Q I have noticed that an estate agency firm has numerous properties for sale by auction with extremely low advised minimum values. For example, there are properties being advertised for €100,000 but the likely outcome is that the final selling price will be between €30,000 and €60,000 higher than this. Is this practice legal?
A Matters relating to the regulation of estate agents are dealt with by the Property Services Regulatory Authority (the PSRA), which was established under the Property Services (Regulation) Act 2011, and the particular area to which you refer is dealt with to a reasonable degree of detail under that Act.
In summary, it should not occur.
I would, however, like to be clear as to certain terminology being used. During the boom years when auction sale prices far exceeded the guide prices, an attempt was made to bring both guide prices and selling prices into line, and the term Advised Minimum Value (AMV) was introduced on a voluntary basis. This was subsequently changed to Advised Market Value (also AMV) which now has a statutory definition. Most properties advertised for auction will quote an AMV (M for Market). The AMV is not the same as the reserve price, which is the minimum price a vendor is prepared to accept for a property, and neither the AMV nor the reserve price are necessarily the same as the final selling price. Some agents will quote a minimum reserve price. Private treaty sales usually quote an asking price, or may merely state a price on the ad.
First and foremost, any agent offering properties for sale must be licensed, and must have a signed letter of engagement in place between them and their client. Coupled with this, the agent must provide the vendor with a statement of the Advised Market Value (AMV) of the property. This tells the vendor what the agent thinks the property should make when put on the market. The definition of AMV, according to the Act, means “. . . the licensee’s reasonable estimate, at the time of such valuation, (a) of the amount that would be paid by a willing buyer in an arm’s length transaction after proper marketing where both parties act knowledgeably, prudently and without compulsion, or (b) of the relevant price range within which would fall the amount that would be paid by a willing buyer in an arm’s length transaction after proper marketing where both parties acted knowledgeably, prudently and without compulsion.”
Once the agent starts advertising the property, they must not quote a price that is less than the AMV.
Additionally, the agent must retain on file evidence of reasonableness and means of calculation of the AMV – in other words how they arrived at that AMV. Clearly there should be a correlation between their comparable evidence and the calculation and the AMV figure. These documents must be made available to the Authority if an investigation is taking place.
If the property is being sold by auction, the vendor may not bid themselves, or engage anyone else to bid on their behalf.
Essentially, the Act is seeking to ensure that the quoted price is as close to the final selling price as possible, so that interested parties are not unduly or deliberately misled into believing that a property might be sold close to the quoted price, when both the agent and vendor are expecting a far higher price. Of course exceptions can occur, and there can be unanticipated significant interest in a property for a number of reasons, and indeed it is not unknown that there can be significantly less interest than anticipated. My own view is that property market sentiment can change quite quickly, and in the case of private treaty sales which can take longer to conclude there can be a significant lag between the time of “doing the deal”, or going sale agreed, and the price appearing on the house price register, which indicates that there could well be a perfectly reasonable explanation as to why the disparity has occurred in these instances. Auction sale prices are known immediately on the fall of the hammer.
Whilst it is helpful that a disclosed reserve price is quoted in advance of an auction, it is not the same as the AMV.
You can make a complaint to the PSRA if you believe the practice of deliberately understating AMVs is occurring; if the authority believes there are sufficient grounds for the complaint it may carry out an investigation. If the Authority decides to carry out an investigation, it would need to establish if the occurrences of prices far exceeding the AMV are frequent and persistent. If it does find deliberate or persistent breach of these rules, then it may well find that “improper conduct” (the term used in the Act) has occurred, and appropriate sanctions may be imposed upon the agent. Edward Carey is a chartered residential agency surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie
Do tenants have room to improve?
Q I am a tenant of a commercial property and I am coming to the end of my lease. The landlord is seeking a significant claim to the fact that I made minor alterations internally in terms of adding two additional partitioned rooms. In my opinion this had added value to the property and should not attract a penalty. I received verbal permission for the works two years ago from the landlord. Where do I stand in relation to this?
AThis issue is to do with “dilapidations”, which is in effect the works that a tenant has to do in order to comply with the repairing and yielding-up obligations under the terms of the lease. The lease is the key document and should set down your repairing responsibilities. However, even at this, it can be quite difficult to interpret your repairing obligations and it is probably fair to say that there are two opposing views between landlords and tenants. Typically a landlord believes or understands that the tenant is responsible for major repairs and improvements and expects the building to be returned as good as new. On the other hand, typically a tenant believes that the only obligation is to give the premises a “lick of paint”. More often than not, the answer lies somewhere in between these two extremes, and should in fact be contained within the lease; these can normally be properly interpreted by chartered building surveyors who practice in the area of dilapidations.
Take the example that you have raised regarding the installation of partitions. Clearly, this is a huge improvement from your perspective in that you now have self-contained offices/meeting rooms etc which allow you to make better use of the premises. However, from the landlord’s perspective, the partitions are unique to you and may not suit the next tenant, and thus the landlord may simply see these as a liability with a cost to remove.
The fact that you sought and obtained the landlord’s verbal approval is not really relevant, unless there was a specific agreement clarifying whether these should be retained or removed on lease termination.
This is because you were probably obliged under the terms of the lease to obtain the landlords consent prior to carrying out any works of this nature and it is also most likely that there will be a clause in the lease clarifying whether or not any partitions/ improvements can be retained or if these are to be removed.
Very often the obligation to remove or strip out partitions would be included within the yield-up clause which may specifically call for the removal of all tenant fixtures and fittings on termination of the lease. In the absence of a specific clause, it is most likely that you would have to strip out the partitions unless it can be proved that they can and will be used by the next tenant.
More often than not tenants are in a poor position and are often faced with large claims for remedial works at lease termination. It is important, however, to seek advice from a qualified professional specialising in the area of dilapidations as they will be able to interpret the lease and guide you through the process and with a view to minimising your dilapidations liability. Val O’Brien is a chartered building surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie
