Q&A Hero

Q: Once possession and control are conveyed in a lease agreement, the owner must provide the tenant with uninterrupted use of the property without any interference from any entity that may threaten to impose upon the tenant's leasehold interest in the property. In other words, the tenant is entitled to which of the following? A. Quiet enjoyment B. Tenant improvement C. Concession D. Expansion option

Q: As with any valid contract, enforceable leases must meet a number of requirements. One of these requirements is for each party to provide appropriate consideration. In a lease, which of the following constitutes the landlord's consideration? A. Promise to pay rent B. Passing on legal title to the property C. Permission to occupy the space or property D. Commission to the leasing agent

Q: Josh is negotiating the sale of his car with Jonathan. Jonathan asks if the car has ever been in an accident and Josh replies, "no, it has never been in an accident." In fact, the car was nearly totaled the year before when Amanda, Josh's girlfriend, driving Josh's car, hit a wet spot and skidded into a pole. She had it repaired without telling him about the accident. Josh has committed: A.Fraud. B.Innocent misrepresentation. C.Injurious falsehood. D.Nothing because he thought he was being truthful and didn't intend to deceive Jonathan.

Q: The lease is a contract between a property owner and tenant that transfers exclusive use and possession of space to the tenant, but allows the owner to retake possession of the property at the expiration of the lease. Which type of interest allows the owner to retake possession at the end of a lease? A. Remainder interest B. Reversion interest C. Spousal interest D. Co-ownership interest

Q: You can commit a civil assault without committing a civil battery.

Q: Chapter 22 " Leases and Property Types

Q: The United States is the only country in the world in which punitive damages are regularly awarded.

Q: Suppose that a property owner plans on spending $15,000 per year over the next 5 years on maintenance and repairs. However, if she does not spend this amount, she will not be able to keep rents at market levels, vacancies will increase, and the resale value of the property in 5 years will be lower. Assume that she would lose about $7,000 a year in net income and would realize a loss of $85,000 in lower property value at the time of sale if maintenance is not maintained on the property. Determine the difference between the present value of the cost of maintaining the property and the loss to the owner if the property is not maintained assuming that the owner could earn a 7 percent return on any funds not invested in maintenance and repairs? A. The present value of the maintenance costs is $27,802 less than the present value of the averted loss B. The present value of the maintenance costs is $27,802 greater than the present value of the averted loss C. The present value of the maintenance costs is $32,802 less than the present value of the averted loss D. The present value of the maintenance costs is $32,802 greater than the present value of the averted loss

Q: In evaluating potential tenants for residential rental properties, a landlord may be interested in calculating the ratio of prospective rent to income for the applicant. Given the following information, calculate the rent to income ratio for the applicant. Applicant's Gross Annual Salary (Income): $45,000; Prospective Monthly Rent: $1,000; Applicant's Annual Income Tax and Benefit Payments: $7,650. A. 2.22% B. 2.68% C. 26.67% D. 32.13%

Q: Meeting federal standards immunizes manufacturers from strict products liability suits.

Q: Given the following information, calculate the leasing agent's commission in dollar terms. Lease Term: 10 years, Monthly Rent: $5,000, Commission: 3%. A. $150 A. $1,500 C. $1,800 D. $18,000

Q: Assumption of the risk may be express or implied.

Q: Suppose an owner is trying to decide whether or not to make improvements to her property. Given the following information, what would be the value added or potential loss if the improvements are undertaken? Current rent per square foot: $8.75, Anticipated rent per square foot: $14.50, Cost of improvements: $250,000, Square feet: 34,000. A. Gain of $54,500 B. Loss of $54,500 C. Gain of $195,500 D. Loss of $195,500

Q: For negligence, the plaintiff must prove the defendant was the actual and proximate cause of the harm.

Q: A property management contract establishes an agency relationship between the manager and the owner. Considering that the management fee is often calculated as a percentage of gross income, this would seem to create an agency problem in that the agreement does not give managers the incentives to control operating expenses while they attempt to increase rental income. Though seldom the case, basing the property management fee on which of the following measures would, in theory, better align the interests of the owner and manager?A. Effective gross incomeB. Net operating incomeC. Miscellaneous incomeD. Capital expenditures

Q: Damages that repay an injured party for past and future medical expenses are called compensatory damages.

Q: You are guilty of the tort of conversion if you purchase stolen goods, even if you didn't know that they are stolen.

Q: Despite the magnitude of their real estate holdings, many non-real estate corporations have historically expended little effort to manage these assets effectively. Recently, the development of which of the following markets has helped to quell concerns related to this issue? A. Commercial mortgage backed securities (CMBS) B. Sale-leaseback C. Tenancy-in-common (TIC) D. Installment sale

Q: In contrast to maintenance and repair expenditures, which are operating expenses, the improvement decision generally involves a capital expenditure meant to increase the value of the structure. Which of the following classifications of improvements calls for the restoration of a property to satisfactory condition without changing the floor plan, form, or style of the structure? A. Rehabilitation B. Remodeling C. Adaptive reuse D. Conversion

Q: In malpractice cases, the standard of reasonableness applied is that of the reasonable person.

Q: Lilly Lawyer charges Careless Client $500 per hour for legal services. This is an example of a contingency fee.

Q: With a performance-based management contract, an asset manager's fees are tied directly to the rate of return earned by investors on the portfolio of managed properties relative to a benchmark. In private commercial real estate, the choice of benchmarks for performance is limited in large part to return indices provided by which of the following organizations? A. Standard and Poor's B. National Association of Real Estate Investment Trusts C. National Council of Real Estate Investment Fiduciaries D. Wilshire Associates

Q: If a professor, during class, accuses a student of being a thief when in truth the student had never stolen anything in their life, the professor is guilty of libel.

Q: Real estate asset managers perform certain functions that would not be expected of asset managers who deal with stock and bond portfolios. Which of the following functions would you expect both asset managers in real estate as well as stocks / bonds to perform? A. Find specific assets in which the owners/client can invest B. Monitor asset performance C. Negotiate the acquisition price of assets D. Oversee due diligence and closing

Q: While college-level courses are not widely available, a number of professional and trade organizations exist in the field of property management. Which of the following certifications awarded by the Institute of Real Estate Management is aimed at individuals who manage larger, residential, office, industrial, or retail properties? A. Certified Property Manager (CPM) B. Accredited Resident Manager (ARM) C. Real Property Administrator (RPA) D. Member of Appraisal Institute (MAI)

Q: Workers' Compensation laws deal with minimum wage and overtime rules.

Q: Your roommate is away for the weekend and you take her Accounting 101 book to study in the library. She has not given you permission but you intend to return before she returns so you don't think that it would matter. While in the library, the book is stolen. Your roommate can sue you for conversion.

Q: Both owners and managers must carefully designate their responsibilities in the management agreement. In a management agreement, all of the following would typically be responsibilities of the property manager EXCEPT: A. Maintenance of financial accounts for money collected from tenants B. Liability C. General property management D. Reports on property performance

Q: Juries award punitive damages in only about 2% of litigated cases.

Q: While some property owners choose to perform both the property and asset manager functions themselves, many commercial property owners choose to employ professional property managers instead. The property manager works under a management contract in which the manager is empowered to serve as the owner's fiduciary. This type of relationship is more commonly referred to as a(n): A. agency relationship B. open listing relationship C. joint-venture D. correspondent relationship

Q: If someone is found guilty of a civil assault, one possible penalty is going to jail.

Q: An owner whose property is in a strong market position, where fewer services can be offered to tenants for the same dollar of rental income and where the owner will not lose tenants if the property is undermaintained, is said to participate in a market that has: A. a relatively elastic demand for space B. a relatively inelastic demand for space C. economies of scale D. diseconomies of scale

Q: Trespass to land requires that the trespasser deprive the land owner of use and enjoyment by damaging the property.

Q: Maintenance and repair of a property is an ongoing process that can be divided into four principal categories. Which of the following classifications includes ordinary repairs to a building on a day-to-day basis (e.g. repairing a broken window, fixing a leaking roof)? A. Custodial maintenance B. Corrective maintenance C. Preventive maintenance D. Deferred maintenance

Q: Bill collectors are often targets of intentional infliction of emotional distress lawsuits, while retailers trying to stop shoplifters are frequently the defendants in false imprisonment suits.

Q: Publication, with regard to defamation, requires that the lie be printed and distributed to the public.

Q: Concerned with a potential information asymmetry problem, state legislators have been proactive in passing legislation that protects the rights and interests of tenants within which of the following property types? A. Office B. Retail C. Industrial D. Apartment

Q: In many jurisdictions, to successfully sue for the intentional infliction of emotional distress, the injured party must prove both emotional distress and physical symptoms.

Q: The lease is a contract between the owner and the tenant that transfers exclusive use and possession of the space to the tenant in return for rent or other consideration. In this arrangement, the owner is referred to as the: A. lessor B. lessee C. agent D. benchmark

Q: A defendant can be found liable for a strict liability tort even though the defendant was shown to be neither intentionally nor negligently the cause of the harm.

Q: When property managers are looking to secure a mix of tenants for which "the whole is greater than the sum of its parts," or in other words a group of tenants that shares similar characteristics such that the experience of living together is mutually beneficial, they are seeking what is referred to as: A. permanence potential B. synergism C. rehabilitation D. adaptive reuse

Q: A tort is any civil (non-criminal) wrong.

Q: For residential properties, the ratio of prospective rent to gross monthly income is a valuable screening tool in judging a potential tenant's ability to fulfill rent obligations. Generally, this ratio should not exceed: A. 10% B. 20% C. 30% D. 40%

Q: Regarding strict liability, name and explain the two types of product defects that give rise to liability.

Q: When leasing nonresidential properties, owners would prefer to rent exclusively to high quality tenants. Such owners will tend to seek out companies whose general debt obligations are rated "investment grade" by one of more of the U.S. rating agencies. These potential tenants are more commonly referred to as: A. tenant reps B. credit tenants C. tenant mix D. in-house leasing agents

Q: Leases are considered the engines that drive property values. Therefore, it should not be surprising that owners of commercial property may seek an independent leasing broker to focus on finding tenants to lease space. In exchange for their services, leasing brokers are paid a commission based on what percentage of the face amount of the lease? A. 0.5 to 1.5% B. 3 to 5% C. 7 to 10% D. 15 to 20%

Q: Name and explain the three main categories of torts.

Q: What is proximate cause and how does it affect liability for negligent conduct?

Q: The real estate industry applies which of the following labels to individuals who are responsible for the decisions that affect the physical, financial, or ownership structure of the property. A. Asset manager B. Property manager C. Leasing manager D. Regional manager

Q: Commercial real estate returns are determined in no small part by how well the ongoing management function is performed. Management decisions can be classified into two categories: property management and asset management. Which of the following functions would be considered a primary responsibility of an asset manager? A. Property acquisitions and dispositions B. Marketing a property to prospective tenants C. Maintaining the condition of the property D. Signing leases

Q: What must the plaintiff prove in a negligence case?

Q: Unlike many publicly traded stock and bond investments, commercial real estate investments: A. can be bought and sold in highly liquid markets. B. yield maximized returns when assets are held for short periods of time. C. yield returns generated mostly from the asset's net operating income, rather than price appreciation. D. have going-in and going-out transaction costs that are low (as a proportion of asset value).

Q: What are the possible types of damages that may be awarded to a successful plaintiff in a tort action? Explain their purpose(s).

Q: Accelerated methods of depreciation result in greater depreciation allowances than straight-line depreciation in the early years of the depreciation schedule. Suppose a personal property is eligible for a three-year cost recovery period and can be depreciated using 200 percent declining balance depreciation. Calculate the accelerated depreciation rate in the first year.A. 14.28%B. 28.57%C. 33.33%D. 66.66%

Q: What are UCC gap-filling provisions? Give an example and explain how and why are they applied?

Q: The tax treatment of up-front financing costs calls for these expenses to be amortized over the life of the loan. However, if the loan is prepaid prior to the term of the loan (perhaps because the property is sold), the tax treatment of these costs changes. If up-front financing costs on a 30-year loan total $6,000, and the loan is prepaid in full at the end of year 5, what is the maximum amount that the investor can deduct when calculating taxable income from rental operations in year 5? A. $5,000 B. $5,200 C. $5,600 D. $6,000

Q: Why does the statute of frauds exist for the types of contracts that it covers?

Q: The use of mortgage debt to finance an income property investment has certain tax consequences. For example, up-front financing costs for investment properties are not fully deductible in the year in which they are paid. Instead, they must be amortized over the life of the loan. If up-front financing costs on a 30-year loan total $6,000, what is the maximum amount per year that the investor can deduct when calculating taxable income from rental operations? (Assume that there is no prepayment on the loan) A. $100 B. $200 C. $2,400 D. $6,000

Q: On April 1st, Billy Bob passes a gun store and sees an AK-47 automatic rifle in the window on sale. Thinking that it would be perfect for hunting squirrels, he asks about the gun and the store owner says that he has a crate of them. He tells Billy Bob that the sale is good for one more week. Billy Bob gives the owner a deposit of $100 to hold one for him till payday. On April 4th, the state legislature passes a statute banning private ownership of automatic weapons. When Billy Bob goes into the store on April 5th is he entitled to purchase the weapon? Explain.

Q: Given the following information, calculate the taxes due on sale for the following fully taxable sale. Net Sale Proceeds: $1,500,000, Adjustable Basis: $830,000, Depreciation Recapture: $150,000, Capital Gain Tax: 15%, Depreciation Recapture tax: 25%. A. $37,500 B. $78,000 C. $100,500 D. $115,500

Q: Explain how conditions precedent and conditions subsequent affect a contract?

Q: Given the following information, calculate the depreciation allowance for year 1. Depreciable Basis: $200,000, Declining Balance Depreciation: 175%, Cost Recovery Period: 27 years. A. $3,704 B. $6,481 C. $7,407 D. $12,963

Q: If a contract contains ambiguous terms, how will the court interpret and resolve the ambiguities?

Q: Given the following information, calculate the straight-line depreciation rate for the first year using the midmonth convention. Cost recovery period: 27 years, Date of purchase: April 10th. A. 2.6% B. 3.63% C. 19.5% D. 70.8%

Q: What are the four exceptions to the statute of frauds requirement that sales of goods contracts be in writing?

Q: Homeowners receive preferential tax treatment under current federal income tax laws. The benefits that homeowners receive from this treatment include all of the following EXCEPT: A. Appreciation in the value of the home that has occurred since the time of purchase is excluded from federal taxable income B. Homeowners can deduct their mortgage interest expenses on both first (primary) and second homes from federal taxable income C. Homeowners can deduct local property taxes from federal taxable income D. Losses on the sale of a personal residence can be deducted from federal taxable income

Q: Giselle has just graduated and been offered a job. In fact they have offered her a job for the rest of her life. Under the statute of frauds, does this contract have to be in writing? Why or why not?

Q: The tax treatment of real estate holdings that are classified as trade or business property and are held for more than one year is more commonly referred to as which of the following sections of the tax code? A. Section 1231 B. Section 1031 C. Section 856 D. Section 851

Q: When may oral evidence be presented after a written contract has been agreed to?

Q: Name the four types of contracts specified in the text that must be in writing to be enforceable under the statute of frauds.

Q: Sharon purchased a new photocopier for her business. According to her accountant, she can deduct 1/7th of its original cost each year for the next seven years from her taxable income. This depreciation method is commonly referred to as: A. declining balance method B. straight line method C. sum of the years' digits method D. modified accelerated cost recovery system

Q: How does the statute of frauds view a promise to guarantee another's debt and the promise to become liable should another party perform?

Q: Johnson Builders is in the new residential construction business. They built a house that sat empty for 6 months after its completion. This type of property would be categorized as a: A. personal residence B. dealer property C. trade or business property D. investment property

Q: In Norfolk Southern Railway Company v. Kirby Pty. Ltd. d/b/a Kirby Engineering, the court analyzed the effect of a Himalaya Clause. What does a Himalaya Clause do or say? A.It extends a principal's liability limitation to independent contractors that the principal deals with but removes it from the principal's agents. B.It removes a principal's liability limitation with regard to independent contractors that the principal deals with extends it to the principal's agents. C.It extends a principal's liability limitation to the principal's agents and independent contractors that the principal deals with. D.It removes a principal's liability limitation with regard to the principal's agents and independent contractors that the principal deals with.

Q: All taxable income from investment property sales must eventually be classified as either ordinary income, depreciation recapture income, or capital gain income. What is the maximum tax rate that an investor can be charged on depreciation recapture income? A. 10% B. 15% C. 25% D. 35%

Q: Which of the following is not covered by the statute of frauds? A.Contracts for the sale of land. B.Contracts to pay the debt of another. C.Contracts which cannot be performed within one year. D.A loan of $50,000.00 to be paid back in six months.

Q: The benefit of being classified as a capital gain is that the income is subject to a tax rate that maxes out at 15%, which may be well below the tax rates associated with depreciation recapture income and ordinary income for a particular investor. In order to qualify for the lower capital gain tax rate, the property being sold must be held for more than: A. 1 month B. 3 months C. 6 months D. 12 months

Q: Words with an interpretation or meaning particular to an industry are said to be or have: A.Trade lingo. B.Industry custom. C.Business banter. D.Trade usage.

Q: In a like-kind exchange, property owners must meet a number of conditions in order to be eligible to take advantage of this tax deferment. One criterion is for the exchange to be between "like-kind" properties. Which of the following exchanges represents an example of an eligible "like-kind" exchange? A. An apartment property for shares in a publicly traded REIT B. A retail property in the U.S. for a retail property in China C. An office property for a principal residence. D. A retail property for an office property, both within the U.S.

Q: American Paper, Inc. enters into a contract to purchase all of the trees currently growing on a 500 acre tract of land. They will be cutting the trees down, shipping them to a mill and processing them into paper. A.The contract may be oral because living trees are not goods under the statute of frauds. B.The contract may be oral if it can be completed within one year. C.The contract may oral because they are not buying the land itself. D.The contract must be in writing because purchasing the attached trees is considered a contract for an interest in real property.