SEMINAR 15 JUNE 2015 SUBJECT. NEXT SEMINAR 20 th July CBRE C Bar at 08:00hrs. PREVIOUS SEMINARS Notes posted

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1 SEMINAR 15 JUNE 2015 SUBJECT 1. AGENCY - 40 mins 2. Questions 10 mins NEXT SEMINAR 20 th July CBRE C Bar at 08:00hrs PREVIOUS SEMINARS Notes posted Seminars SEMINAR BY DOUG STEVENS TO 1 st & 2 nd YEAR GRADUATES DELIVERED AS A POWERPOINT PRESENTATION

2 AGENCY Buying or Selling of a Freehold or Leasehold interest in land and buildings THREE ASPECTS The skills and standards required to be a good agent The regulations and guidelines to follow as an agent The statutes and guidelines to know for APC test

3 BUYING AND SELLING PROCESS Instructions Are they clear What is objective SALE speed certainty - price What is objective BUY location timescale - price Winning Instructions Establishing track record market knowledge

4 COMPETENCY Are you the right person / company Do you have the necessary skills market sector knowledge Can you identify the best market When buying do you have the contacts on & off market

5 INDEPENDENCE / CONFLICTS Check for conflicts of interest If there are potential conflicts disclose them early in process Can you provide independent advice

6 TERMS OF ENGAGEMENT It is a requirement to send Terms of Engagement to new clients Standard Terms - Specific Terms Ideally to be agreed by client Estate Agents Act 1979 section S.18

7 MONEY LAUNDERING VAT Anti money laundering controls and monitoring You must put in place certain controls to prevent your business from being used for money laundering if you re covered by the Money Laundering Regulations. These include: assessing the risk of your business being used by criminals to launder money checking the identity of your customers checking the identity of beneficial owners of corporate bodies and partnerships monitoring your customers business activities and reporting anything suspicious to the National Crime Agency (NCA) making sure you have the necessary management control systems in place keeping all documents that relate to financial transactions, the identity of your customers, risk assessment and management procedures and processes making sure that your employees are aware of the regulations and have had the necessary training VAT is property registered for VAT. Is it a TOGC sale

8 PRIOR TO INSPECTION Collate all information from client and your own sources Other deals done in town. Past details Read lease Check title docs Land registry Ask for floor plans Goad plans or OS plan Planning consent Ask client / vendor re- deleterious materials

9 INSPECTION Detailed Measurements for notes Double check calculations of areas on site Update Goad / floor plans Check Rights of Light and Fire Escape Photographs Look at what is there also record what is not there

10 PREPARING REPORT & VALUATION Collate comparables and market activity in the sector Report to client with valuation (NOT Red Book) and recommendation as to method of sale and marketing Prior to marketing secure approval of recommendations from client Progress the marketing reporting all offers drafting detailed Heads of Terms for lawyers to be instructed On freehold sales anticipate pre-contract enquiries

11 FOUR MAIN METHODS OF SALE Private Treaty Informal Tender Formal Tender Auction

12 Private Treaty Sale by private treaty is the most common method Party autonomy can be private and confidential or open market No obligation to sell but no certainty on timescale or completion of transaction

13 Informal Tender Can follow on from private treaty to draw negotiations to a close in a best bids process Terms of the bidding process to be clearly set out and sent to all prospective bidders covering timing, funds or financial arrangements, any conditions on board approval, solicitors etc. Reserving the vendor s right not to accept the highest or any offer made

14 Formal Tender Also known as sealed bids Generally used where public accountability is an issue Exercises more control Comprehensive marketing and legal information provided with an ITT (invitation to tender) Advantages Parties bidding blind with no opportunity to impose conditions or increase or decrease their offer after submission Fairness Can lead directly to a sale contract Even in a formal tender vendor can state that they are not obliged to accept the highest or any offer received

15 AUCTION Quick and relatively certain method of sale (subject to realistic reserve) Best means of disposing of quirky property Higher brochure cost Open sale

16 STATUTE AND REGULATIONS Misrepresentation Act 1967 Estate Agents Act 1979 Property Misdescriptions Act 1991

17 STATUTE AND REGULATIONS Misrepresentation Act 1967 Agent has a duty of care to avoid a misrepresentation of fact or a false statement which has the effect of inducing the party to purchase however, use of a disclaimer clause clearly notified to the party may protect the vendor and agent if the disclaimer is fair and reasonable Headley Byrne & Co Limited vs Heller & Partners (1964) Agents liability for negligent statements subject to three tests o Foreseeability was the damage reasonably foreseeable o Proximity was the legal relationship between the agent and the purchasing party sufficiently proximate o Fairness was it fair just and reasonable for a duty of care to arise oimportance of the wording of disclaimer clauses

18 STATUTE AND REGULATIONS Estate Agents Act 1979 Introduced to regulate estate agency particularly in relation to clients money S.18 Agree terms - especially level of fees & when payable Under Section 21 notification of a personal interest in a property Policed by the Trading Standards Office of each Local Authority

19 STATUTE AND REGULATIONS Property Misdescriptions Act 1991 An offence to make a false or misleading statement in relation to specified matters such as size, price, location, description, legal information NB - This Act was repealed in 2013

20 STATUTE AND REGULATIONS Unfair Trading Regulations 2008 Misleading Marketing Regulations 2008 Consumer Protection Regulations 2008 ( CPR`s ) Business Protection Regulations 2008 ( BPR`s ) These regulations largely supercede the previous three main Acts. Fundamental difference is that the regulations now apply to potential buyers and vendors extending the duty of care not just to actual clients but to potential clients, potential viewers and potential buyers in addition to the actual buyer In addition to the giving of false or misleading information it is regarded as an unfair practice to hide or fail to provide information, to fail to demonstrate professional diligence and to exert undue pressure on any party It is policed by the Competition Markets Authority (CMA) previously the Office of Fair Trading (OFT)

21 PURPLE BOOK RICS UK Commercial Real Estate Agency and Brokerage Standards Updated Oct pages 1 Duty of Care to client - guidance on conflicts of interest - the Bribery Act Securing instructions: Information that an agent must provide to his client under the Estate Agent Act When commission is payable & how much. 3 Disposals: marketing the property: includes an explanation of auctions and tenders and detailed guidance on how to market a property without falling foul of the Property Misdescriptions Act Acting for the seller: implementing the disposal: sets out the information that an agent is legally bound to supply to his client on offers received and provides guidance on post-offer conduct. 5 Letting a property: Provides glossary of the key terms in commercial leases. 6 Acquisitions: guidance for agents to meet clients acquisition specifications. Does not envisage that the agent will for buyer and seller when a property is found. 7 Ending the instruction: Tying up all loose ends at the end of an instruction. 8. Security & Safety - Data protection. and health and safety /inspections. 9 Agency management - money laundering, insurance client money management. BLUE BOOK for Residential Estate Agency Standards 2012 (2014)

22 RICS GLOBAL AGENCY & BROKERAGE STANDARDS (UK REAL ESTATE AGENCY CODE) Lists 12 Core Principles Act in an honest, fair, transparent and professional manner Carry out work with due skill, care and diligence and ensure all staff employed have the necessary skills to carry out their tasks Ensure that clients are provided with terms of business that are fair and clear with details of the firm s Complaints Handling Procedure Avoid conflicts of interest and where they arise deal with them openly and fairly Non-discriminatory Fair, clear, timely and transparent communications Marketing and advertising material to be honest and truthful Client money separately accounted for and insured Professional Indemnity Insurance Identify client and your obligations to them & other parties Give realistic assessments of selling prices / rents based on market evidence and professional judgement Carry out viewings in accordance with clients wishes

23 2014 ADDENDUMS TO 2012 CODE Consumer can be your contractual client, a potential client, a potential or actual buyer and a potential or actual viewer. You must ensure that you do not engage in any unfair commercial practice by saying, doing or omitting to do something that causes, or is likely to cause, the average consumer to take a different transactional decision.you must critically assess the relevance and accuracy of the information you do or do not provide to consumers at each of the transactional process and must also undertake effective due diligence on each transaction and maintain complete and accurate business records. Definitions Average consumer A consumer who is reasonably well informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors. Someone who takes reasonable care of their own interests. This definition can change depending upon the target of a particular business or of a marketing campaign. The average consumer will then relate to a member of that target group. Material information The information that the average consumer needs, according to the context, in order to take an informed transactional decision. Misleading action A commercial practice that contains false information, or in its overall presentation deceives or is likely to deceive the average consumer or create confusion and causes or is likely to cause the average consumer to take a transactional decision that they would not otherwise have taken. Misleading omission Omitting, hiding or otherwise disguising material information.