Real Estate Broker License Exam Professional Ethics, Antitrust, and Specialized Practice Syllabus

What is a "group boycott" under antitrust law in real estate?

An agreement among competitors to refuse to do business with (or to disadvantage) a particular broker—often a discount or non-traditional brokerage—to restrain competition. It is a per se violation.

What is "market allocation" and why is it illegal?

An agreement among competing brokers to divide territories, customers, or property types to avoid competing. It is a per se antitrust violation under the Sherman Act.

What additional conduct does the Clayton Act address beyond the Sherman Act?

The Clayton Act targets practices that may lessen competition—such as tying arrangements, exclusive dealing, and anticompetitive mergers—and allows private parties to sue for treble (triple) damages.

What are the criminal penalties for a Sherman Act violation by an individual?

Up to $1 million in fines and up to 10 years in prison for individuals (and up to $100 million for corporations); injured parties may also recover treble damages in civil suits.

What is the core requirement for truthful real estate advertising?

Advertising must not be false, misleading, or deceptive—property descriptions, pricing, availability, and the licensee's status must be accurate and verifiable.

What is a "blind ad" and why is it prohibited?

A blind ad omits the licensed broker's identity/brokerage name, making it appear a private party is selling. Most states prohibit it; all licensee advertising must disclose the brokerage name.

Under most state rules, how must a real estate team advertise its name relative to the brokerage?

The team name must include a term like "team" or "group," must clearly display the affiliated brokerage's name (often in equal or greater prominence), and cannot imply the team is an independent brokerage.

What must appear in a salesperson's advertising regarding their employing broker?

The advertising must include the employing/responsible broker's name (the brokerage) so the public knows the salesperson works under a licensed broker, not independently.

What compliance rules apply to a licensee's social media posts about listings?

They must include required brokerage disclosures, be truthful and non-discriminatory, honor fair housing rules, keep listing information current/authorized, and follow the same advertising laws as traditional media.

Who is responsible for the accuracy and removal of an online listing once a property is sold or the listing expires?

The listing broker/agent must promptly update or remove the listing; leaving stale or sold listings active can constitute misleading advertising and may violate MLS rules.

What is a key fair housing risk specific to targeted digital advertising of housing?

Using ad-platform targeting to include/exclude audiences by protected characteristics (or proxies like ZIP code) can constitute illegal discriminatory advertising under the Fair Housing Act.

What disclosure does the CAN-SPAM Act and similar rules require in email/text real estate marketing?

Commercial messages must identify the sender, provide a valid physical address, avoid deceptive subject lines, and offer a functional opt-out/unsubscribe mechanism (and prior consent for texts under TCPA).

What is a leasehold estate?

A tenant's possessory interest in real property for a limited time under a lease; it is personal property (a chattel real), with the landlord retaining the reversionary fee interest.

Compare an estate for years and a periodic estate (tenancy).

An estate for years has a fixed beginning and ending date and terminates automatically with no notice. A periodic estate renews automatically period-to-period (e.g., month-to-month) and requires notice to terminate.

Define an estate at will and an estate at sufferance.

An estate at will continues for an indefinite term with consent of both parties and can be terminated by either (usually with notice). An estate at sufferance arises when a tenant holds over after a lease ends without the landlord's consent.

Compare a gross lease, a net lease, and a percentage lease.

In a gross lease the landlord pays operating expenses (tenant pays fixed rent). In a net lease the tenant pays rent plus some expenses (taxes/insurance/maintenance, e.g., triple net). In a percentage lease the tenant pays base rent plus a percentage of gross sales (common in retail).

What is the difference between an assignment and a sublease?

An assignment transfers the tenant's entire remaining leasehold interest to a new tenant. A sublease transfers only part of the term or premises, with the original tenant retaining a reversion and remaining liable to the landlord.

What is the implied covenant of quiet enjoyment in a lease?

A landlord's implied promise that the tenant may possess and use the premises without interference from the landlord or anyone with superior title; breach (e.g., constructive eviction) can release the tenant.

What is constructive eviction?

When a landlord's act or failure to maintain the premises makes them uninhabitable, allowing the tenant to vacate, stop paying rent, and treat the lease as terminated—provided the tenant actually moves out within a reasonable time.

What is a security deposit and what are typical statutory limits on its handling?

A prepayment to cover unpaid rent or damages beyond normal wear and tear. States commonly cap the amount (e.g., 1-2 months' rent), require it be held separately or in escrow, and mandate return within a set period (often 14-30 days) with an itemized statement of deductions.

For what may a landlord lawfully withhold from a security deposit, and for what may they not?

They may withhold for unpaid rent, repair of tenant-caused damage beyond normal wear and tear, and cleaning to the move-in condition. They may not withhold for ordinary wear and tear or for upgrades.

What is the difference between an actual eviction and a self-help eviction?

An actual (judicial) eviction follows the legal unlawful-detainer process with a court order. A self-help eviction (changing locks, removing belongings, shutting off utilities) is illegal in most states and exposes the landlord to liability.

What is the implied warranty of habitability?

A landlord's implied obligation (in most residential leases) to maintain the premises in a livable condition meeting basic health and safety standards—working plumbing, heat, water, structural safety, and code compliance—regardless of lease language.

What is retaliatory eviction and why is it prohibited?

Evicting or penalizing a tenant for exercising a legal right (e.g., reporting code violations or organizing tenants). It is prohibited; many states presume retaliation if adverse action occurs shortly after the protected activity.

What is a property management agreement and what relationship does it create?

A contract between an owner and a property manager (a general agent) authorizing the manager to operate the property; it creates an agency relationship with fiduciary duties and defines authority, fees, and term.

What essential terms should a property management agreement include?

Identification of the property, the manager's scope of authority and duties, management fee/compensation, term and termination provisions, reporting/accounting requirements, owner's responsibilities, and signatures.

What are the property manager's primary duties to the owner?

To produce the highest return consistent with the owner's goals—marketing and leasing, rent collection, maintenance and repairs, budgeting and accounting, tenant relations, and compliance with applicable laws (including fair housing).

How must a property manager handle tenant security deposits and rent receipts?

Keep them in a separate trust/escrow account (no commingling with the manager's or owner's operating funds), maintain accurate records, and account to the owner per the management agreement and trust-fund laws.

Which classes are protected under the federal Fair Housing Act?

Race, color, religion, national origin, sex (including sexual orientation and gender identity per HUD), familial status, and disability (handicap).

Give examples of prohibited fair housing practices in rentals.

Refusing to rent, setting different terms or fees, steering, discriminatory advertising, falsely denying availability, and refusing reasonable accommodations/modifications for disabled tenants based on a protected class.

What is the difference between a reasonable accommodation and a reasonable modification under fair housing law?

A reasonable accommodation is a change in rules/policies/services for a disabled tenant (e.g., allowing a service animal despite a no-pets policy). A reasonable modification is a physical alteration to the unit (e.g., a ramp), usually at the tenant's expense in private housing.

What is the formula for capitalization rate (cap rate) in investment analysis?

Cap Rate = Net Operating Income (NOI) / Property Value (or Purchase Price). Rearranged: Value = NOI / Cap Rate.

How is Net Operating Income (NOI) calculated?

NOI = Effective Gross Income (potential gross income minus vacancy/credit loss, plus other income) minus operating expenses. It excludes debt service (mortgage payments), depreciation, and income taxes.

What is the Gross Rent Multiplier (GRM) and how is it used?

GRM = Sale Price / Gross (Monthly or Annual) Rent. It is a quick comparison tool to estimate value: Value = GRM x Subject's Gross Rent. It ignores expenses and vacancy.

What is cash-on-cash return and how is it calculated?

Cash-on-cash return = Annual Before-Tax Cash Flow / Total Cash Invested (down payment + closing costs). It measures the return on the investor's actual cash, accounting for leverage.

How does the IRS allow depreciation of residential vs. commercial investment real estate?

Only the improvements (not land) are depreciated using straight-line: residential rental property over 27.5 years and commercial property over 39 years.

What is a Section 1031 like-kind exchange and its main tax benefit?

A 1031 exchange lets an investor defer capital gains tax by exchanging like-kind investment/business real property for another. Key deadlines: identify replacement property within 45 days and close within 180 days.

What is the Section 121 primary-residence capital gains exclusion?

Homeowners may exclude up to $250,000 (single) or $500,000 (married filing jointly) of gain on the sale of a primary residence, if they owned and used it as their main home for at least 2 of the prior 5 years.

What is the difference between an express and an implied warranty on new construction?

An express warranty is a written/stated promise by the builder (e.g., a one-year workmanship warranty). An implied warranty (warranty of habitability/good workmanship) arises by law that the home is built in a workmanlike manner and fit for habitation.

What is a certificate of occupancy and when is it required?

A document issued by the local building authority certifying that a new (or substantially renovated) structure complies with building codes and is safe to occupy; it is required before the property may be legally occupied.

What is a mechanic's lien and how does it relate to new construction?

A statutory lien that contractors, subcontractors, and suppliers can place on a property for unpaid labor or materials. It can attach even without owner consent and may take priority based on when work began, clouding title until resolved.