Ch 7 Pearson VUElease rent

1. An estate for years would be created by (page 186) A. express agreement. B. adverse possession. C. operation of the law. D. holding over.

A (Because it is a lease for a specified period of time, there must be specific agreement.)

5. A lease prohibited assignment or subletting without the owner's prior approval. The lessee assigned without asking the lessor. The assignment is (page 193) A. void. B. voidable. C. unenforceable. D. illegal.

B (The owner can consider it a material breach and terminate the lease or accept the assignment.)

21. A child was injured when be fell through the floor in an abandoned house. If the owner was held liable for the injury, the house was probably considered a(n) (page 194) A. encroachment. B. attractive nuisance. C. hazardous substance. D. implied easement

B (There is a special duty of owners when property is likely to attract children.)

6. The Uniform Residential Landlord and Tenant Act provides that the tenant (page 192) A. can agree to hold the landlord harmless for actions of the landlord. B. may apply the security deposit to the last month's rent. C. may not unreasonably withhold permission for the landlord to enter the premises. D. will make the repairs necessary to keep the premises fit for habitation.

C (Entry must be for a reasonable purpose with reasonable notice.)

35. A residential lease has an implied covenant of (page 188) A. acknowledgment. B. exculpation. C. merger. D. habitability.

D (Also implied covenant of quiet enjoyment.)

53. A lessee defense against eviction for nonpayment of rent would be that the (page 188) A. tenant is on welfare. B. tenant is an unmarried mother. C. rent charged is higher than for other similar units. D. premises are not habitable.

D (The landlord breached the duty to keep the premises habitable and cannot force rent collection.)

51. A real estate salesperson may be directly compensated by (page 200) A. a buyer. B. a seller. C. any broker. D. his or her own broker.

D (The only party that can pay salesperson is his or her own broker.)

27. R rented a summer cottage for the first two weeks in July. What type of tenancy does R have? (page 186) A. Estate for years B. Estate at will C. Periodic tenancy D. Tenancy at sufferance

A (A lease for a definite period of time.)

33. An owner died, which immediately ended a tenant's rights. What kind of tenancy was it? (page 186) A. Tenancy at will B. Tenancy at sufferance C. Periodic tenancy D. Estate for years

A (Ceases on death of tenant or landlord.)

66. Which of the following is personal property? (pages 187-188) A. Oil and gas leases B. Oil and gas rights C. Single family owner occupied dwelling D. Air rights

A (Chattels real. Royalties are paid rather than rent.)

77. Brokers are protected from conversion of funds by their salespersons by (page 196) A. bonding. B. the state surety fund. C. errors and omission insurance. D. state licensing law.

A (Fidelity bond would indemnify the broker, a state surety fund would protect the person depositing the funds and errors and omission covers negligence but not theft. )

30. A lessee would have the greatest protection with a(n) (page 186) A. estate for years. B. estate at will. C. tenancy at sufferance. D. periodic tenancy.

A (If lessee is not in default. lessee is assured possession for a set period.)

76. A broker does not want to modify his office to accommodate an employee with a disability. Legally the broker has no obligation to do so if there are (page 201) A 10 employees. B. 20 employees. C. 100 employees. D. 150 employees.

A (If there are 15 or more employees, the employer must modify the premises to the extent reasonably possible for employee access.)

13. J leased to K, who subleased to L, who then subleased to M. The lease between K and L could be regarded as a(n) (page 193) A. sandwich lease. B. assignment. C. master lease. D. flat lease.

A (It is a sublease that does not involve the owner. Subleases are referred to as sandwich leases.)

11. A lease in which the lessee's total monthly rent costs remain unchanged for the term of the lease is what type of lease? (page 187) A. Gross B. Net C. Percentage D. Graduated

A (It is also known as a flat lease.)

39. A broker withdrew her commission out of the trust account prior to a sale closing. This would be regarded as (page 197) A. conversion. B. commingling. C. a novation. D. proper if all funds have been deposited in the account.

A (It is theft as the broker is not entitled to any portion of the trust monies until closing or deposit is forfeited.)

72. A tenant's lease was not terminated when the lessor's interests were lost by foreclosure. The lease contained a(n) (page 189) A. nondisturbance clause. B. antimerger clause. C. subordination clause. D. holdover provision.

A (Otherwise a prior mortgage foreclosure could wipe out the tenant's rights.)

38. In the absence of a notice to terminate, a lease that automatically renews itself would be a (page 186) A. periodic tenancy. B. tenancy for years. C. gross lease. D. ground lease.

A (Such as a month-to-month lease.)

68. A characteristic of a tenancy at will is that it is A. for an indefinite period. B. without permission. C. automatically renewed. D. assignable.

A (Tenancy with permission, and unassignable.)

73. A buyer is protected against a tenant's claim of setoffs against rent because the tenant signed a(n) (page 190) A. estoppel certificate. B. nondisturbance clause. C. antimerger clause. D. subordination clause.

A (Tenant acknowledges lease obligations and that he has no claims to offset amount due.)

16. An agent received a cash deposit which he placed in his personal bank account and then wrote a personal check to the trust account. This action would be considered (page 197) A. commingling. B. conversion. C. embezzlement D. proper conduct.

A (The agent mixed personal and trust funds monies in a personal account.)

3. The effect of a lease assignment is that the (pages 193-194) A. entire lease interest is transferred. B. assignee makes rent payments to the assignor. C. assignee is a tenant of the assignor. D. assignor remains primarily liable on the lease.

A (The assignee makes rent payments to the original lessor.)

50. An owner wanted to structure the lease to provide income benefits like an annuity but also wanted inflation protection. To a long-term net lease she added a provision relating to (page 187) A. the Consumer Price Index. B. EMF. C. a right of first refusal. D. quiet enjoyment.

A (The consumer price index is commonly used in leases, so rent reflects the actual purchasing power.)

16. What type of long-term lease is best for a commercial tenant during an inflationary period? (page 187) A. Gross B. Percentage C. Index D. Net

A (The rent would not increase; therefore, it would not be good for the landlord.)

44. A broker can properly do which of the following? (page 199)) A. Charge discount fees for services B. Pay salespersons a draw against commissions earned from trust monies C. Pay commissions to salesperson of other brokers D. Keep cash received in an office safe until closing

A (There is no problem in cutting fees, but answer {B} is conversion and {D} is commingling. Only the salesperson's broker can compensate the salesperson.)

48. A tenant vacated premises prior to the expiration of the lease after the landlord leased the unit on the floor above as a martial arts center. The tenant was not liable for further rent because the landlord breached the (page 188) A. implied covenant of habitability. B. implied covenant of quiet enjoyment. C. nondisturbance clause. D. exculpatory clause.

A (Unreasonable noise created by a new tenant violates this covenant. Covenant of quiet enjoyment refers to an interference with tenant's lease rights.)

67. In the absence of any agreement, interest earned on trust monies belong to (page 197) A. the party depositing the funds. B. the broker. C. the party to whom the funds are eventually to be disbursed. D. both the broker and the owner of the funds.

A (Until closing, the interest belongs to the person depositing the funds.)

47. A lessor wants a tenant to protect the lessor from claims of others based on problems concerning the premises. What type of insurance would the lessor want the lessee to carry? (page 195) A. Public liability B. Errors and omissions C. Homeowner policy D. Fire and extended coverage

A (With the landlord as a named insured.)

8. A buyer's earnest money deposit was placed in the broker's escrow account when a purchase offer was received. The owner gave a counteroffer, but the buyer refused it and has requested return of her deposit. The seller has requested that the deposit should not be returned to the buyer. The broker should (page 197) A. give the deposit to the broker's principal. B. return the deposit to the buyer. C. keep the deposit in the escrow account. D. file an interpleader action.

B (Because the offer was rejected by the counteroffer, the deposit must be returned. U the offer had been accepted and failed to close, then an interpleader action would be proper.)

74. An invitee is injured when a stair rail breaks. The insurance coverage that would protect the owner would be (page 195) A. workers' compensation. B. liability. C. casualty. D. fire.

B (Claims for injury to people or property of others.)

34. A lease that ends on a specified date without the requirement of notice is a(n) (page 186) A. tenancy at will. B. estate for years. C. tenancy at sufferance. D. periodic tenancy.

B (Lease for a definite period of time.)

36. The reason that some states allow brokers to keep some broker funds in trust accounts is to (page 197) A. protect broker funds from broker creditors. B. cover bank fees. C. simplify trust accounting. D. avoid bank charges.

B (Otherwise a disbursement check could be returned "insufficient funds because of bank charges.)

61. Prior to a lease agreement, the owner let the prospective tenant take possession. Based on these facts the tenant has a (page 186) A. tenancy at sufferance. B. tenancy at will. C. gross lease. D. periodic tenancy.

B (Possession given without agreement.)

69. An estate for years would be created by (page 186) A. a devise. B. express contract. C. implied contract. D. escheat.

B (Since it has a definite term, it had to be expressly created.)

45. A landlord failed to deal with a serious rodent problem, claiming she could not afford an exterminator. A tenant could break a lease based on (page 190) A. commercial frustration. B. constructive eviction. C. merger. D. destruction of the premises.

B (Tenant can treat breach as proper cause to end lease obligations.)

64. Who is the trustee of a real estate trust account? (page 197) A. The closing agent B. The broker C. The buyer D. The seller

B (The broker is the trustee of the trust account.)

20. G leased a commercial building to S for 10 years. After 6 months, S moved out without notice. G advertised for a tenant. G's actions relate to (page 193) A. liquidated damages. B. mitigation of damages. C. punitive damages. D. severance damages.

B (The lessor has a duty to keep tenant damages as low as reasonably possible.)

79. A tenant informed a new owner that he had an agreement with the former owner that there would be 6 months free rent based on the tenant's repairs to the property. The new owner does not have to honor the agreement because (page 190) A. it was made by another. B. the tenant had signed an estoppel certificate. C. the lease was not recorded. D. of the exculpatory clause.

B (The tenant acknowledged lease obligations and that the tenant had no claims against the landlord to offset the obligations.)

43. A landlord served a tenant with an unlawful detainer action because the tenant called a building inspector regarding a code violation. The landlord's action was (page 192) A. constructive eviction. B. retaliatory eviction. C. a civil rights violation. D. proper.

B (This is a defense against unlawful detainer.)

37. A tenant on a long-term lease purchased the building from his landlord and resold it to investors at a profit, making no mention of lease rights. The lease was terminated by (page 190) A. commercial frustration. B. merger. C. surrender. D. recordation.

B (When the tenant purchased the building, there was no longer a tenancy because the lesser interest {leasehold} was merged into the ownership.)

59. The Federal Personal Responsibility and Work Opportunity Act provides (page 201) A. an equal right to work for all persons. B. that illegal immigrants may not be professionally licensed C. that employers are responsible for all acts of their employees. D. that employees may be held liable for crimes committed during employment.

B (illegal immigrants cannot be licensed as salespersons or brokers.)

65. A real estate salesperson used her name in an advertisement. This was proper if she (page 200) A. also included her house number. B. also included the name of her broker. C. indicated she was a real estate salesperson. D. include a physical address.

B (The salesperson cans not appear to act as a broker. The broker's name must appear in the ad, even if paid for by the salesperson.)

71. A landlord can charge a tenant extra if the tenant (page 191) A. is disabled. B. receives rent from public assistance. C. has a pet. D. has a child.

C (An extra charge is allowed.)

24. As to question 23, what is M's company dollar? (page 198) 23. In 2006, Broker M bas $306,000 in gross income. He paid his salespersons $180,000 in commissions and has office operations expenses of $92,000. Broker M's cash flow was (page 198) A. $306,000 B. $214,000 C. $126,000 D. $34,000

C (Company dollar is gross income less commission splits.)

28. An example of constructive eviction would be a (page 190) A. tenant who refuses to pay rent. B. tenant being given a notice to quit or pay rent. C. landlord cutting off the tenant's heat and water. D. tenant who remains in possession after termination of the lease.

C (Constructive eviction is wrongful conduct by a landlord that interferes with the tenant's quiet enjoyment allowing tenant to vacate and end all lease obligations.)

18. A broker who handled a closing inadvertently inserted the wrong legal description in a deed giving the buyer more property than described in the purchase agreement. The broker would have some protection from personal liability because of (page 195) A. the state surety fund. B. the fact he acted in good faith. C. an errors and omission policy. D. the broker's agency capacity.

C (Coverage for negligent acts.)

25. As to Question 23, if Broker M has 3 sales persons, what is the desk cost? (page 198) 23. In 2006, Broker M bas $306,000 in gross income. He paid his salespersons $180,000 in commissions and has office operations expenses of $92,000. Broker M's cash flow was (page 198) A. $102,000 B. $71,333 C. $30,667 D. $11,666

C (Desk cost is office expense of $92,000 divided by number of salespersons {three}.)

70. An exculpatory clause in a lease means (page 189) A. all repairs will be made by the tenant. B. the lease cannot be assigned. C. the tenant will not hold landlord liable for damage or injury. D. the tenant is entitled to quiet enjoyment.

C (Hold-harmless clause.)

2. The tenant who remains in possession after the lease expires (page 186) A. is on a periodic tenancy. B. has a freehold interest. C. is a tenant at sufferance. D. has a servient tenement.

C (In many areas, the holdover tenant can be treated like a trespasser.)

57. The term unlawful detainer would be used in connection with a (page 190) A. trustee. B. lender. C. tenant. D. agency.

C (It is a formal eviction procedure.)

55. A property manger's real estate license was revoked because the agent (page 186) A. received a percentage of contractor fees as part of the agent compensation. B. collected a fee as a percentage of rents received. C. received kickback checks from suppliers and contractors. D. charged leasing fees as well as percentage fees.

C (Kickbacks violate the agent's fiduciary duty.)

10. A lessee is relieved of all obligations under the lease when the (page 190) A. lessee is evicted for rent arrearage. B. property is sold. C. lessee is constructively evicted. D. lessee can no longer afford to pay the rent.

C (Lessor breached lease so lessee. who vacates. is relieved of all further lease obligations.)

63. Parties to a dispute ask for mediation. The parties (page 203) A. are bound to the mediator's decision. B. have given up their rights to use the courts. C. need not reach an agreement. D. must also agree to arbitrate.

C (Mediation is only an attempt to seek resolution by bringing in a third party.)

9. One of the requirements for a real estate salesperson to be considered an independent contractor by the IRS, is that the (page 200) A. salesperson be paid a salary. B. salesperson not be responsible to a broker C. broker-salesperson contract states that the salesperson shall be treated as an independent contractor for tax purposes. D. salesperson not be supervised by a broker.

C (Other two requirements are that they be licensed and that pay be related to sales not hours.)

58. A landlord may enter leased premises without tenant notification (page 192) A. when tenant is behind in rent payments. B. anytime during daylight hours. C. only in an emergency. D. if the landlord believes premises are being used for an illegal purpose.

C (Otherwise, reasonable notice is required.)

40. A tenant has the right to meet the terms offered by any prospective new tenant when the current lease expires. What is this right called? (page 188) A. Holdover provision B. Option C. Right of first refusal D. Extension agreement

C (Right of first refusal can be for leasing as well as purchase.)

42. A salesperson kept all commissions earned on her transactions but paid her broker $2,150 each month. This is an example of a (page 199) A. discount broker. B. la carte pricing. C. 100% commission agreement. D. a fixed fee agency.

C (Salesperson keeps 100 percent of commissions earned but pays broker a fee.)

54. A nondisturbance clause provides that (page 189) A. the landlord will not disturb the tenant. B. the tenant will not disturb the landlord. C. the lease will be honored by the lender. D. tenant will not sue landlord for any breach.

C (The mortgagee agrees not to terminate the lease.)

75. Which of the following describes a sublease? (page 193-194) A. The sublessee becomes the tenant of the lessor. B. The entire leasehold is transferred. C. The sublessee is a tenant of the lessee. D. The sublessee becomes primarily liable on the lease.

C (The original lessee is liable on the lease and the sublessee is only liable to his lessor {original lessee}.)

26. A lessor believes the desirability and sales volume of a large retail store will increase dramatically in the next few years. In negotiating a long-term lease for the premises, the lessor would ask for what type of lease? (page 187) A. Flat B. Triple net C. Percentage D. Gross

C (This would mean greater rent as retail volume increases.)

22. One reason a company would sell and then lease back its real property would be (page 187) A. the deductibility of interest. B. to reduce monthly expenses. C. liquidity. D. the tax benefits of depreciation.

C (To obtain cash from an illiquid asset.)

41. The Uniform Residential Landlord and Tenant Act provides that (page 191) A. it is a one-year lease when no rental period is agreed to. B. if no rental amount is specified, then no rent can be collected. C. the tenant must sign an exculpatory clause if requested to do so. D. the maximum-security deposit for unfurnished units is one month's rent.

D (And 1 1/2 months for furnished units {many states have modified these amounts}.)

23. In 2006, Broker M bas $306,000 in gross income. He paid his salespersons $180,000 in commissions and has office operations expenses of $92,000. Broker M's cash flow was (page 198) A. $306,000. B. $214,000. c. $126,000. D. $34,000.

D (Cash flow is net spendable after deducting commissions paid and operating expense from the gross income.)

49. A sale failed to close and each party blamed the other party. Buyer and seller have each demanded the earnest money deposit. The broker should (page 198) A. give the funds to the party depositing the funds. B. give the funds to the principal of the broker. C. give the funds to the state licensing authority. D. commence an interpleader action.

D (Force the parties to adjudicate their claims.)

56. An agreement where lessee gives premises to lessor prior to expiration of lease, ending lease obligations is a(n) (page 191) A. eviction. B. unlawful detainer. C. foreclosure. D. surrender.

D (If a landlord accepts premises as a surrender. all obligations end. An abandonment is not a surrender.)

A tenancy based on permissive occupancy without any tenancy agreement would be a A. month-to-month lease. B. freehold interest. C. tenancy at sufferance. D. tenancy at will.

D (It is personal and cannot be assigned.)

78. A mortgage, that was entered into prior to a lease, was foreclosed. The new owner was unable to evict the tenant because (page 189) A. the lease was recorded. B. there was an exculpatory clause. C. there was an estoppel certificate. D. there was a nondisturbance clause.

D (Mortgagee agreed to honor the lease in event of foreclosure.)

29. A valid lease must include (page 188) A. an exculpatory provision. B. the specified use of the premises. C. a definite termination date. D. a description of the premises.

D (Must specify what is leased.)

62. A sale leaseback offers the buyer/lessor the advantage of (page 187) A. making operational capital available. B. removing obligations from the balance sheet. C. the tax deductibility of rents. D. long term income.

D (Others are advantages to seller/lessee.)

80. Property managers are customarily paid for services by (page 186) A. rebates from suppliers. B. a percentage of net profits before taxes. C. a percentage of net profit after taxes. D. a percentage of the gross.

D (Share in gross. There may be no net.)

31. A balance sheet would show (page 194) A. expenses. B. profit or loss. C. cash receipts. D. net worth.

D (Shows assets and liabilities. Others are in profit and loss statement.)

19. An unlicensed party can receive compensation for handling a sale when the party (page 196) A. is an attorney who has a valid sale listing. B. charges a fixed fee not a percentage commission. C. is an employee of a licensee. D. is acting under court order.

D (Such as a trustee or administrator. The attorney is not acting as an attorney but as a broker.)

12. Broker L, who manages property for M, approaches tenant N for back rent a day after M dies. N refuses to pay. The broker should (page 185) A. give N statutory notice to quit or pay rent. B. start an unlawful detainer action. C. turn the matter over to a collection attorney. D. take no further action.

D (The agency agreement terminated with the death of the principal.)

7. A salesperson may be compensated for real estate service by (page 200) A. the owner. B. another broker. C. another salesperson. D. the salesperson's employing broker.

D (The only person who can pay a sales person for an act requiring a real estate license is his or her broker.)

17. A property manager is in trouble because of compensation received. This compensation was a (page 186) A. percentage of the gross. B. fee for leasing. C. fee for supervising repairs. D. kickback from a supplier.

D (The property manager cannot make a secret profit.)

60. L failed to pay $5,000 to broker M as an agreed commission payment should L's tenant N renew a lease. L later gave broker M a deposit of $10,000 with a purchase offer. The seller refused the offer. Which action of broker M would be proper? (page 198) A. Hold the $10,000 in trust until M's claim is adjudicated. B. Give L $5,000 and use the other $5,000 to offset the commission claim. C. Turn the funds over to the court to decide who is entitled to the deposit D. Return the $10,000 to L.

D (Trust monies cannot be held by the broker to offset any claims the broker may have against the party depositing the funds.)

4. In accordance with the Uniform Residential Landlord and Tenant Act, a lessor may properly require that the tenant (page 192) A. pay a security deposit equal to two months' rent. B. agree to a limitation on the owner's liability. C. pay any lessor attorney fees arising from a dispute. D. restrict use of the premises to residential purposes.

D (Unless the lease authorizes other use.)

46. The initial action in an eviction for nonpayment of rent would be a(n) (page 190) A. unlawful detainer action. B. writ of possession. C. seizure notice. D. notice to quit or pay rent.

D (Usually a three-day notice followed by the unlawful detainer action.)

52. Which of the following statements regarding ethics and the law is TRUE? (page 203) A. If it is legal it is ethical. B. If it is illegal it is unethical. C. Legality and ethical are synonymous. D. Ethics tends to precede the law.

D (What is unethical may be legal today but become illegal in the future.)

14. Partial lease interests were transferred by a lessee. This is a(n) (page 193) A. step-lease. B. gross lease. C. assignment. D. sublease.

D (While an assignment transfers all interests. a sublease can transfer a partial interest.)