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

24 sample cards from the Professional Ethics, Antitrust, and Specialized Practice deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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).

11. 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.

12. 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).

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

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Professional Ethics, Antitrust, and Specialized Practice flashcards FAQ