POR Texas 2 unit 8 Property Management

Hilda manages an apartment complex in downtown Houston. The apartments are always completely full, with a waiting list to get in. Which of the following could be the cause of the high occupancy rate?

Although a high percentage of occupancy may appear to indicate an effective rental program, it also could mean that rental rates are too low. Anytime the occupancy level exceeds 95%, serious consideration should be given to raising the rents in an apartment house or office building—but only after conducting a survey of the competitive space available in the neighborhood.

Property owner Lisa has rejected an application for the rental of one of her properties. Which of the following is TRUE as it applies to Lisa's responsibilities?

Lisa must tell the applicant that the credit-reporting agency did not make the decision to reject the applicant. Under the provisions of the Fair Credit Reporting Act, if a property owner rejects an application based on the applicant's credit report, the applicant must be given the name of the credit-reporting agency and must be informed of the right to get a copy of the credit report. The landlord, however, cannot give the applicant a copy of the report. The applicant also must be told that the credit agency did not make the decision to reject the applicant. If the rejection was based on an applicant's credit score, that score, along with key factors that adversely affected the credit score, must be included in the rejection notice. If a property owner rejects an applicant based on information other than a credit report, the owner must either disclose the reason or tell the applicant that she has the right to submit a request for disclosure of the reason for rejection.

Mary Ellen, a single mother of two children, is applying to lease an apartment. Which of the following would NOT be a legitimate reason for rejecting her application?

Mary Ellen's children are both under age five. Some of the legitimate reasons for rejecting prospective tenants include unsatisfactory references, evictions, frequent moves, bad credit report or too may debts, length of time at current employment too short, smokers, no verifiable source of income or insufficient income, too many vehicles for the available parking space, pets, current drug users, and conviction of a crime. All property owners and managers must comply with federal, state, and local fair housing laws in the selection of tenants. Mary Ellen's children are a protected class based on the Fair Housing Act.

Maintenance, rehabilitation, insuring the property, and addressing environmental requirements are

a property manager's physical management activities. Property managers also perform administration activities, such as preparing budgets and reporting to the owner, and marketing activities, such as finding and selecting tenants.

Property manager Frieda hires Albert as the full-time janitor for one of the buildings she manages. While repairing a faucet in one of the apartments, Albert steals a television set. Frieda could protect the owner against liability for this type of loss by purchasing which of the following?

a surety bond. Surety bonds cover losses from an employee's criminal acts or negligence. Casualty insurance covers such events as theft, burglary, vandalism, and machinery damage; it is generally coverage on specific risks rather than being all-inclusive. Liability insurance covers medical expenses for a person injured in an owner's building as a result of the landlord's negligence. Workers' compensation insurance provides medical care and a portion of lost wages to employees who have a work-related illness or are injured at work.

There are eight key component to an agreement between a professional property management company and a building owner, including "allocation of costs." What does that refer to?

allocation of costs is an internal agreement that sorts out whether the management company or building owner will pay things such as building employee taxes and Social Security benefits. It also details who will pay for things like building promotion and expenses, such as telephone, electricity and onsite office maintenance.

An apartment complex property manager has concerns about the owners' liability for possible drownings in the pool. They talk to the owners, who ultimately decide to drain and backfill the pool. This is an example of which of the following ways of managing risk?

avoiding the risk. When considering the possibility of a loss, the property manager and the owner must decide whether it is better to avoid it, by removing the source of risk, such as a swimming pool. Controlling the risk would be done by setting pool hours or hiring lifeguards.

Which of the following is NOT a function of property management?

construction. Buildings already are constructed before the professional property manager sets foot on the property. However, once the property management team is in place, almost every other aspect of the property is the responsibility of the manager.

Which of the following is NOT one of a property manager's responsibilities?

construction. Property management involves leasing, managing, marketing, and overall maintenance of real estate owned by others.

A property manager for a single-family residential unit may do all of the following without a license EXCEPT A) prepare billing statements. B) control the acceptance or deposit of rent. C) maintain the property. D) collect rent and mail it to the landlord.

control the acceptance or deposit of rent. Property managers who merely collect rent, do billing statements, and make maintenance arrangements do not need to be licensed. If a property management company also is going to lease and list for lease real property belonging to others for compensation, then the people who do the leasing and listing of the properties must be properly licensed. As of 2011, anyone who controls the collection or deposit of rent for a single-family residential unit must be licensed as a real estate sales agent or broker.

Jeffrey, a property manager, and Pete, a property owner, negotiate a property management agreement. That agreement should include

description of the property to be managed. The description of the property could include one building or several. If any recreational facilities on the property also are to be managed, they should be specified.

Janet is a property manager for a large mixed-use space. She wishes to purchase insurance coverage for her negligence and innocent mistakes. What type of insurance should she purchase?

errors and omissions. Errors and omissions insurance is specialty coverage to protect against negligence and innocent mistakes and errors.

Jane is a property manager for a large commercial office building in Dallas that was constructed in 1936. Which of the following is NOT a consideration for Jane in attracting new tenants?

external obsolescence. Renovation or modernization of buildings that have become physically or functionally obsolete and thus unsuited to new tenants' needs is important. The renovation of a building generally enhances the building's marketability and increases its potential income. External obsolescence is caused by factors not on the subject property.

Which is NOT a provision of the FTC "Red Flag" FACTA rule?

if a property manager cannot resolve address discrepancies in a credit report and/or application, the manager may still lease to the rental applicant. Under certain circumstances, if a property manager verifies a correct address, it must be reported to the consumer reporting agency. If the manager cannot resolve the discrepancies, the rule states that the rental application is to be denied.

When is asbestos presumed to be present?

in buildings constructed before 1981. Asbestos is presumed to be contained in most structures built before 1981.

Which of the following aspects of property management does NOT require a real estate license?

marketing property. If the duties include showing or leasing the property for the owner for which the manager gets paid, a license is required. A license is also required for any person who controls the acceptance or deposit of rent from a resident of a single-family residential real-property unit.

Which of the following would be considered a capital expenditure in creating a budget for a property manager?

renovation of the units. If an owner and a property manager decide that modernization or renovation of the property will enhance its value, the manager should budget money as capital expenditures to cover the costs of remodeling. In the case of large-scale construction, the expenses charged against the property's income should be spread over several years.

In setting an operating budget, which of the following is not a fixed expense?

repairs. The operating budget is based on anticipated revenues and expenses and must reflect the long-term goals of the owner. In preparing a budget, a manager should begin by allocating money for such continuous, fixed expenses as employees' salaries, real estate taxes, property taxes, and insurance premiums. Repairs are considered a variable expense.

Joe is a new property manager for Capital City Apartments. He is in the process of establishing rental rates for the units. What is Joe's basic concern in setting the rates?

that income from the rent covers expenses and provides a fair return on the investment. In establishing rental rates for a property, a basic concern must be that, in the long term, the income from the rentable space covers the fixed charges and operating expenses and also provides a fair return on the investment. However, consideration also must be given to the prevailing rates in comparable buildings and the current level of vacancy in the property to be rented.

Which of the following is a legitimate reason for rejecting a residential tenant?

the tenant has too many debts. Conviction of a crime that was a threat to property in the past five years, including manufacture or distribution of a controlled substance is a valid reason for rejecting an applicant. An arrest is not a conviction. Current drug use is also a valid cause for rejection.

Renovations have begun on a large apartment complex. Which statement applies to the property manager's responsibility for toxic fumes from the paint and carpeting and lack of proper ventilation?

these are environmental concerns that a property manager will need to address. The property manager must be able to respond to a variety of environmental problems. Tenant concerns—as well as federal, state, and local regulations—determine the extent of the manager's environmental responsibilities.

A property manager taking out insurance is an example of which of the following ways of managing risk?

transferring the risk. When insurance is considered, a competent, reliable insurance agent who is well versed in all areas of insurance pertaining to property should be selected to survey the property and make recommendations.

It is the obligation of the property manager to reach agreement with the property owner that the building

will be strategically marketed and maintained according to neighborhood quality, local demographics, need, and capacity to pay. The manager's chief job is to control revenue and expenses to secure the building owner's bottom line.

Must a professional management company have a "supervising broker" on staff, or may it simply hire individuals who have sales licenses?

yes, management companies must have supervising brokers who are responsible for the actions of the sales agents. Property managers and supervisors must be knowledgeable about a number of issues, not the least of which is fair housing law, as well as accounting practices.