Real Estate Fundamentals: Understanding Property, Contracts, and Fair Housing Laws, Exams of Advanced Education

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IL Leasing License Terms Exam

Questions and Answers

Land/Realty - Answer- Consists of the surface, subsurface and airspaces along with anything that is permanently attached to it Surface - Answer- is what we can see when we look at the property Subsurface - Answer- The space beneath the surface and extends to the center of the earths Subsurface rights - Answer- mineral rights, oil and gas rights, and sometimes water rights Airspace - Answer- the space above the surface and extends into infinity Air rights - Answer- the right to use all of the airspace above the surface (ex. allowing airplanes to fly over someone's land as long as this use does not interfere with the landowners enjoyment of the property) Improvements - Answer- man-made objects that are directly attached to the land (ex. Building, fence, or landscaping. Also includes man-made, publicly-owned structures ex. streets, sewers, gutters) Real Property is - Answer- land and improvements that are permanently affixed to the land

1. permanence
2. non-homogeneity
3. immobility Non-homogeneity - Answer- its unlike every other parcel of land Personal property - Answer- Includes all movable items, objects, or property not permanently affixed to the land. Courts consider the rights acquired through a residential lease to be personal property Fixture - Answer- personal property that is permanently attached to real property. (Once an item of personal property becomes a fixture, it take son the characteristics of real property and is considered real property)

Trade fixtures - Answer- an item of personal property that does not become a fixture because it is attached to real property for a business purpose (ex. walk-in freezers in a food store) Identifying a fixture: - Answer- -How the item is attached -Whether the item has been customized to the underlying real property -The actual intent of the individual attaching the object -The specific agreement of the parties to the sale or lease Ownership in severalty - Answer- ownership by one person or entity Concurrent ownership - Answer- ownership by a group Tenancy in common - Answer- a form of co-ownership in which ownership interests of a deceased owner can be passed along to the owners chosen heirs Joint tenancy - Answer- A form of co-ownership Contracts - Answer- legal binding promises Implied contracts - Answer- A contract that is formed by the actions of the parties and are not stated orally or in writing. (ex. tenants who live on the 2nd floor of a 3-flat believe they have the right to use to stairwell in building as does the landlord, even though this is not written in the lease) Express contracts - Answer- Specific oral or written agreements of two or more parties Unilateral contracts - Answer- A contract in which one party makes a promise to do something if another party performs a specific act. (ex reward offered to a person who finds a lost dog) Bilateral contract - Answer- formed when two parties exchange promises (ex. a lease) Executory contract - Answer- Not all of the promises or terms of the contract have been fufilled Executed/Discharged contract - Answer- All of its promises or terms have been fulfilled Assignment - Answer- The act of one party to a contract allowing someone else to assume all of his/her rights under the contract Novation - Answer- Occurs when all parties to the contract agree to a substitution of one of the parties to the contract by creating a new agreement

Menace - Answer- The threat to use force Undue influence - Answer- occurs when someone uses their position to influence another party, thereby causing that party to do something they would not have otherwise agreed to Breach of contract - Answer- occurs when one of the parties to a contract violates the terms of the agreements without a legal reason Rescind the contract - Answer- Contract is cancelled and treated as if it never existed Ask a court to award monetary damages - Answer- money awarded to the injured party of a breached contract by the court system Compensatory measure in a contract breach - Answer- Intended to return the injured party to the financial condition they were in before the breach occurred Punitive measure in a contract breach - Answer- Intended to punish the party who breached the contract Enforce specific performance - Answer- The party who breached the contract must perform as originally agreed Lease - Answer- a bilateral contract in which the lessor promises to provide exclusive possession of the property to the lessee in return for the lessee's promise to pay rent Lessor - Answer- the owner or landlord giving the lease Lessee/tenant - Answer- the person receiving the lease Leasehold estate/leasehold interest/tenancy - Answer- the rights that the tenant acquires in the lessors property, which are attached to the property rather than the lessor Tenancy for years - Answer- A specific timeframe/definite period of time for any length of time ex. hours, days, weeks, months, years -Does not require notice to terminate -The lease period ends upon the expiration of the specified time period Periodic tenancy - Answer- No specific ending date, Automatically renews itself and goes from period to period ex. week-to-week, month-to-month or year-to-year lease Residential periodic leases that renew automatically, generally are for short terms and are not in writing

Tenancy at will - Answer- No definite duration, only exists at the will of the parties. Needs notice of termination Tenancy at sufferance - Answer- Created when a lessee who was once entitled to occupy the premises stays after his/her rights have ended ex. Expired lease term Wrongfully possessing the owner's property aka illegal Holdover tenancy - Answer- Created when a lessor accepts rent from a tenant whose lease has terminated Acceptance of rent is considered to be ratification of the tenant's right to continue occupying the property Treated as a month-to-month lease (periodic tenancy) Acceptance by ratification - Answer- if the tenant does not sign the lease but takes possession of the premises, this is recognized as acceptance by the courts Assignment and sublet clauses - Answer- the act of one party to a contract allowing someone else to assume all of his/her rights under the contract is assigning, and the transfer of a portion of the lease term with reversion to the lessee is subletting. Repair and maintenance clauses - Answer- clearly stated which repairs or maintenance tasks are the responsibility of the lessor and which are of the lessee Improvements clause - Answer- states which rights the lessor will have to enter the premises to make improvements as well as what the tenant is allowed to do with regard to improvements of the property Destruction clauses - Answer- describes what rights and responsibilities the lessor and lessee have if the premises is partially or completely destroyed Provisions of law clauses - Answer- statements required by local, state, and federal laws. Fair housing and human rights provisions would be part of these laws Unenforceable clauses - Answer- a lease clause that makes each clause separate. If one clause is deemed incorrect or unenforceable, it will not invalidate or affect any other part of the lease Termination clauses - Answer- stating the method and procedure for ending the lease When a lease terminates, the right to possess the property is returned to the lessor Voluntary termination - Answer- automatic upon expiration of its term or through surrender and acceptance at any time during its term Surrender and acceptance - Answer- indicates the mutual agreement of parties to terminate the lease

Security deposits - Answer- money taken from the tenant at the time the lease is created in order to protect the landlord in the event that the tenant damages the property or does not pay all the rent before vacating the premises Requirements for security deposits - Answer- 1. A lessor of residential property of five or more units cannot withhold any portion of a security deposit to cover property damage unless an itemized statement of damages is sent to the lessee

2. Lessors of residential buildings that have 25 or more units must pay interest annually on security deposits that are held longer than six months Special accounts/ "trust accounts"/ escrow accounts - Answer- an account that holds the security deposits, separate from the sponsoring broker's and the landlord's funds. Commingling - Answer- depositing personal funds in a special escrow account established to hold funds belonging to others Civil Rights Act of 1866 - Answer- guarantees property rights (to inherit, purchase, sell or lease real and personal property) to all citizens regardless of race No impact on private discrimination Fourteenth Amendment 1868 - Answer- prohibits state governmental discrimination Fifth Amendment's due process clause was newly interpreted to prevent racial discrimination by the federal government Equal Opportunity in Housing 1962 - Answer- prohibits discrimination in housing that is owned, operated, or assisted by the federal government based upon race, color, creed, and national origin The first federal antidiscrimination initiative of the 20th century Limited impact on housing market Title VI of the Civil Rights Act of 1964 - Answer- prohibits racial discrimination in programs receiving federal financial assistance Not in the private housing market Fair Housing Act (Title VIII of the Civil Rights Act 1968) - Answer- bans discrimination on the basis of race, color, religion, or national origin in most types of housing transactions private discriminator acts ex. the refusal to rent or sell real estate, discrimination during sale or rental transactions, blockbusting, and discrimination in real estate advertising Fair Housing Act 1974 - Answer- expanded to prohibit discrimination on the basis of gender Includes legal remedies to counteract housing discrimination

Fair Housing Amendments Act of 1988 - Answer- the addition of two protected classes (1) families with children and (2) handicapped persons, and granting Department of Housing and Urban Development (HUD) greater authority of enforcement A landlord is prohibited from refusing to make reasonable accommodations in rules, policies, practices or services if it is necessary for the disabled person to use the housing The Fair Housing Amendments Act of 1988 Protects: - Answer- Race Color Religion National origin Sex Physical/Mental handicap Hearing, mobility, and visual impairments Chronic alcoholism Mental illnesses Mental impairments AIDS-related illnesses Familial Status An adult who lives with someone under the age of 18 Someone who is pregnant An adult who has or will have custody of a child Exemptions From/Limitations to the Fair Housing Act: - Answer- -Private Owner Exemption -Religious Organizations -Private Clubs -Occupancy Standards -Drug Conviction -Health & Safety -Housing for Elderly Private Owner Exemption from FHA - Answer- The private sale of a single-family home is exempt if: -the owner does not own more than 3 single-family homes -the home is sold without the help of a real estate agent -no discriminatory advertising is used -the owner either was the most recent occupant of the home or has not already used this exemption during the previous 24 months -Mrs Murphys Boarding house rule Mrs Murphys Boarding house rule - Answer- Dwellings containing living quarters occupied by no more than four families living independently of each other if the owner maintains and occupies one of such living quarters at his/her residence

Steering - Answer- occurs when a licensee attempts to direct a prospect to a particular area based on the person's race, color, sex, religion, etc. Testers - Answer- private groups and governmental entities ("prospective tenants") monitor a licensee's behavior to determine if they are violating any fair housing laws or regulations Americans With Disabilities Act 1990 - Answer- must be obeyed by private employers and providers of public accomodations Nonresidential and public goods and services must be accessible to the disabled persons Title III of the ADA 1992 - Answer- prohibits all private entities that own, operate or lease a place of public accommodation from discriminating against an individual on the basis of a disability place of public accommodation - Answer- a privately owned business or facility that affects commerce ex. Lodging, recreation, education, entertainment, public transportation, etc. Requires that owners and tenants of public accommodations to remove barriers and make readily achievable modifications = accomplished with minimum difficulty or expense (Maximum civil award is $55k for a first violation, $110k for subsequent violations) Section 8 Housing Assistance Payments (HAP) - Answer- a rent subsidy program that assists eligible, low-income families in obtaining decent, safe, and sanitary housing Federal government, through HUD's Office of Housing, provides assistance through rent subsidies Housing assistance payment - Answer- rental subsidy equal to the difference between their share of the rent and the rent charged by the owner -Low income families: income is no higher than 80% of the area median -Rents must be within the fair market rent (FMR) for the area and type of housing Section 8 Voucher Program - Answer- financial assistance for eligible tenants who wish to live at section 8-eligible housing Leasing agent license - Answer- can only engage in activities directly associated with residential real estate leasing. (-18 years old -Can practice without license for 120 days, only if sponsored by a managing broker -Must be enrolled in a pre-license class within 90 days 120 days to successfully complete the course and state examination, and make application for a license

-Must complete 6 hours of continuing education for each renewal period; expires july 31st of even-numbered years -Activities may include: leasing or renting of residential real property, collecting rent, negotiating leases, and attempting, offering, or negotiating to lease, rent, or collect rent for the use of residential real property) Broker license - Answer- may be issued to individuals or legal entities such as corporations, partnerships, and limited liability companies (-21 yrs or older, completion of high school or equivalent -Complete 90 hours course work, 30 hrs post-license education -Must complete 12 hours of continuing education for each renewal period; expires april 30th of odd-numbered years -Can assist the public in sales or leasing transactions involving all types of real property -Does not allow someone to collect compensation for brokerage services directly from the public or from other sponsoring brokers -All brokers must collect all compensation for brokerage services through their sponsor) Managing broker license - Answer- an individual or business entity that can assist the public in sales or leasing transactions involving all types of real property (-21 yrs or older, completion of high school or equivalent -Complete 45 hours of managing broker pre-license education have been licensed at least 2 yrs -The only real estate licensees who are allowed to supervise other licensees -Can sponsor themselves or be sponsored by another managing broker -Leasing agent and broker licensees must both be sponsored by another managing broker and every real estate office must have a managing broker -Required if an individual or business entity wishes to act as a sponsoring broker) Sponsoring broker license - Answer- is allowed to enter into agreements and collect compensation directly from the public To terminate the relationship with another licensee, sponsor must... - Answer- 1. Sign the licensee's license indicating the date of termination of sponsorship

2. Make copies of the license
3. Return the original license to the licensee
4. Mail a copy of the terminated license to the IDFPR within two days of termination Inoperative status - Answer- a licensee who is not sponsored by a managing broker Non-renewed status - Answer- once a license has expired and the licensee does not renew Expired licenses maybe be renewed as a late renewal during the two-year period following the date of expiration

Exclusive brokerage agreement - Answer- a written agreement between a sponsoring broker and a client who will receive exclusive representation and the following minimum services -Accepting offers and counteroffers -Delivering offers and counteroffers -Assisting the client with communicating and negotiating the presentation of notices, offers, and counteroffers -Answering the client's questions regarding these matters Blind advertising - Answer- includes any real estate advertisement that does not include the sponsoring broker's business name (illegal) Framing - Answer- occurs when linked content from one site is displayed to look like it is part of your own site; authorization must be obtained before "framing" content from another brokerage/multiple listing services' website. Company Policy: must maintain a policy manual addressing the following - Answer- Agency Discrimination Confidentiality Advertising Training Supervision Disclosure Risk management Escrow Agency - Answer- the legal relationship created when one person represents another Is expected to advise and be an advocate for his/her principal Principal/client - Answer- the person being represented; a consumer who is represented by a licensee A licensee's obligations to a client are not the same as a consumer* Consumer - Answer- a person or entity who is seeking or receiving real estate brokerage services without forming an agency relationship Ministerial acts - Answer- administrative or informative activities that do not rise to the level of representation Confidential information - Answer- information that could harm the client's negotiating position Stigmatized property - Answer- property that might be undesirable because it was the site of a presumably negative event ex. Suicide or alleged ghost sighting occurred. (If it doesn't apply to the physical condition of the home do not have to disclose)

Unlicensed practice - Answer- Unlicensed practice: results in the qualification for an investigation by the department who can collect a civil penalty up to $25,000 per offense Civil penalties must be paid within 60 days Grounds for Discipline - Answer- disciplines for the violation of fair housing laws by licensees Illinois Department of Financial and Professional Regulation (IDFPR): -refuse to issue or renew license -place a licensee on probation -suspend or revoke licensure -reprimand licensee -impose a civil penalty up to $ Guaranteed sales plan - Answer- an arrangement between a licensee and an owner in which the licensee lists the seller's property and promises to purchase the property if it is not sold within a specific time frame Injunction - Answer- a court order that forces someone to stop doing a specific act Class A misdemeanor - Answer- individual found guilty of falsely acting as a licensee Class 4 felony - Answer- repeated offense Real Estate Recovery Fund - Answer- The purpose of this fund is to reimburse the public when a licensee's actions result in the loss of actual money rather than market value ( injured parties can recover up to $25,000 plus attorneys' fees) Real Estate Administration and Disciplinary Board - Answer- -9 member board appointed by the governor -Members must be IL residents for at least 6 yrs prior to appointment -6 members need to have been a broker licensee for at least 10 yrs -3 members need to represent consumer interests and must not be licensed under the act, not be married to a licensee, and not own an interest in real estate brokerage Real Estate Coordinator - Answer- oversees the IDFPR's real estate division and reports to the department's secretary Peer review advisers - Answer- individual licensees-hired by the department-to assist in investigations of alleged violations of the law Real Estate License Administration Fund - Answer- all money received by the department is to be deposited into this fund, money is used to pay expenses of the department for administration of the act