Purchase and Sale Flashcards
(110 cards)
1
Q
What are the four methods of sale?
A
- Private Treaty – Property marketed at an asking price, negotiation occurs.
- Formal Tender – Sealed bids, legally binding upon acceptance.
- Informal Tender – Sealed bids but not legally binding upon acceptance.
- Auction – Public bidding, legally binding when the hammer falls.
2
Q
What is an advantage and disadvantage of sale by private treaty?
A
✅ More time for negotiation.
❌ Longer sales process.
3
Q
What is an advantage and disadvantage of formal tender?
A
✅ Competitive pricing due to sealed bids.
❌ High costs, legally binding upon acceptance.
4
Q
What is an advantage and disadvantage of informal tender?
A
✅ Allows competitive offers without binding commitment.
❌ Seller still has discretion, creating uncertainty.
5
Q
What is an advantage and disadvantage of auction?
A
✅ Fast, transparent process with immediate exchange.
❌ May deter some buyers due to commitment on the day.
6
Q
What are the legal processes to complete a purchase/sale?
A
- Due diligence (searches, CPSEs, valuation, finance arrangement).
- Negotiation & agreement of Heads of Terms.
- Exchange of contracts (deposit paid, legally binding agreement).
- Completion (funds transferred, property ownership changes).
7
Q
How do exchange and completion work in an auction transaction?
A
Exchange happens immediately when the hammer falls.
Completion typically occurs 20 working days later.
8
Q
What is the Estate Agents Act 1979?
A
Regulates conduct and obligations.
9
Q
What does the Consumer Protection from Unfair Trading Regulations 2008 do?
A
Prevents misleading property marketing.
10
Q
What is the Misrepresentation Act 1967?
A
Liability for false/misleading statements.
11
Q
What are the six key principles of the Estate Agents Act 1979?
A
- Duty to disclose interests.
- Pass on all offers fairly.
- Transparency in fees and commissions.
- No discrimination between buyers.
- Proper handling of client money.
- Comply with trading regulations.
12
Q
How does Section 18 relate to your agency practice?
A
Limits a landlord’s dilapidations claim to the actual reduction in property value.
13
Q
What are the four agency bases?
A
- Sole agency – One agent, no commission if seller finds buyer.
- Sole selling rights – One agent, commission payable even if seller finds buyer.
- Joint agency – Two agents work together, one fee split.
- Multiple agency – Several agents, only the successful agent gets commission.
14
Q
What is a ready, willing, and able purchaser?
A
A buyer who can proceed at the agreed price and terms.
15
Q
How does Section 21 relate to your agency practice?
A
Regulates termination notices given to estate agents.
16
Q
What three things do you need to make a contract?
A
- Offer
- Acceptance
- Consideration (payment or exchange of value)
17
Q
Can a verbal contract be legally binding?
A
Yes, except for land sales, which must be in writing under the Law of Property (Miscellaneous Provisions) Act 1989.
18
Q
What is capacity in relation to contract law?
A
The legal ability of a party to enter a contract (e.g., not a minor, mentally capable).
19
Q
What are key points of the Consumer Protection / Business Protection Regulations?
A
Agents must not mislead buyers/tenants with false or omitted material information.
20
Q
What are considered to be unfair practices under this legislation?
A
False claims, pressure sales tactics, omitting material details.
21
Q
What are the key principles of the RICS Professional Standard: Property Agency and Management?
A
- Act honestly, fairly, and transparently.
- Provide clear terms of engagement.
- Ensure competency and compliance with regulations.
22
Q
What are three key issues raised in the RICS Real Estate Agency and Brokerage Standards?
A
- Duty of care towards clients and third parties.
- Conflicts of interest must be managed properly.
- Anti-money laundering (AML) procedures must be followed.
23
Q
What is a factor which drives property markets?
A
Interest rates – Lower rates increase demand due to cheaper borrowing.
24
Q
What is an example of supply and demand in a property market?
A
Commercial office space in central London – Rising demand for flexible workspaces, supply constrained by planning regulations.
25
What are government incentives which impact demand in relation to purchase & sale work?
1. Stamp Duty Land Tax (SDLT) relief for first-time buyers.
2. Business rates relief for commercial properties.
26
What are current SDLT levels for commercial property?
0% up to £150,000.
2% between £150,001 - £250,000.
5% above £250,000.
27
What are the different types of interest in land?
Legal Interests – Freehold, Leasehold.
Equitable Interests – Easements, mortgages, options.
28
What is the difference between freehold and leasehold?
Freehold – Full ownership indefinitely.
Leasehold – Ownership for a fixed period.
29
What are profits à prendre?
The right to extract natural resources from land (e.g., fishing, timber cutting).
30
What are rentcharges?
Annual charges on freehold land for historical services (phased out by Rentcharges Act 1977).
31
What are the implications if a rentcharge is not paid in full?
The rentowner may take possession or sell the freehold.
32
Why would you use online marketing for a purchase/sale transaction?
Broad audience reach, cost-effective, allows digital viewings.
33
What are CPSEs and the sale process?
Commercial Property Standard Enquiries (CPSEs) – Seller’s legal information disclosure before sale.
34
What is a Memorandum of Sale?
Confirms the agreed sale price and party details before contracts are issued.
35
When is an auction sale legally binding?
When the auctioneer’s hammer falls.
36
What due diligence should be carried out pre-auction?
Legal pack review, title checks, planning status, building surveys.
37
What are the advantages/disadvantages of buying/selling at auction?
Advantages – Quick sale, competitive bidding.
Disadvantages – Buyer must complete quickly, less room for negotiation.
38
What are the RICS Common Auction Conditions?
Standard contract terms ensuring fairness and transparency in auction sales.
39
What is a reserve price?
Minimum price the seller will accept, kept confidential.
40
Can you sell a property before or after auction?
Yes, via pre-auction agreements or post-auction negotiations.
41
How does finance work for auctions?
Buyers need finance in place before bidding, with completion required in 20-28 days.
42
What deposit is typically payable and when?
10% deposit payable immediately upon the hammer falling.
43
What is a proxy bid?
A bid placed by the auctioneer on behalf of an absentee buyer.
44
When is insurance required in relation to an auction purchase?
Insurance is required immediately upon exchange of contracts, which occurs when the auctioneer’s hammer falls.
The buyer is responsible for insuring the property from this point to protect against damage or loss.
45
Is VAT payable on auction properties?
VAT is only payable if the seller has opted to tax the property.
If VAT applies, the buyer must pay VAT in addition to the purchase price.
46
What are the key principles of RICS Professional Standard Auctioneers Selling Real Estate (6th Edition)?
1. Transparency in the auction process.
2. Clear disclosure of material information in auction particulars.
3. Fair treatment of all bidders.
4. Compliance with relevant laws and regulations.
5. Proper handling of deposits and client money.
6. Due diligence checks to prevent fraud and financial crime.
47
What are the EPC requirements at auction?
An Energy Performance Certificate (EPC) must be available before marketing a property at auction.
Properties with an EPC rating below E cannot be let under MEES regulations.
The EPC must be included in the legal pack for transparency.
48
Do you have to check anything in relation to an auction venue?
Ensure the venue meets health & safety regulations.
Check IT systems for online bidding compatibility.
Verify compliance with accessibility laws (Equality Act 2010).
49
What does the Sale of Land by Auction Act 1867 say?
A contract is legally binding when the auctioneer's hammer falls.
If the sale is subject to conditions, they must be clearly displayed at the auction.
Sets rules on deposit payments and auctioneer responsibilities.
50
How are arrears dealt with in relation to auction properties?
The auction legal pack must disclose any arrears (e.g., rent, service charges, business rates).
Responsibility for arrears typically passes to the buyer unless stated otherwise.
A special condition of sale may require the seller to clear arrears before completion.
51
What should be included in auction particulars?
Legal description of the property.
Tenure (freehold/leasehold), lease terms, and rent details.
EPC rating and compliance with MEES.
Special conditions of sale.
Guide price and reserve price information.
52
What is the power to sell?
The legal right to dispose of a property, typically granted under a mortgage deed or receivership process.
Lenders or receivers may auction a property under power of sale if the borrower defaults.
53
What are the requirements around the Auctions (Bidding Agreements) Acts 1927 and 1969?
Prohibits collusion between bidders to manipulate auction prices.
Bidders must not enter into agreements to fix prices or prevent competitive bidding.
Breaches can result in fines and criminal charges.
54
What do you understand by the planning use classes?
Planning Use Classes define the permitted use of a building or land.
Last amended in September 2020 with the introduction of Class E (Commercial, Business & Service).
55
When were the planning use classes last amended and what changes were made?
September 2020 – Class E replaced previous retail (A1), office (B1), and leisure (D1/D2) uses.
New Class F for community facilities.
56
Why are POA (Price on Application) listings unlawful?
They breach transparency requirements under the Consumer Protection from Unfair Trading Regulations (CPRs).
Misleading pricing can distort market competition and misinform buyers.
57
What key changes were introduced in respect of this competency by the Charities Act 2022?
Simplified disposal of charity-owned land, reducing administrative burdens.
Allows charities to sell property without needing Charity Commission consent in some cases.
Greater flexibility in selecting property advisors.
58
What is a factor which has impacted upon sale value/sale terms?
Market conditions – During economic downturns, buyer demand falls, leading to lower offers and longer sale times.
Lease terms – Shorter leases or restrictive covenants can reduce sale price due to investment risk.
59
What is an example of when you have provided marketing/sale strategy to a client?
Advised on the sale of a mixed-use retail/residential building.
Conducted market research, set an asking price, and targeted investors via online marketing, agent networks, and auction exposure.
60
Talk me through an example of when you have purchased/sold a property.
Sold a high-street retail unit via private treaty.
Negotiated with multiple buyers, ensured due diligence (legal pack, CPSEs), and managed the transaction to completion.
61
What is a private treaty sale?
The most common method of selling property, where the seller negotiates privately with buyers until an agreement is reached.
62
What other sales methods could you have advised?
Auction – If the seller required a quick and certain sale.
Informal Tender – If the seller wanted competitive bids with flexibility.
Formal Tender – If the seller needed a structured, deadline-driven process.
63
What evidence did you have to support the advice to sell as is and not to make improvements?
Market comparables showed limited value uplift from refurbishment.
Buyer demand in the area was high for unmodernised properties (developer interest).
Cost-benefit analysis indicated renovation costs would outweigh short-term value gains.
64
Why was a conflict of interest check required?
Ensured no pre-existing relationship with the buyer that could compromise impartiality.
RICS Professional Statement on Conflicts of Interest mandates checks for transparency.
65
Provide examples of key terms in Terms of Engagement (ToE).
1. Agency fee structure (commission rates and VAT treatment).
2. Marketing strategy and property details.
3. Duration of agency agreement (sole agency vs multiple agency).
4. Termination clauses and notice periods.
66
What information was included in the market report?
Comparable sales evidence, local market trends, recommended asking price, expected timescales, and marketing strategy.
67
How was the residential market performing in Llandudno at the time of marketing?
Strong demand for residential property due to limited supply.
Increased interest from second-home buyers and investors.
68
What are the benefits of cash purchasers?
Faster transactions as no mortgage delays.
Higher certainty of completion, reducing risk of sales falling through.
Buyers may accept lower prices due to speed and security.
69
What was included in the memorandum of sale?
Details of buyer and seller, agreed purchase price, deposit amount, expected exchange/completion dates, and solicitor details.
70
Why is a memorandum of sale needed?
Confirms the terms agreed before legal contracts are drafted.
Facilitates smoother communication between solicitors.
71
What parameters did your client set?
Target sale price, timescales for disposal, marketing approach (private treaty vs auction), and preferred buyer profile (investors vs owner-occupiers).
72
What was included in the Heads of Terms (HoTs)?
1. Purchase price and deposit terms.
2. Agreed lease terms (if subject to lease).
3. Conditions precedent (planning, funding approvals).
4. Target exchange and completion dates.
73
What are the pros of selling at auction?
Best price on the day secured. Process is quick and transparent.
74
What are the cons of selling at auction?
Fees are higher. All information is disclosed.
75
What are the pros of selling via private treaty?
Increased flexibility. Relatively inexpensive.
76
What are the cons of selling via private treaty?
Either party can pull out of the deal. The asking price may be under or over market price.
77
What is the difference between sole agency and sole selling rights?
Sole agency is where a single agent has exclusive right to market the property. Sole selling rights mean the agent always gets a fee even if the client finds a buyer.
78
What do you do if you receive two identical bids for a property you are marketing?
Recommend advancing to a 2nd round of bids.
79
What are the permitted board sizes on a building?
Stipulated under town and country planning regulations 2007.
## Footnote
Residential: Flat boards – 0.5 sq m; V boards – 0.6 sq m. Commercial: Flat boards – 2 sq m; V boards – 2.3 sq m. Planning permission is required if the building is listed or in a conservation area.
80
What would be your procedure for preparing a marketing report?
Confirm client expectations. Undertake market research and identify key comparables. Research potential demand for the property. Prepare and send out marketing information to possible tenants.
81
What advice would you give a client who wishes to take a vacant unit on the high street?
Ensure it suits their criteria. Are the vendor's terms reasonable? Is there any planning permission in place for change of use?
82
What are the current LTT thresholds in Wales?
From 10 October 2022:
Up to and including £225,000 – 0%; £225,000 to £400,000 – 6%; £400,000 to £750,000 – 7.5%; £750,000 to £1,500,000 – 10%; Over £1,500,000 – 12%.
83
Is there stamp duty on leases?
Yes, it is the responsibility of the tenant of the commercial property. SDLT is not payable on all commercial leases, and it is best to seek advice from a qualified accountant.
84
When does SDLT need to be paid on leases?
It needs to be paid within 14 days of the effective date of the transaction.
85
How do breaks affect the calculation?
The SDLT must be paid for the entire length of the lease and cannot be claimed back if the break clause is activated.
86
What are capital allowances?
Capital allowances offer tax relief on the costs of plant and machinery within non-residential property. Capital allowances can be deducted at a proportion of these costs to reduce taxable profit.
87
Who is able to claim capital allowance?
Owner occupiers, landlords, individuals, and companies. Expenditure must be incurred on plant and machinery. They are available for 6 years from the date of expenditure.
88
What are rates?
Business rates are a local tax that is paid by the occupiers of all non-domestic and business property in the same way council tax is applied to domestic property.
89
How are the rates calculated?
The rateable value is assessed by VOA. A property's rateable value is an assessment of the annual rent the property would rent for if available on the open market.
90
What properties are exempt from rates?
Places of public worship. Unoccupied listed buildings. Vacant industrial property.
91
What is a schedule of condition?
A schedule of condition is prepared in order to serve as a detailed record of a property's condition.
92
What is the scope of the Estate Agent Act 1979?
The Estate Agent 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.
93
What would you make reference to in your section 18 letters of the Estate Agent Act 1979?
Section 18 of the act requires that estate agents provide particulars for the circumstance in which the client will become responsible for the estate agent fees.
94
What is the Property Misdescriptions Act 1991?
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.
95
What is the Misrepresentation Act 1967?
It provides a greater amount of security to parties entering into contractual agreements to ensure they are not tied into a contract or that they do not suffer losses as a result of misrepresentation.
96
What is a negligent misstatement?
Relates to a representation of fact which is carelessly made and is relied on by another party to their disadvantage.
97
Is misstatement the same as misrepresentation?
Misrepresentation is between contracting parties. Negligent misstatement does not require a contract to be in place.
98
Who are connected persons under the Estate Agent Act?
Employer, Principal, An employee, An agent.
99
What must estate agents ensure in relation to connected persons under the Estate Agent Act?
You must declare any conflicts of interests.
100
What is meant by the term ‘without prejudice’?
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.
101
What is included in the heads of terms for a purchase?
Vendors details, Purchasers details, Date, Demise, Considerations, Conditions, VAT, Timing, Deposit.
102
Why did you recommend private treaty for 12 cwlach street?
Private treaty was suitable due to the property's modest value, niche appeal, and the need for flexibility in negotiations.
103
What are the four methods of sale?
1. Private Treaty – Flexible, commonly used.
2. Auction – Fast and binding; best for unusual or vacant properties.
3. Informal Tender – Allows competitive bids without binding terms.
4. Formal Tender – Bids submitted by a deadline, and acceptance creates a binding contract.
104
How did you assess that it was better to sell as is rather than carrying out improvement works at 12 cwlach street?
I conducted a cost–benefit analysis, estimating that refurbishment costs would not yield a proportionate increase in value. Market comparables showed that buyers were willing to carry out their own improvements, and the property was still marketable in its current condition.
105
What conflict of interest checks were carried out at 12 cwlach street?
We followed RICS guidance by checking for existing relationships with interested parties, internal staff involvement, and potential dual agency situations. No conflicts were identified, and a conflict of interest declaration was signed and retained.
106
How did you report to your client during the sale process of 12 cwlach street?
I provided regular email updates, including marketing feedback, viewings and offers, solicitor updates during conveyancing, and recommendations on price adjustments or negotiation strategies.
107
How did the price agreed compare with your advice for 12 cwlach street?
The sale completed in line with my recommended asking price, supported by market comparables. This reflected a realistic valuation in light of the property's condition and market sentiment.
108
Why was your client able to move quickly on 94 ms?
As a cash buyer with no reliance on third-party funding, my client was able to proceed quickly.
109
Can a verbal contract be legally binding?
Yes – under English law, verbal contracts can be legally binding. However, property contracts must be in writing and signed by both parties to be enforceable under the Law of Property (Miscellaneous Provisions) Act 1989.
110
When are AML checks undertaken?
AML checks must be carried out before establishing a business relationship or conducting a transaction, and when acting as agent in a property sale or letting over £10,000 per month.
