Real Estate Exam
A legal description of real property:
We locate property by using the address. The address can change; however, a legal description will not. With a legal description, a surveyor can find the exact physical location of the property. With a legal description, stakes can be used to establish boundary lines, observe buildings, and trees or other objects. A deed must contain a legal description to be recorded, but it is not needed to transfer title. To transfer title, the property conveyed need only be identified.
To form a contract, there must be an offer and an acceptance. This is called:
An offer and acceptance is nothing more than an offer made by one person that is accepted by another. Mutual assent refers to the idea that two people understand what they agreed to. Two people may agree to something, yet have a different understanding of the agreement. For a contract to exist, the parties’ agreement must be mutual. That is: both parties understand what was agreed upon. Consideration is what one person provides in exchange for what will be received. The giving up of an object or privilege is consideration. It could also be refraining from doing what one has a right to do or it could be transferring an item of value to another person. The statement, “I will give you my car” does not have consideration. It is a promise to make a gift and cannot create a contract. The statement, “If you give me one dollar, or if you do not eat meat for one month, then I will give you my car” has the consideration required to form a contract. Legal capacity refers to a person NOT being a minor or adjudicated incompetent. Without legal capacity, a person cannot enter into a contract or the contract is voidable at the option of the person lacking the contractual capacity. Present contractual intent means present, as in “I intend a contract now”. Two people cannot agree that next week they will meet and not leave until a contract is formed. A contract is either formed or it is not.
In a landlord/tenant relationship, the landlord is said to hold a:
A leasehold is one of the bundle of rights associated with ownership. It is the right of possession. A tenant receives possession from the landlord, so the tenant has the leasehold, not the landlord. At the end of the lease, the tenant’s right of possession ends and the right of possession reverts back to the landlord. A demise describes the landlord’s transfer of possession to the tenant
Which legal form of ownership involves the separation of property into individual ownership elements, common ownership elements and limited ownership elements?
The statement is the definition of a condominium. A co-operative involves a corporation acquiring ownership to real estate. Owning stock in the corporation enables the stockholder to move into the property, but rent must be paid to the corporation. If the property increases in equity, the stock will go up in value. A time-share involves dividing the ownership of the property into 52 one-week intervals and selling each week individually. The time periods may vary and time-shares are poor investments. A homeowners association is a non-profit corporation formed to manage the affairs of its members. In a condominium, the association would collect a monthly association fee and handle the maintenance, repairs and insurance of the common and limited common elements of the association.
How many acres are in a lot described as E 1/2 of NW 1/4 of SE 1/4
The rectangular survey system for describing property starts with a grid of lines 6 miles apart creating townships. The north-south lines are called meridian lines and the east-west lines are called base lines. Each square formed has 6 miles per side and has 36 square miles in it. Each square mile is called a section and contains 640 acres. A section is divided in 1/2 or in 1/4 as many times as is required to locate the parcel of land. This question takes a section and divides it as E 1/2 of NW 1/4 of SE 1/4, so the section was divided as follows: 640/4 = 160/4 = 40/2 = 20 or 1/2 x 1/4 x 1/4 = 1/32 640/32 = 20
A street address: I. Helps us get mail and pizza delivered to our home II. Does not help identify the property’s boundaries, so it is not considered a formal method to describe property III. Is enough to create a binding contract to sell real estate. The legal description is needed to close, but it need not be included in the purchase agreement
A legal description in the purchase agreement is not required to create a binding legal contract. The property must be identified and the street address is sufficient. The legal description will be needed after forming the contract to obtain the survey, the title report and for the deed to be recorded.
The parole evidence rule: I. Will prevent the courts from enforcing a contract that is not in writing II. Will not allow oral evidence to explain the written contract III. Will allow oral evidence to explain, but not contradict a written contract IV. Does not relate to matters involving fraud, mistake and ambiguities
The statute of frauds requires certain contracts to be in writing to be enforceable by the courts. If the requirements for the statute of frauds have been met, and there is enough of a written contract for the courts to enforce, the parole evidence rule will be used. The parole evidence rule allows testimony and other evidence to be reviewed to fill in missing terms or explain paragraphs in a written contract capable of two or more meanings. In the case of fraud, a person would be able to explain to the court the circumstances leading up to the contract being signed.
Which is the least curable form of obsolescence:
Economic obsolescence is the least curable due to the cost to remove it. It involves the situation of the community surrounding the subject property having deteriorated and the cost to cure will involve many different properties. The subject property may be in excellent condition but its market value is reduced because the surrounding area has deteriorated. Functional obsolescence occurs when a property lacks features expected by people currently buying real estate. Examples could be an older home that is well maintained but lacking closets or a five-bedroom home with a one car garage. Physical deterioration involves the wear and tear of the subject property. If it hasn’t been painted in 15 years, the unpainted wood may need replacement. Super adequacy involves an improvement to real estate the cost of which cannot be recouped from the sale of the real estate. For example: installing expensive marble tile in a little two-bedroom house on a crawl space will not increase the value. It would be super adequate.
If the landlord fails to repair a broken furnace in the middle of January and the property is located in Chicago, it may be considered:
A constructive eviction occurs when the tenant, in possession of property, is unable to enjoy that possession due to the poor condition of the property. An actual eviction could occur legally, through court process, or illegally. In either case of actual eviction, the tenant is actually removed from the property. A partial eviction means the tenant is ousted from part of the property and remains in possession of part. A retaliatory eviction occurs when a landlord attempts to remove a tenant from the property because the tenant complained about the condition of the property or attempted to enforce the terms of the lease. To clarify, if a tenant asks the health department to force the landlord to repair the property, the courts will not allow the landlord to evict the tenant in retaliation.
The type of manager most likely to be licensed as a real estate broker is the:
A property manager is a person who manages one or more properties for one or more owners. It is the real estate broker who is most likely to carry out this function. A building manager will manage one building for one owner, and a resident manager will reside in the building being managed. Any of the three could be a real estate broker. The question asks for which of the three is most likely to be a broker.
The security deposit law is designed to protect which party?
It is often true that getting a judgment against a person is easier than collecting on the judgment. With a security deposit, the landlord is given the money at the beginning of the lease so the landlord can collect if a court finds that the landlord is entitled to the money. The money on deposit with the landlord remains the tenant’s until the parties agree or a court finds the landlord entitled to the money. All of the rules are designed to protect the tenant from the landlord. The landlord cannot take the tenant’s money without the tenant’s agreement or a court order. A person may think that giving a landlord money to hold just in case the tenant breaches the lease is protection for the landlord. It is, however it is limited protection in that the law caps the total the landlord can take as a security deposit. If the tenant damages the property or owes rent in excess of the security deposit, the landlord may still collect by using the traditional legal theories of collecting. i.e.: Breach of contract or vandalism.
Which form of ownership involves a proprietary lease?
A co-operative involves a corporation acquiring ownership to real estate. A person will then buy the stock of the corporation and move into the property and pay rent to the corporation. If the property increases in equity, the stock will go up in value. The lease between the corporation and the tenant is called a proprietary lease because the tenant is a stockholder of the landlord corporation.
The primary objectives of a property manager are:
A property manager is aware that the property might be pledged as collateral for a loan or sold at sometime in the future. The manager is to keep the property in good condition and maintain the property value so the highest net operating income is realized. Net income is more important to the owner than gross income because it equals gross income minus expenses.
When the rent payment is a fixed amount for the term of the lease, the lease is called:
To remember the difference between a gross lease and a net lease, think of the difference between gross income and net income. In a gross lease, the landlord receives rent and must pay all of the expenses associated with the property, including taxes, insurance and snow removal. After paying the expenses, what is left is the net income. In a net lease, the tenant pays all of the expenses, so the rent received by the landlord is net rent. A percentage lease is often used in a shopping mall. It requires the tenant to pay a certain percentage of the tenant’s gross sales as rent.
Ownership: I. Is tangible II. Is intangible III. May be divided into different rights owned by different people. IV. Is not divisible.
Tangible objects take up space and can be photographed. Ownership is intangible. It is society’s recognition of the rights a person has in property. Ownership of real estate is transferred by a deed; the grantee will not lose the ownership transferred if the deed is lost. With ownership are various rights to use the property. Rights in a property can be allocated to different parties. An owner of real estate may give possession of the surface to a tenant and the right to mine minerals underneath the surface to someone else. Airspace could be given to a cellular phone company for a tower. Each person gets his or her rights from the owner who had it via the ownership
If the landlord and the tenant do not specify the rental period, the manner in which the rent is paid creates this type of occupancy:
If the landlord and the tenant do not agree to a rental period, the law will look at their conduct to find the most reasonable inference of their agreement. How often the rent is paid is a major factor in a court ruling that the landlord and tenant have a periodic tenancy and that the rental period was the time between each rental payment.
The type of tenancy that has a beginning and ending date is the:
The primary feature of an estate for years is that it has a definite beginning and ending date. The name is misleading because the time period can be shorter than one year. A tenancy that started on Monday and ended on Friday of the same week is an estate for years. An estate from year to year is also called periodic tenancy. Its distinguishing feature is that the period automatically renews. Either the landlord or the tenant may cancel the lease by providing one period’s notice. The landlord may raise the rent by giving one period’s notice. A tenancy at will is one that ends the moment either the landlord or tenant wills it to end. A tenancy at sufferance occurs when a tenant who was originally in lawful possession of the property, overstays the welcome. It occurs most commonly when a tenant stays in possession of the real estate after the expiration of an estate for years.
A contract is: I. An exchange of promises that courts will enforce II. An offer made by one party that was accepted by another
A contract is made of the following elements: an offer, an acceptance, consideration, the parties having legal capacity, the subject matter of the contract is legal. A contract will not be created merely because one party accepted an offer. All of the elements are required
A percentage lease is most commonly used in:
A percentage lease includes a fixed amount of rent, plus a percentage of gross sales. A percentage lease is often used in a shopping mall. It requires the tenant to pay a certain percentage of gross sales as rent. It may have a recapture clause. That means the landlord may retake possession from the tenant if the sales are below a stated amount.
If the tenant were to die during the lease period, which type of leasehold would pass to the tenant’s estate?
A tenancy at will or at sufferance ends with the tenant’s death. In a tenancy from period to period, the tenant’s death would be treated as notice of the tenant terminating the lease. The estate of the deceased is obligated for one period’s rent. In a tenancy for years, the estate of the deceased would be obligated to pay rent until the lease term ended or the landlord re-rented the property.