CCS Real Estate Law & Regulations 3 — Questions and Answers
Question 1: A condominium association files a lawsuit against a unit owner for unpaid assessments. The association wins and records a lien. What type of lien is this?
- Mechanic's lien
- Assessment lien (Correct answer)
- Judgment lien
- Tax lien
Correct answer: Assessment lien
Unpaid condominium assessments result in an assessment lien (also called a common expense lien) against the unit.
Question 2: Which provision in a condominium declaration specifies how the common expenses and ownership percentages are allocated among unit owners?
- The plat map
- The percentage of interest or allocated interest clause (Correct answer)
- The use restrictions covenant
- The reserve fund schedule
Correct answer: The percentage of interest or allocated interest clause
The allocated interest or percentage of interest clause in the declaration defines each unit's proportional share of expenses and ownership in common elements.
Question 3: Under the Real Estate Settlement Procedures Act (RESPA), which of the following is prohibited in a residential condominium purchase transaction?
- Charging origination fees
- Paying kickbacks or referral fees between settlement service providers (Correct answer)
- Requiring title insurance
- Collecting escrow reserves at closing
Correct answer: Paying kickbacks or referral fees between settlement service providers
RESPA Section 8 prohibits kickbacks and unearned referral fees between settlement service providers in federally related mortgage transactions.
Question 4: A condo buyer discovers undisclosed material defects after closing. The seller knowingly concealed them. The buyer's strongest legal claim would be:
- Breach of warranty of habitability
- Fraudulent misrepresentation or fraudulent concealment (Correct answer)
- Violation of the Statute of Frauds
- Breach of the implied covenant of quiet enjoyment
Correct answer: Fraudulent misrepresentation or fraudulent concealment
Knowingly concealing material defects constitutes fraudulent misrepresentation, which allows the buyer to rescind the contract or seek damages.
Question 5: In which situation would a condominium association most likely be required to obtain lender approval before taking action?
- Adopting new pet policies
- Entering into a bulk cable TV contract
- Taking out a loan secured by the common elements (Correct answer)
- Changing the association's fiscal year
Correct answer: Taking out a loan secured by the common elements
Encumbering common elements with a loan typically requires approval from unit owners' mortgage lenders because it affects collateral security.
Question 6: What is 'laches' as a defense in condominium law disputes?
- A claim that the statute of limitations has expired
- A defense based on unreasonable delay in asserting a right that prejudices the other party (Correct answer)
- A defense based on the other party's fraud
- A claim that the association lacked standing to sue
Correct answer: A defense based on unreasonable delay in asserting a right that prejudices the other party
Laches is an equitable defense arguing that an unreasonable delay in bringing a claim has prejudiced the opposing party.
Question 7: The FHA (Federal Housing Administration) has specific approval requirements for condominium projects. Which ratio must typically be met for owner-occupancy to qualify a project for FHA financing?
- At least 25% owner-occupied
- At least 35% owner-occupied
- At least 50% owner-occupied (Correct answer)
- At least 75% owner-occupied
Correct answer: At least 50% owner-occupied
FHA generally requires that at least 50% of units in a condo project be owner-occupied for the project to be FHA-approved.
CCS Real Estate Law & Regulations 3
A condominium association files a lawsuit against a unit owner for unpaid assessments.
The association wins and records a lien.
What type of lien is this?