.
o Confirmation that they will forward any offers received in writing.
19
Q
What is the Property Misdescriptions Act 1991?
A
- The Act makes it an offence to make false or misleading statements about specified aspects of land and buildings offered for sale by those in Estate Agency.
- Where information is provided it must be accurate and must not be misleading.
- Coverage of the Act is broad and includes matters relating to:
o Tenure.
o Address.
o Size.
o Location.
o Easements.
o Price.
o Rent.
o Amenities.
o Accommodation.
o Service charges. - Misrepresentation can include matters discussed over the phone, upon an advertising board and within photos.
- Potential Punishments under the Act include:
o Fines of up to £5,000 in magistrates court or an unlimited fine in the crown court.
o Estate Agents may be prevented from practicing in future.
20
Q
What is the Misrepresentation Act 1967?
A
- The Misrepresentation Act 1967 is a piece of legislation within the United Kingdom which was intended to provide a greater amount of security to parties entering into contractual agreements to ensure they are not tied to a contract or that they do not suffer losses as a result of misrepresentation.
- At a common law level, misrepresentation is an untrue or misleading statement of fact made by one party to another that results in the inducement of the other party entering into a contract.
21
Q
What is a Negligent Misstatement?
A
- A Negligent misstatement relates to a representation of fact, which is carelessly made, and is relied on by another party to their disadvantage.
- A negligent misstatement is only actionable in tort if there has been breach of a duty to take care in making the statement that has caused damage to the claimant.
- It is possible to claim for economic loss arising out of a negligent misstatement where no contractual relationship exists between the parties.
22
Q
Who are connected persons under the Estate Agents Act?
A
A connected person under the Estate Agent Act means any of the following:
o Employer.
o Principal.
o An employee.
o Agent.
o Spouse or relative.
o Associate.
23
Q
What must Estate Agents ensure in relation to connected persons
under the Estate Agents Act?
A
- If you are acting as an estate agent you must declare promptly and in writing any personal interest that you or a connected person may hold within a transaction.
- If you have an existing personal interest you must declare this in writing before you begin negotiations.
- If you or a connected person are seeking to acquire an interest in your client’s property you must tell the client in writing as soon as possible.
- You should do the same if you or a connected person are selling your property to the client.
24
Q
What is meant by the term ‘Without Prejudice’?
A
- The term without prejudice means to negotiate without being bound by the terms that are set whether in written form or verbally.
- This aims to prevent statements that are made from being referenced in court where a genuine attempt to settle a dispute is being made.
25
What is included in the Heads Of Terms For a Purchase?
* The following items are to be included in the Heads of Terms:
o Vendors details including their agent and solicitors details.
o Purchasers details including their agent and solicitors details.
o Date.
o Demise.
o Consideration.
o Conditions.
o VAT.
o Timing.
o Deposit.
26
What is the Estate Agents Act (1979)?
Regulates all agency work for land and freehold and leasehold sales.
27
What are the 7 key principles of the Estate Agents Act (1979)?
Clarity on the Terms of Agency (S.18)
Honest and Accuracy
Agreement of liability for Costs
Openness regarding Personal interests (S. 21)
Absence of Discrimination
Legal obligation to tell the client Offers
Keep client’s Money separate
Clients have a 14 day cooling off period upon instruction of an agent.
28
Who policies the Estate Agents Act?
National Trading Standards Estate & Letting Agency Team
29
What are the penalties for breach of the Estate Agents Act (1979)?
Prohibition Order
Warning Order
30
What is a connected person under the Estate Agents Act (1979)?
Someone who could benefit financially from the transaction, such as a family member or a business associate.
31
What are the key principles of the Consumer Protection from Unfair Trading Regulations (2008)?
- Extends the duty of care owed to potential clients, viewers, buyers and actual buyers (all consumers)
- Agents must declare everything known about the property
- Agents can't put undue pressure on potential buyers.
32
Who policies the Consumer Protection Regulations?
Trading Standards Office of a Local Authority
33
What are the penalties for breaching the Consumer Protection from Unfair Trading Regulations (2008)?
Criminal Offence:
Maximum fine
Prohibition Order
2 years in prison.
34
Key principles of the Business Protection from the Misleading Marketing Regulations (2008)?
BPRs offer businesses protection from business-business transactions.
Mirrors CPRs.
Prohibits misleading business-business activity.
Imposes restrictions on how businesses compare their products to products of another company.
35
What is the RICS guidance on estate agency?
RICS Global Real Estate Agency and Brokerage Professional Statement (2016).
RICS UK Commercial Estate Agency Professional Statement (2016).
36
Key principles of the RICS Global Real Estate Agency and Brokerage Professional Statement (2016)?
Professional Statement - All RICS members involved in the sale, letting and leasing of real estate must follow.
Includes:
- Ethics
- Securing instructions
- Acting for the seller
- Acting for the buyer
It is similar to the UK specific professional statement - RICS UK Commercial Estate Agency (2016).
37
What are the key principles of the RICS UK Commercial Estate Agency Professional Statement (2016)?
Provides mandatory standards for those involved in agency work. Has 12 core principles:
- Act in an honest, fair and transparent manner
- Ensure client's are provided with Terms of Business
- Do upmost to avoid conflicts
- Have adequate PII
- Do not discriminate unfairly any dealings
Also advices on key agency matters i.e. acting ethically, securing instructions, marketing, gifts etc.
38
What are the key principles of the Misrepresentations Act (1967)?
Relates to the misrepresentation or a fake statement made by a party during pre-contractual enquiries, which has an effect of inducing the party to purchase.
Agent has a duty of care to check the advice and information given.
39
What are the penalties of the Misrepresentations Act (1967)?
It is a civil offence - a form of negligence. Can be sued for financial damages and/or contract rescinded.
40
What are the main differences between Consumer Protection Regulations (2008) and Misrepresentation Act (1967)?
CPRs are a criminal offence. Misrepresentation is a civil offence.
Misrepresentation Act relates to misrepresentation during the pre-contractual enquiries by the vendor and their agent to potential purchasers.
CPRs relate during the entire agency sales & lettings process.
41
When is planning permission needed for marketing signage?
1. If it's above the allowed sizing
2. Illuminated boards
3. Remote boards
4. Boards on listed buildings & in conservation areas
42
What governs marketing signage?
The Town and Country Planning (Control of Advertisement) Regulations 2007 Only 1 board allowed for commercial properties.
Must remove signs 14 days after completion.
43
What signage does not need planning permission?
Non-residential boards under: 2sqm (flat) 2.3sqm (v-board)
Residential boards under: 0. 5sqm (flat) 0. 6sqm (v-board)
44
When is VAT Applicable?
A landlord/vendor can choose to opt a property for tax, in order to recover VAT on costs spent.
However. this then creates issues for tenants, who now have to pay VAT on rent and service charge. Always advise to see a specialist. Some occupiers can't register for VAT i.e. charities
45
What do Anti Money Laundering Checks consist of?
Public Limited Company:
- London Stock Exchange Listing
Publicly Accountable Body:
- Government ownership / control
Private individual:
passport/driving license
proof of address i.e. utility bill from last three months
Private Limited Company:
certificate of incorporation
full name
registered number
registered office
business address
name of stakeholders with 25% + holding
report any discrepancies to Companies House
46
What regulations govern Anti Money Laundering Checks?
Money Laundering, Terrorist Financing and Transfer of Funds and Regulations (2019),
RICS Professional Statement Countering Bribery, Corruption, Money Laundering & Terrorist Financing (2019).
47
How do you choose which method of sale to use?
1. Client objectives
2. Desired timescale
3. Public accountability
4. Current and likely future market conditions
5. Anticipated level of demand
6. Likely target market
48
What are the pros and cons of private treaty?
Pros: - flexible - parties control the process - no obligation to sell - confidential
Cons: - potential for gazumping/gazundering - late decisions not to buy - associated abortive costs
49
What are the pros and cons of informal tender?
Pros: - flexible - possibility of negotiating a higher bid
Cons: - can be difficult to manage bids
50
What are the pros and cons of formal tender?
Pros: - completely transparent
Cons: - no flexibility
51
What are the differences between formal and informal tender?
Informal tender: further negotiations can follow, can change bid.
Formal tender: single bid only
Informal tender: will not lead to direct to a contract for sale
Formal tender: can lead to a contract for sale
52
What are the pros and cons of an auction?
Pros: - quick sale - certainty of sale (assuming reserved price is achieved and its sold) - good method for unusual properties that are hard to value - used when good interest is expected
Cons: - cost of promotion and publicity - no confidentiality on price achieved - vendor cannot choose purchaser - intensive nature of a short marketing process
53
When are Anti Money Laundering checks conducted at an auction?
AML Checks must be completed prior to the auction for vendors and potential purchasers.
54
When does property at an auction sell?
At the fall of the gavel.
55
What would you do if you got a late bid?
Under the Estate Agents Act (1979), I must disclose all offers received to the client. It is the client's choice on how they handle it and would like to proceed.
56
What are the three bases of agency?
1. Sole agency
2. Joint agency (share fee on a pre-agreed basis)
3. Multiple agency (successful agent gets the fee)
57
What are sole selling rights?
The estate agent is entitled to the fee if there is any disposal of the property while the agreement is in force, regardless of who found the buyer or had negotiations with them. This is the typical clause.
58
What are sole agency rights?
The estate agent is only due a fee if they introduce a purchaser within the instruction term. Less advantageous for the agent as if client finds the purchaser, they will not get a fee.
59
What happens if a buyer fails to complete?
Vendor can serve a notice to complete - giving the buyer a deadline. The legal cost is to be paid by the buyer.
If this deadline is passed, the vendor can rescind the contract and remarket. The vendor may be able to sue for damages for any loss in value following the sale to another party at a lower price.
60
What are agency instruction agreements?
They are a requirement of the RICS Rules of Conduct and the Estate Agents Act (1979) (sections 18 & 21).
A formal contract between a property agent and their client. This agreement outlines the terms and conditions under which the agent will act on behalf of the client, whether for sales, lettings, or property management
There is a statutory cooling off period of 14 days. The agreement must be signed and returned to the agent before marketing can commence.
61
What must agency instruction agreements include?
1. Agency basis (sole / joint)
2. Agency rights (sole selling / sole agency)
3. Proposed fee
4. Marketing costs & disbursements
5. Confirmation of no COIs
6. Money Laundering regulations requirements
7. Timescale for the payment of fees and disbursements
8. Details of CHP
62
What is Gazundering?
Where a buyer lowers their offer at the last minute, just before contracts are exchanged.
The seller, conscious of refusing the new lower price means they are back at square one and the chain may fall apart, often feel forced to accept the new lower offer.
63
What is gazumping?
Gazumping occurs when a buyer has had an offer to purchase a property accepted, but before the sale is completed the seller accepts a better offer from another buyer.
64
What do you do with Heads of Terms once they have been signed off?
You exchange them with the two parties and you send to their solicitors.
Or progress to MCC legal team to progress with completion
65
What agreements and contracts are available for the purchase of land?
1. Option Agreement
2. Promotion Agreement
3. Joint Venture
4. Unconditional Contract
5. Conditional Contract
6. Development Agreement
66
What is an unconditional contract?
It is the simplest form of contract as the buyer agrees to buy it as it is.
It is often unsuitable for a development site, unless planning permission has already been obtained. On exchange the buyer agrees to complete on the purchaser of the land on the completion date specified in the contract. This arrangement provides certainty for both parties.
67
What is a conditional contract?
This allows the buyer to agree to buy the property, subject to certain conditions being satisfied
i.e. STP. Once conditions are satisfied within the timescales specified in the contract, the contract becomes unconditional and the buyer must complete by the set date in the contract.
68
What is a joint venture agreement?
Carrying out the development or purchase which may be owned and controlled by either 2+ companies or individuals who wish to pool resources & limit personal liability for a project.
69
What is a development agreement?
it is a collaboration between a landlord and developer. The landowner supplies the land and the developer seeks planning and to build out the development. Developer contributes to initial planning and build costs. They then split profits between parties. It is a form of Joint Venture.
70
What is overage?
It is a clause within a contract relating to the uplift in GDV or floorspace of a site STP, within an agreed timeframe, A pre-arranged % of price is paid back to the vendor.
71
What is SDLT?
It is a tax that is applied to the purchase of all property. There are different residential and commercial bands.
Varying eligibility criteria depending on if you're i.e. a first time buyer or a 2nd home buyer.
72
What's included in particulars to avoid issues with Misrepresentation Act?
A disclaimer stating: "They assume no responsibility for any statement that may be made in these particulars. These particulars do not form part of any offer or contract and must not be relied upon as statements or representations."
73
What happens at exchange?
Buyer pays a deposit and the sale/purchase contract becomes legally binding
74
What happens at completion?
The balance of the payment for the property is passed over to the seller's solicitor and ownership transfers to the buyer.
