Chapter 4

An agreement in which rent is increased at specified intervals is known as: Select one: a. Graduated rental lease. b. Participation lease. c. Acceleration lease. d. Net lease.

a. Graduated rental lease.

What tax benefits does a business owner gain if she sells the building the business operates from and leases it back from the buyer? Select one: a. It may convert a low-deductible mortgage payment into an entirely deductible lease payment b. The gain on sale will be tax-deferred c. The business owner will be able to take depreciation deductions d. All of these are benefits to the business owner

a. It may convert a low-deductible mortgage payment into an entirely deductible lease payment

During the term of the lease, the lessor of a property holds what form of estate in the property? Select one: a. Leased Fee b. Leasehold c. Estate for Years d. None of the above

a. Leased Fee

A commercial tenant's rent is increased because a property is shown to have increased in value by a recent appraisal of the property. This lease is most likely a(n): Select one: a. Revaluation lease b. Index lease c. Percentage lease d. Net lease

a. Revaluation lease

A proprietary tenant usually has an interest in a cooperative apartment. Select one: a. True b. False

a. True

In a revaluation lease, the rent is adjusted automatically according to the reappraisal of the real estate. Select one: a. True b. False

a. True

Periodic leases that renew at set intervals require proper notice in order for one party to terminate. Select one: a. True b. False

a. True

A lease that allows for annual rent to increase on each anniversary is a Select one: a. graduated lease. b. gross lease. c. percentage lease. d. net lease.

a. graduated lease.

Mary owns a retail store which is a lessee in a small shopping mall. The store pays a base rent of $1,000 per month plus 3% of annual sales in excess of $240,000. If the store was charged $28,800 in rent for the year, what were its sales for that year? Select one: a. $750,000 b. $800,000 c. $960,000 d. $1,000,000

b. $800,000

Peter rents a ground floor apartment. A major water line supplying most of the upper floors burst and left his unit uninhabitable. Peter immediately moves out of the apartment and so notifies the landlord. Peter would consider this to be: Select one: a. Actual eviction b. Constructive eviction c. Casualty eviction d. Abandonment

b. Constructive eviction

What type of estate could be present in both a life estate and a leased-fee estate? Select one: a. Fee simple estate b. Estate in reversion c. Estate for years d. Estate at sufferance

b. Estate in reversion

A tenancy for years is created by adverse possession. Select one: a. True b. False

b. False

The legal process by which a landlord removes a tenant from leased premises when there has been a breach of the lease terms is known as an ejectment. Select one: a. True b. False

b. False

A restaurant owner leases some space in a shopping mall for a restaurant. The lease requires that the restaurant serve only Portuguese menu items. This is an example of a(n): Select one: a. Protective covenant b. Restrictive covenant c. Subordination clause d. Escalator clause

b. Restrictive covenant

An action to oust someone who is not legally in possession of real property is called: Select one: a. execution. b. ejectment. c. deposition. d. egress.

b. ejectment.

A lease provision that prohibits using certain premises for a drugstore is called a Select one: a. protective covenant. b. use covenant. c. restrictive covenant. d. condemnation covenant.

b. use covenant.

Don owns a store in a shopping mall. He pays base rent of $1,500 per month plus 2.5% of sales in excess of $300,000. If his total sales were $1,200,000 for the year, what was the total rent for the year? Select one: a. $30,000 b. $37,500 c. $40,500 d. $48,000

c. $40,500

The Anytown Helpers is a charitable group run by a local church. They provide temporary low-cost housing to people with children who are poor and/or victims of abuse. They give preference to those who are members of the church. Does this violate the Fair Housing Act of 1968? Select one: a. Yes, in all cases b. No, in no case c. No, as long as the church does not discriminate in membership against any protected class d. Yes, unless the church has received a specific waiver from HUD

c. No, as long as the church does not discriminate in membership against any protected class

A clause in a lease which gives future mortgages priority over the lessees' interests is called a(n): Select one: a. Protective covenant b. Restrictive covenant c. Subordination clause d. Escalator clause

c. Subordination clause

Each of the following statements is correct about property subject to a sublease, EXCEPT: Select one: a. The sublessor remains solely liable for the rental payments b. Landlords can include a clause in the lease requiring lessor approval of any sublease arrangement c. The sublessee makes the rental payments directly to the landlord d. The original lessee becomes the sublessor

c. The sublessee makes the rental payments directly to the landlord

What is the primary difference between a gross lease and a net lease? Select one: a. The method of determining rent increases b. The length of the lease c. Who pays the property taxes, insurance and maintenance costs d. The size of the space rented

c. Who pays the property taxes, insurance and maintenance costs

A clause in a lease which enables the lessor to raise the rent in the future is called a(n): Select one: a. Protective covenant b. Restrictive covenant c. Subordination clause d. Escalator clause

d. Escalator clause

If the landlord (owner) of property dies during the period of a valid lease, what effect would it have on the lease and the tenant? Select one: a. The lease is void, by operation of law. b. The lease would be voidable, at the option of the tenant. c. The right of possession would revert to the estate of the deceased. d. It has no effect.

d. It has no effect.

When a lessee assigns his or her leasehold interest in a property, all of the following statements are true, EXCEPT: Select one: a. The assignor transfers all of his or her rights in the property to the assignee b. The assignee pays the rent directly to the landlord c. The lessor has the right to require prior approval of the assignment d. The assignor remains primary liable for the rental payment

d. The assignor remains primary liable for the rental payment

A valid written lease generally requires... Select one: a. legal capacity of both parties. b. a meeting of the minds. c. consideration. d. all of these options.

d. all of these options.