Real Estate Law: Understanding Property Types, Contracts, and Fiduciary Duties, Exams of Nursing

Download Real Estate Law: Understanding Property Types, Contracts, and Fiduciary Duties and more Exams Nursing in PDF only on Docsity! Page | 1 ILLINOIS LEASING AGENT EXAMS 2 2024 |VERSION (A &B) WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED RATIONALES ANSWERS BY EXPERTS |FREQUENTLY TESTED QUESTIONS AND SOLUTIONS |ALREADY GRADED A+|LATEST UPDATE The Illinois Human Rights Act recognizes and protects age for persons above the age of what? 40 years or older. According to Illinois law, licensees must give disclosure of their status to who? Clients and Customers What is the minimum age to obtain a managing broker's license in Illinois? 20. Illinois has a real estate license reciprocity agreement with: Some States; Colorado, Connecticut, Florida, Georgia, Indiana, Iowa, Nebraska, Wisconsin An unlicensed employee may NOT do the following? Negotiate or agree to any commission, commission split, management fee, or referral fee on behalf of a licensee. If an Illinois real license agent places an ad on the Internet offering his services as a real estate agent. Under state law, at a minimum, what are Illinois real licensees required to include? The name of their brokerage and franchise (if applicable). Under agency law in Illinois disclosed dual agency is? Legal with the consent of all parties. How many days must an aggrieved person give written notice to the Department within 30 days of the entry of any judgment that may result in collection from the Real Estate Recovery Fund? 30 Days Per section 15-75 of the Illinois Real Estate License Act, there are minimum services required when there is an exclusive brokerage agreement in place. Which of the following of these examples is NOT required? Page | 2 Concealing adverse facts pertaining to the physical condition of the property at the client seller's request that is known by the licensee but not by the prospective buyer. Is Illinois a Community Property state? No. All escrow funds received by the Sponsoring/Managing Broker shall be deposited into the broker's escrow account when? No later than the next business day. Who appoints the members of the Illinois Real Estate Administration and Disciplinary Board? The Govenor. To become a managing broker in Illinois a licensee must have had an active real estate license for at least: Two of the past 3 Years. Which Illinois fund was established for research and education at state institutions of higher education or other organizations for research and for education to further the advancement of education in the real estate industry? Real Estate Research and Education Fund A managing broker who has supervisory responsibilities for licensees in one or, in the case of a multi- office company, more than one office and who has been appointed as such by the sponsoring broker registered with the Department is called what? Designated Managing Broker There are many protected classes according to Illinois Fair Housing law and the Illinois Human Rights Act. Which of the following is not a protected class? Credit A broker named Thomas works for Linda, owner of L&L Realty. Thomas decides to spend some of his own money to take out an extra ad for a property he really wants to sell. Which of the following statements about his ad and this situation is true? The ad must be under the sponsoring broker's name but can include Thomas's name. What is the purpose of the Real Estate Recovery Fund? To provide a means of compensation for actual monetary losses suffered by individuals as a result of the acts of a licensee who violated the license law. How many members are there in Illinois Real Estate Administration and Disciplinary Board in total? 15 Page | 5 Principal amount. Justin takes out a mortgage loan that requires monthly payments of $650.50 for 25 years and a final payment of $30,000. What type of loan is this? Balloon loan. A salesperson working for Trinity Real Estate LLC has moved to Lotus Realty. What happens to the listings the salesperson took at Trinity Real Estate LLC? The listings belong to Trinity Real Estate LLC. Local zoning ordinances often regulate all of the following except? Market value of property. Is replacement cost and reproduction cost the same thing and if it is different, what is the difference? No, the reproduction cost process looks at the cost of creating an exact replica, while with the replacement cost process, it looks at the cost of replacing an insured property with one of similar functionality. What is it called when parties have fully performed the terms of a contract? Executed Market value is? The price the property is sold for or an estimate of the present property plus future potential. Which of the following best describes the prepayment penalty clause? The statement that a lender can penalize a borrower if the borrower pays off the mortgage much sooner than usual. Fees that the buyer pays to close the deal are called: Closing costs. The deed that offers the grantee the most protection. With this type of deed, the grantor makes a series of legally binding promises (called covenants) and warranties to the grantee agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land. General Warranty Deed In real estate, a deed is best defined as: A written legal document by which ownership of real estate is conveyed from one party to another. A contract for the sale of real estate that does not state the consideration to be paid for the property and is not signed by the parties is considered what? Void Page | 6 A bilateral contract is one in which the promise of one party is given in exchange for the promise of the other party. Under the terms in a mortgage, the lender must be paid in full if the property is sold to another person. This is known as the? Alienation Clause Which act amended the comprehensive environmental response, compensation, and liability act (also known as CERCLA)? SARA What is a one-of-a-kind contract that is solely between the seller and the buyer. In this arrangement, the seller gives the buyer the option to purchase property at a given price for a set period? An option contract. What is the difference between a lease option contract and lease purchase contract? The difference between a lease option and a lease purchase agreement is that the lease option only obligates the seller to sell. The real estate contract clause that almost always begins with the words "to have and to hold." Habendum Clause Government power is the constitutional authority and inherent power of a state to adopt and enforce laws and regulations to promote and support the public health, safety, morals, and general welfare. Escheat is when a property owner dies and leaves no proper documented inheritance plan, the property ownership reverts to the government. Which of the following can be achieved by dividing the price of the property by the rent that is produced? Gross rent multiplier. Which of the following is a common example of real estate police power? Zoning What is the document that defines the relationship between the broker and the seller? Listing Agreement Buyer Dan is considering buying a lot to build a single-family residence. Dan hires an appraiser to appraise the lot. Which approach to value would the appraiser choose to complete the task? Market Data Approach or Sales Comparison Approach Which of the following would not be considered real property? Page | 7 A mortgage What is the difference between void and voidable contracts? Choose the best answer. Void contracts are not contracts, while voidable contracts have the necessary elements to be enforceable, but can be rejected by one party. Which of the following would NOT be covered under a builder's new home warranty? Structural damage caused by flooding. What is a written supplement or amendment to an existing will such as one affecting the transfer of real estate upon death? Codicil What is the total quantity that buyers are willing to buy at a given time at certain prices? Demand A couple owns an older home in a neighborhood that is becoming a commercial area. Because of the change in the use of the land, the couple can expect the value of their parcel to increase at some future time. This is an example of the principle of Anticipation A claim that has the appearance of having valid title, but in reality, the person either does not hold actual title, or there is a significant defect in the written documents supporting title, that makes it invalid. This an example of which legal concept: Color of the Title. The person who hires or appoints an agent is called the: Principal. What best describes an agency relationship where an agent has legal authority to act on behalf of the principal? Univeral Agency Which term refers to the packaging of a number of mortgage loans for sale in the secondary mortgage market by a financial institution or mortgage banker who originated the loans? Warehousing The Civil Rights Act of 1866 prohibits discrimination in real estate based on: Race Johnny is purchasing a house and does not want to purchase all of the furniture that is being left behind. He signs the contract on Tuesday, and on Thursday changes his mind about the furniture. He calls his agent, and they add the furniture to the contract. What is this an example of? Page | 10 Time Utilizing the 28/36 rule, if Rebbecas gross income is $4,500 a month, she would need to spend less than ______ in housing costs a month to qualify for most loans. 1,260 Which business structure traditionally features a board of directors? Corporation CRV stands for Certificate of Reasonable Value and is issued by who? The Department of Veterans Affairs. What best describes an agent hired to perform a specific duty? A special agency. Which of the following best describes the term "emblements?" Annual crops produced by cultivation legally belonging to the tenant. Why is an oral lease for two years not generally enforceable in law? Statute of Frauds. Brokerages and real estate agents across America connect using a multiple listing service (MLS) At the very minimum advertising property or services by real estate professionals, should include what? The brokerage firms name. A lender's refusal to lend money to potential homeowners attempting to purchase property located in predominantly minority neighborhoods is Redlining To whom does an agent always owe their fiduciary responsibility? The principal. A tenant rented an apartment, signing a 16-month lease. After the lease expired, the tenant paid 1 month's rent and got a receipt. What kind of type of lease does the tenant have? Tenancy at will. A seller is asked whether any known plumbing defects exist on her property. She replies that to the best of her knowledge there are no plumbing defects. However, unknown to her the pipes are corroded and due for replacement. Is the seller in violation of her disclosure responsibilities? No, since she is unaware of the plumbing issue, she is not liable for failure to disclose material defects. Page | 11 The statute of frauds, applies to all real estate sales agreements. What is the best definition listed for the term: "conventional loan?" A type of loan that is not insured or guaranteed by the government, but backed by private lenders. Which of the following would NOT apply to the income approach in the valuation process? Depreciation In the appraisal of a building constructed in the 1930s, the cost approach would be the least accurate method because of difficulties in estimating depreciation, estimating changes in the cost of construction, and estimating changes in prices of building materials. In order for a month-to-month tenancy to be legally valid which of the following MUST the contract include? All of the following. Who dictates trust accounts and when to deposit earnest money or other trust funds? State Specific License Law A real estate agent advertised a home for $250,000. When a Chinese couple asked the agent for the price of the house. The agent told them the seller wanted $260,000 instead. Under the federal Fair Housing Act of 1968, such a statement is illegal because the terms of the potential sale were changed for the Chinese couple. Which of the following best describes real property? all things attached to the land and all the legal rights to it. What determines who pays for what and how much at closing? Proration The execution date or date executed is the day a contract is signed. The effective date is what? Choose the best answer. The day the contract goes into effect. In some cases the execution date and effective date are the same. What is best defined as, a document in which a property owner contracts with a real estate agent to find a buyer for the owner's property? Listing Agreement. A seller made a counteroffer and gave three days for acceptance. The very next day, the seller receives a better offer, which they want to accept. What is the first step the seller should make? Withdraw the counteroffer. Page | 12 What is the agency responsible for the enforcement of the Fair Housing Act? Department of Housing and Urban Development Which of the following real estate contract clauses is typically seen in blanket mortgages and allows for the freeing of all or part of a property from a claim through a proportional or full amount of the mortgage being paid off? The Release Clause Researching recently sold homes in the area and homes that haven't been sold in the area and comparing their prices. Is an example of a comparative market analysis. A mortgage loan that requires monthly payments of $400.00 for 15 years and a final payment of $20,000. Typically a loan structured like is called a a balloon loan. Fair Housing 1866 1 protected class, RACE, no exemptions. Fair Housing 1968 4 Protected classes, RACE, COLOR, RELIGION, AND NATIONAL ORIGIN. 4 Exemptions. Fair Housing 1988 2 Protected Classes, DISABILITIES AND FAMILIAL STATUS, 2 Provisions for senior housing. When an air conditioner is installed it is not considered personal property because it is not permanently installed. True Landlord has a religious belief that unmarries coupled should not be living together and denied their application. What fair housing law does this violate? Fair Housing 1968 The fair housing logo in advertisements is a HUD guideline, not a federal law. True. (Housing and Urban Development). Licensee explains a lease agreement to a prospective tenant. What does it violate? Violation of the Real Estate License Act. NOT LL/Tenant Act. Leasing agent accepts cash at 9am on Friday. What does the agent do with the cash until the nest business day? Give it to sponsoring broker. Page | 15 false Disciplinary actions for leasing agents: Shall conform with disciplainary actions for licensed real estate brokers An applicant shall not practice as a student leasing agent _____________. more than once in a 24 month period. Which of the following is true about sponsor cards? a-sponsor cards are only issued for residential leasing agents b-all sponsor cards are issued by IDFPR c- It is a temporary 45 day permit issued by the sponsoring broker d-it is a 180day student permit c The real estate recovery fund is maintained by IDFPR, who is eligible to collect damages from this account? Any person who suffered a loss based on a licensees conduct. How many times can a person take the state licensing exam before they have to repeat the course again? 4 times the IDFPR requires escrow records to be maintained by the sponsoring broker: 5 years When must escrow money be deposited by the sponsoring broker? No later than the next business day following the transaction. Where is the original license for a leasing agent kept? In the sponsoring brokers principal office Mary is sponsoring broker, she was found guilty of a license act violation. Her license was suspended. What is the status of the licenses that were sponsored by Mary? All sponsored licensees immediately go into inactive status. Which of the following is not a blind ad? An advertisement for rental property with the brokerage company name and phone number listed on the ad. A licensee seeking an apartment encountered discrimination based on his age. Which one of the following statements is correct regarding the real estate recovery fund? a- the licensee may not file a complaint with IDFPR because of the real estate recovery fund is for members of the general public and not licensees. Page | 16 b- the licensee may not file a complaint because there is no witness to the discrimination when the licensee claims that discrimination took place c-the licensee may file a complaint and a hearing will be conducted by IDFPR to determine if any discrimination took place d- the licensee may file a complaint with IDFPR because the discrimination took place five years ago and the case was opened within the required time period. c A licensee owns 1% of a residential property that is being advertised for rent. What is the maximum amount of ownership that a license you can have any property before disclosure is required? There is no minimum or maximum percentage of ownership that is required. A student leasing agent was hired on January 15. The sponsoring broker did not complete the 120 day student permit until January 30. When does the 120 day period begin? The permit begins the day of the sponsoring broker completes the 120 day permit online and IDFPR. A sponsor card can be issued by a sponsoring broker to a student after they pass the state exam. Which license category does the sponsor card apply to? Leasing agents, brokers, and managing brokers. Which of the following is not a violation of the license act? a-failure to maintain good record keeping. b-residential leasing agent decides to not renew their lease c-call mingling money/property of business or personal funds. d-failure to comply with requests from IDFPR within 30 days. b A managing broker must notify IDFPR in all of the following circumstances except; a-a branch office was closed b-a new branch office was opened c-a new leasing agents 45 day permit is due to expire d-corporate office for the company has relocated c A listing agent was given a $100 check from another licensee to compensate them for the lease agreement that they worked on together. Which of the following statements is correct? a-it is acceptable because the amount is less than $500 b-it is acceptable because the amount is less than $250 c-it is unacceptable because the broker needs to know about this d-it is unacceptable because it is against the license act to receive payment directly from another licensee d Sponsoring broker is required to have a written employment agreement with; Page | 17 Licensed residential leasing agents, brokers, and managing brokers. Which of the following is permitted under the federal fair housing act? a-advertise property for rent only to a special group b-increase the rent because an applicant is a minority c-refuse to rent to an individual with poor credit history d-foreman applicant that the unit is rented when in fact it is not c A blind ad refers to: Using only a street address or telephone number A leasing agents original, active license should be kept in what location? The sponsoring broker's office. A person was found guilty of unlicensed practice by IDFPR. The person has been fined $25,000 for unlicensed practice. How long does the licensee have to pay that amount? 60 days A leasing agent is changing employment and has provided notice to the current sponsoring broker. When the current broker returns to the license to the licensee, what is the status of that license? inoperative Discriminatory advertising shows: A preference for families only, Ads featuring pictures of only one race, a preference based on race, color, religion, sex, national origin, disability or familial status. If a leasing agent advertises apartment for rent "For families only", it is a violation of which act? Fair housing amendment act of 1988 The fair housing amendment act of 1988 reference people with disabilities which includes: Mental or Physical impairments A licensee are selling their own home must include the following in their advertisement: Agent owned or broker owned The use of a religious phrase or symbol in an advertisement is: Most likely discriminatory An owner of a single-family home restricts the rental of rooms in her home to women only. The owner has: Not violated any civil rights acts Phrases like "nice area for children" or "perfect for a large family" are: Page | 20 An adult with persons under the age of 18, a pregnant person, one who has custody or is in the process of custody of a person under 18 Housing and community development after 1974 prohibited discrimination based on sex A lending institution requiring different rates and terms for minorities as an example of Redlining The practice of inducing a person to lease or purchase by making representations about the ethnic makeup of the neighborhood or about a particular persons race living in the neighborhood is called Blockbusting Ancestry and age are protected classes and are part of which act? Illinois human rights act banks cannot charge different loan rates for individuals, based on the neighborhood the home is located in. This practice is called; redlining Lead-based paint disclosure is required for residential homes in Illinois reconstructed prior to 1978 The fair housing amendment act of 1988 includes which of the following protected classes Disabilities and familial status He visually impaired man inquires about the rental of an apartment. He utilizes the services of an assistant animal. The landlord has a "no pet" policy. The prospective tenant may be responsible for: Repairs to the unit if the assistance animal or owner damage the property which the following is an example of blockbusting a-showing apartments only in certain buildings b- limiting the number of children that can occupy unit c- limiting the number of occupants per unit d- informing prospects of ethnic make up of the community d A property is located near the airport and some tenants have complained about the noise. In order to minimize complaints, the landlord should: discolse only the factual information about the property A residential apartment complex has a no pet policy. If a tenant utilizes a service animal for disability related issue the landlord may: Page | 21 require documentation if it's their policy The Illinois human rights act included each protection for individuals over which age 40 Which of the following is a federal protected class? Familial status A fire completely destroyed an apartment building. The leases for the current residents are: Canceled/terminated Which of the following is not a federal protective class? age A prospective tenant suspects age discrimination because of only being 18 years of age. Which of the following statements is correct? a-it's a protected class under federal law b-age disrimination act of 1975 c-age is protected under state law for under age of 40 d-age is not a protected class under federal law d An owner of a six unit apartment building had a fair housing complaint filed against him because he would not lease to a 20 year old pregnant female. If the owner is found guilty of discrimination, which of the following acts with the owner be in violation of? Fair housing amendment act of 1988 A person with a disability requires to have their service animal accompany them in the pool area. Does the housing provider need to allow this? Yes, service animals must have access to all areas of the property A leasing agent refers all minority renters to a property located on the other side of town. This is an example of Steering The fair housing act of 1960 prohibits discrimination based on: Color, religion, national origin Another name for blockbusting is panic peddling When does a landlord need to pay interest on security deposits? 25 residential units or more Page | 22 The act that requires landlords to refund the security deposit or provide a list of itemized damages is called: Illinois security deposit return act Another name for personal property is: Chattel Security deposits are: Safeguards against damages How much notice in Illinois is required to terminate a month to month lease 30 days The security deposit return act applies to how many units Five or more units What should not be asked on rental applications? - race - color - number of children Residential real property disclosure act applies to how many units 1-4 units Radon and meth were added to which of the following; residential real property disclousure act An occurrence on a property such as a murder or suicide is an example of Stigmatized property The EPA program requiring the use of certified contractors for removal of lead-based paint went into affect what year 2010 Security deposit Not rent. Advanced sum to ensure against damages Latent Defect problem not discoverable by normal prudent inspection (mold, esbestos) Material defect Page | 25 Uninhabitable living conditions When a leasing agent directions elderly resident to a quiet building, this is called steering The residential disclosure act applies to Sellers of four units or less When our sponsor cards issued after passing state exam Who issues sponsor cards The sponsoring broker A tenant installed a new light fixture in the dining room of their apartment. What kind of property is a light fixture when they install it Real property (permanent) An owner of a 12 unit apartment building lives on site. In his absence, the maintenance person shows vacant apartments. Is this acceptable? yes The appliances in a residential apartment unit are considered: The landlord/owner's property A tenant was given an option to renew by the landlord. Later the landlord decides to revoke the option. what can be done? Tenant can sue the landlord for performance of the lease A prospective tenant claims that they were being discriminated against by leasing agent. Who does the prospective tenant report the discrimination to? IDFPR A 12 unit apartment building is sold to a new owner. What happened to the leases for the tenants in the building? The leases remain in effect 1. The lease contract stated that the renters would bring in the security deposit within five days. It is now the sixth day and the renters have not brought in the money. This is legally referred to as: Breach 2. In dealing with the public, a licensee: Page | 26 may keep silent about a material fact concerning the property if the client is the owner. d) may negotiate different commissions with different owners. 3. Escrow monies: could include security deposits as well as earnest money. 4. An offer may be terminated: if it is rejected; if it is changed; or if it is revoked before acceptance. A property management company runs a complex of several buildings, all belonging to the same owner and on the same parcel of land. At the owner's request, the manager has made apartments available to families with children in just two of the buildings. This practice is: Steering 6. In a lease an owner may hold a future interest in the property known as: Reversion are interest 7. Which of the following would be considered a dual agency? A licensee is representing both landlord and tenant in the same transaction. 8. To be enforced, the Statute of Frauds requires that all contracts for the sale or lease of real estate be: In writing 9. A young couple with a toddler and an infant want to lease an apartment in a complex that is occupied primarily by adults. The rental agent shows the couple apartments only on the first floor. Which of the following is true? The rental agent should have inquired about the couple's preference for apartments. 10. On Tuesday, the agent received an offer and a check for security deposit from a renter. The owner accepted and signed the lease at 11 am on Wednesday. The agent must: deposit the money in his escrow account by the close of business on Thursday. 11. The primary requirement of a contract would be: Offer and acceptance 12. Because of the complexity of laws that affect real estate today, a property manager should be familiar with all of the following EXCEPT: the "Blue-Sky" laws. 13. If a complaint goes to the federal courts based on the Civil Rights Act of 1866, the complaint would be that there was discrimination based on: Race 14. When a tenant, who has a written lease with the owner, sublets all or any part of the premises: Page | 27 the original lease is unaffected unless it contains a provision that prohibits such subletting. 15. Which of the following people may discriminate on the basis of race? No one 16. It would be a violation of the antitrust laws for a broker to: a) charge one owner 7% while charging another 6%. agree to a minimum commission with other brokers 17. The building leases prohibit tenants from altering the property in any way. One tenant is now confined to a wheelchair, and cannot maneuver over the doorstep into the apartment by herself. Nor can she use the bathroom facilities in her wheelchair. Which of the following is true? The tenant is entitled to make the necessary alterations. 18. Which of the following is illegal? Refusing to hire an otherwise qualified person because a disability will necessitate occasional time off work. 19. The amount of security deposit in a contract for the lease of real property is determined by: Agreement of the parties. 20. Broker Doug has an office in Chicago. A licensee with Broker Doug is the designated agent of the owner. Another licensee with Broker Doug is the designated agent of the renter. Which of the following statements is true? In Illinois, this situation avoids dual agency for the broker. 21. A licensed agent selling or leasing his own home without using his broker's services may discriminate on the basis of: Non of the above 22. A woman advertises a 2-bedroom apartment for rent in her 6-unit building in Chicago, stipulating "Adults Only." She is in violation of: the Illinois Human Rights Act. 23. An Illinois resident has signed an agreement to rent a condominium in Florida for the month of March. This arrangement is legally considered: An estate for years 24. Commingling may be charged if the broker: deposits escrow money in his personal account. 25. A licensee acting as an owner's property manager: must not profit from private contracts at the expense of the owner. Page | 30 49. A leasing agent representing the owner of the building is showing an apartment to a prospective tenant. The agent knows that a murder/suicide took place in the apartment several months ago. The agent should: not disclose this fact, since disclosing would not be in the owner's best interest. 50. Under CAN-SPAM, emails used to advertise products or services requires: the valid physical postal address of the sender's business. Acceptance by Ratification The acceptance of lease terms that occurs when a tenant takes possession of the property but does not sign a lease. This form of acceptance is recognizable by the courts. Accord and Satisfaction When all parties have agreed to a change in one or more of the terms of a contract. Actual Eviction The legal process that results in the tenant's being physically removed from the leased premises. Administrative Law Judge (ALJ) A judge who hears complaints and considers evidence regarding violations of the Fair Housing Act. Agency The legal relationship created when one person represents another. Air Rights The right to use the open space above a property, usually allowing the surface to be used for another purpose. Airspace The air above the earth, all the way into space. Americans With Disabilities Act of 1990 A law passed in 1990 that requires employers and public facilities to make "reasonable accommodations" for people with disabilities and prohibits discrimination against these individuals in employment. Assignment The act of one party to a contract allowing someone else to assume all of his/her rights under the contract. Customer A consumer who is not being represented by a licensee. Page | 31 Bilateral Contract promise for a promise Blockbusting Inducing an owner to sell or rent a dwelling by making representations regarding entry of persons of a protected class, also referred to as "panic peddling." Breach of Contract The action or lack of action of one party to a contract which violates the terms of the agreement. Brokerage Agreement The relationship created between a sponsoring broker and any member of the public who is receiving real estate services through the sponsoring broker or the broker's sponsored licensees. Chattel Personal property, or objects which are not permanently affixed to land. Civil Rights Act of 1866 Guaranteed property rights to all citizens regardless of race. This act specifically provides that all citizens shall have the same right to inherit, purchase, sell or lease real and personal property. Client A person who is being represented by a licensee Commingling Depositing personal funds in a special escrow account established to hold funds belonging to others. Compensation Anything of value that is given in exchange for real estate services. Contract A legally binding promise or set of promises, generally setting the terms of a business arrangement like an apartment lease. Compensatory Damages Money paid with the intent to return the injured party of a defaulted contract to the financial condition they were in before the breach occurred. Competent Parties Parties to a contract who are of legal age, sane and sober Consumer Page | 32 A person or entity seeking or receiving real estate brokerage services. Concurrent Ownership Ownership of property by two or more individuals or entities Condemnation Action The court action used to exercise the power of eminent domain, allowing the government to purchase property against the wishes of the owner. Confidential Information Information that could harm the client's negotiating position. Consideration The promise offered in exchange for an action, something of value or another promise Constructive Eviction A defense used by the lessee to avoid paying rent and vacate the property when the lessor allows the premises to become uninhabitable for an unreasonable amount of time in violation of the lease agreement. Designated Agency Representation of either the purchaser/lessee or the seller/lessor, as assigned by the licensee's sponsoring broker. Designated Managing Broker A managing broker who has supervisory responsibilities for licensees who has been appointed as such by the sponsoring broker. Destruction Clause A lease clause that describes what rights and responsibilities the lessor and lessee have if the premises is partially or completely destroyed. Discharged Contract A contract in which all of the terms of have been fulfilled, also called an "executed contract." Dual Agency The practice of representing both the buyer/lessee and the seller/lessor in a real estate transaction. Duress The use of force to induce another to act against his/her will. Eminent Domain Government police power that allows the taking of private property for public purpose. Page | 35 All parties to the contract agree to a substitution of one of the parties to the contract by creating a new agreement. Offer and Acceptance The parties' agreement to the terms of a contract. A "meeting of the minds." Offeree A person receiving the offer. Offeror A person making an offer. Option A contract to hold an offer open for a specified period of time. Ownership in Severalty Individual ownership of property by one person or entity with no co-owners. Panic Peddling Inducing an owner to sell or rent a dwelling by making representations regarding entry of persons of a protected class. Also referred to as "blockbusting." Parol Evidence Rule The legal rule that prohibits courts from allowing oral evidence to change the terms of a written contract Periodic Tenancy A lease that has no specific ending date, will automatically renew itself, and goes from period to period, as in month-to-month. Personal Property Property not permanently affixed to the land, also called "chattel" or "personalty." Place of Public Accommodation A privately owned business or facility that affects commerce and falls within at least one of several specified categories from the Americans With Disabilities Act. Protected Class A group of individuals protected under the Fair Housing Act. Provisions of Law Statements required by local, state and federal laws. Fair housing and human rights provisions would be part of these laws. Page | 36 Punitive Damages Money awarded by the court to an injured party of a breached contract to punish the party who caused the breach. Purchase Option A lease clause that gives the lessee the right to purchase the property under certain conditions. Real Estate Land and all leaseholds and other interest in land. Real Property Land and improvements that are permanently attached to the land. Realty The surface, subsurface and airspace, along with that which is permanently attached. Renewal Option A lease clause that gives the lessee the right to extend the lease term under certain conditions. Rent Money paid for use of leased property Repair and Maintenance A lease clause that clearly states which repairs or maintenance tasks are the responsibility of the lessor and of the lessee Rescind An agreement between parties that a contract is to be cancelled and treated as if it never existed. Security Deposit Money deposited for or by the tenant with the lessor to be forfeited if the lessee defaults or damages the property. Specific Performance Legal remedy for breach of contract that forces the party who defaulted on the contract to perform as originally agreed. Statute of Frauds Law requiring that all real estate contracts be in writing in order to be enforceable by the courts. In Illinois, leases of one year or less are an exception to this law and can be enforced through the courts even if oral. Statute of Limitations Page | 37 A law limiting to the amount of time a party can wait before bringing action against another party who has committed fraud or violated the terms of a contract Steering The action of an agent/licensee to direct a prospective toward or away from specific neighborhoods and units within a housing complex or building. Stigmatized Property Property that might be undesirable because it was the site of a presumably negative event that did not impact physical condition. Subagency The practice of an agent allowing other agents to assist in performing some or all of the tasks of the agency Sublet The transfer of a portion of the lease term, most often the premises, with reversion to the lessee. A right acquired by the lessee unless otherwise denied. Subsurface The space beneath the surface extending to the center of the earth. Subsurface Rights The rights to use the space beneath the surface of land to the center of the earth, including mineral rights, oil rights, gas rights and water rights. Surrender and Acceptance Mutual agreement between parties to terminate a lease or other contract. Tenancy The rights a tenant acquires in the lessor's property, also known as a "leasehold estate or interest." Tenancy At Sufferance A lease that is created by law when a tenant continues to occupy property after his/her rights have expired, wrongfully possessing the owner's property Tenancy At Will A lease with no definite duration which can be terminated by either party at any time. Tenancy For Years A lease that has a specific ending date. Its timeframe can be hours, days, weeks, months or years Tenancy in Common Page | 40 Place a licensee on probation or suspend or revoke licensure. Reprimand or impose a civil penalty not to exceed $25,000 Title III of the ADA, which went into effect in 1992, 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. readily achievable modifications," easily accomplished with minimum difficulty or expense, to ensure that disabled individuals have equal opportunity for access cases of public accommodation discrimination the maximum civil award is $55,000 for a first violation and $110,000 for subsequent violations, plus attorney's fees. The plaintiff may also seek injunctive relief, requiring businesses to modify their facilities or existing policies or practices. Leasing license All Illinois residential easing agent licenses expire on July 31st of even-numbered years. After their first renewal, residential leasing agents are required to complete eight hours of continuing education during each two-year renewal period. The law provides the following exceptions to licensing requirements Any person, company, or related employees, if managing property owned or leased by that person or entity. Someone acting under a power of attorney. Someone acting under the power of a court order. A resident manager of a residential property who occupies a unit on the premises as a primary residence. Government employees acting in the course of their duties. Multiple Listing Services. Not-for-profit referral services. State-regulated utilities and their employees. Newspapers and other advertising media offering related real estate services. Licensed Assistants a licensed or unlicensed person who has been hired to assist a licensee. An unlicensed assistant cannot engage in real estate activities that require a license. A licensed assistant must receive compensation from the same sponsor as the licensee being assisted. Disclosure of Compensation The sponsoring broker's compensation in the transaction. The sponsoring broker's policy with regard to sharing compensation with other brokers. All compensation that the licensee may earn from third parties through the transaction. Any ownership interest of 1 percent or more that the licensee has in a non-public company (if the Page | 41 licensee is referring the client to that company). If applicable, that the sponsoring broker will be receiving compensation from both the buyer and the seller (or lessor and lessee) in the same transaction. Disclosure of Licensed Status A licensee must give written disclosure of his or her licensed status to all parties involved in a transaction where the licensee has or may acquire an ownership or leasehold interest. Blind advertising illegal and includes any real estate advertisement that does not include the sponsoring broker's business name. A sponsored licensee must use the sponsor's name in all advertising that is part of the brokerage business. Any advertising that includes the licensee's name must also include the sponsoring broker's business name. Unlicensed Practice performing acts requiring a license without obtaining the required license, the Department has the authority to investigate and can collect a civil penalty of up to $25,000 per offense. Civil penalties must be paid within 60 days. Real Estate Administration and Disciplinary Board All members need to have been residents and citizens of Illinois for at least six years prior to appointment. Twelve members need to have been managing broker or broker licensees for at least 10 years prior to appointment. Three members shall be public members who 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 a real estate brokerage business. IDFPR Illinois Department of Financial and Professional Regulation, issue real estate licenses Real Estate Administration and Disciplinary Board Appointed by the governor, 15 people, residents of the state for 6 years or more, give recommendations on professional conduct and disciplinary action Real Estate Research and Education Fund A fund maintained by the Illinois State Treasury for research and education at state institutions of higher education or other organizations for research and the advancement of education in the real estate industry. $125,000 budget per year Real Estate Administration Fund Money in in trust by state treasury, operating expense for the IDFPR Peer Review Advisors Investigate complaints Page | 42 License Categories Broker, Managing Broker, Residential Leasing Agent Brokerage Agreement A written or oral agreement between a sponsoring broker and a consumer for licensed activities. All exclusive brokerage agreements must be in writing. Client A person who is being represented by a licensee Compensation Valuable consideration give by one person to another in exchange for performance of a service or activity Good Moral Behavior No felonies, prior revoked licenses, fraud, false application 120 Day Student Permit Issued for leasing agents by a sponsoring broker, must be enrolled within first 60 days, agent may practice as a student only once in a 24 month period 45 Sponsor Card Temporary permit allowing a sponsee to engage in practice as a leasing agent until issued a license, issued after applicant passes the exam, need a new sponsor card every time they change sponsoring brokers Hearings Conducted by IDFPR, determine suspension or revocation, investigation is conducted, licensee is notified within 30 days prior to the hearing Suspension/Revocation If sponsoring broker's license is revoked all licenses become inopperative Real Estate Recovery Fund Provides money to people that were defrauded by a licensee, may recover between $25k-$100k Escrow Records maintained for 5 years, record must be kept in office for 2 years within 24 hours Fair Housing Laws A collection of laws designed to prevent discrimination Puffing Page | 45 A hidden defect that affects the property and requires disclosure, termites Mold Small organisms that cling to damp surfaces, can cause allergic reactions, landlords do not have to clean up mold The Illinois Radon Awareness Act (January, 2008) Sellers with 1 to 4 units have to provide buyers with a brochure on radon hazards and radon testing guidlines Fair Credit Reporting Act If you fail a credit check the landlord must provide a letter stating the reason why Security Deposit An advance sum of money paid to the landlord to ensure against damages Interest on Security Deposits 25 or more units, held by landlord for more than 6 months Illinois Security Deposit Return Act only applies to 5 or more units, landlords must return a list of damages within 30 days of lease termination, or must return the security deposit no later than 45 days from the day the lease terminates Property Insurance A type of insurance that covers damage to property, such as a home, fires Liability Insurance insurance that provides protection from claims arising from injuries or damage to other people or property, accidents Real Property The physical condition of the land and everything above, below, and attached, aka "Bundle of Rights" Personal Property Aka chattel, personal items not permanently attached, movable Trade Fixture An article installed by a tenant under the terms of a lease and removable by the tenant before the lease expires. Agency A relationship in which a real estate broker or other licensee represents a consumer with the consumers consent in a real estate transaction Page | 46 Designated Agent a sponsored licensee named by a sponsoring broker as the legal agent of a client. Express Contract A written or spoken agreement between 2 or more parties involved in a real estate deal that clearly spells out the terms and conditions of the transaction Fiduciary One who is in the position of the trust COLAN Fiduciary duties, Care, Obedience, Loyalty, Accountability, Notice Care Care in handling money and property, no commingling Obedience Following client wishes Accountability Accurate record keeping, account for all money Notice (disclosure) Prompt communication, disclosure interest in property Single Agency Licensee represents the buyer or seller (landlord or tenant) Dual Agency Licensee represents the buyer and the seller in one transaction, requires written consent of both parties, presented with a disclosure Antitrust Laws enacted to protect the public against large entities from taking advantage of consumers, aka Federal Antitrust or Sherman Antitrust, Violations (Price fixing (compensation rates), setting up areas of trade) Contract An agreement between two or more competent parties, parties must be in sound mind, engage in some legal purpose, to receive something in value in exchange Consideration Something of value Page | 47 Exclusive Contracts Must be in writing Implied Contracts Implied by someone's actions (dog groomer, nail salon) Bilateral Contract two or more parties make a commitment, apartment lease Unilateral Contracts One person promises the other person something to get a reaction, "option to renew" lease Optionor Party who grants options (owner, landlord) Optionee Party who receives options (tenant) Executed Contract A contract where all terms and conditions are fully met Month to Month Contract Periodic Tenancy, indefinite period of time, no ending, 30 days notice required to terminate lease Valid Contracts Contain all six essential elements, Offer and Acceptance, Legal Purpose, Legal Capacity, Consideration, Reality of Consent, Possibility to Complete Reality of Consent Both parties having an understanding of the terms Void Contract A contract that does not contain the all of the six essential elements Unenforceable Contract Purpose is illegal, contract is not in writing (needs to be if for more than a year), statute of limitations has lapsed Surrender of Lease Mutual agreement by landlord and tenant to terminate a lease. Eviction Page | 50 1. Offer 2. Acceptance 3. Consideration 4. Legal Purpose 5. Legal Capacity Formation of Contracts Classification 1. Valid 2. Void 3. Voidable 4. Enforceable 5. Unenforceable 6. Express 7. Implied 8. Uni/bilateral 9. Executed 10. Executory Postformation of Contracts Discharges 1. Performance 2. Breach 3. Remedies (damages, specific performance, recission) Offer of a Contract 1. Must be an offer by one party that's accepted by the other (offeror and offeree) 2. Mutual assent: meeting of the minds; complete agreement of the purpose and terms 3. Any offer or counteroffer may be withdrawn before acceptance Acceptance of a Contract 1. Not considered accepted until offeror has been notified of the other party's acceptance 2. Must be immediate with offers, acceptances, or other responses to avoid problems, delays, or possible charges. Consideration of a Contract 1. Something of legal value offered by one party and accepted by another as an inducement to perform/refrain from performing some act Legally Competent Parties in a Contract must: 1. Have legal capacity (legal age, mental capacity) Reality of Consent of a Contract Contract must be entered into as free and voluntary for both parties Legal Purpose of a Contract Page | 51 Must be for a legal purpose (nothing illegal) Valid Contract Meets all essential elements that make it legally sufficient/enforceable and binding in a court of law Void Contract Has no legal force or effect because it lacks some of the essential elements Voidable contract Appears to be valid but may be rescinded or disaffirmed by one or both parties based on some legal principle Unforceable Contract May seem valid, however neither party can sue the other to force performance (ex. not in writing or ambiguous) Assignment Substitution of parties; the transfer of rights/duties under a contract Novation Substitution of contracts Anti-Trust Laws These laws prohibit monopolies and any contracts, combinations, and conspiracies that unreasonably restrain trade Price Fixing Practice of setting prices for products or services rather than letting competition in open market establish the prices Group Boycotting Occurs when 2 or more businesses conspire against another business, or agree to withhold their patronage, in order to reduce competition Allocations of Customers/Markets Involves an agreement among real estate companies to divide their markets and refrain from competing for each other's business Tie-in Agreements Agreements to sell one product only if the buyer purchases another product as well The CAN-SPAM Act Page | 52 A federal law that placed guidelines on mass commercial emails. Requires: 1. No false/misleading header information 2. No deceptive subject lines 3. Recipients must be able to opt-out 4. Must be identified as an advertisement The Junk Fax Prevention Act A real estate licensee may not legally send an unsolicited commercial fax messages without written consent or an established business relationship Lease Contract between an owner of real estate (the lessor) and a tenant (the lessee) A lease must: 1. Establish the length of time the contract runs 2. List the amount the lessee pays 3. State other rights and obligations of the parties Reversionary right The landlord's right to possession after the lease expires Leasehold Estate Tenant's right to possess real estate for term of lease Estate for Years A leasehold estate that continues for a definite period of time (Ex. specific beginning and ending dates) Estate for Years Termination No notice is required because there is a specified expiration date. May be terminated early if both parties agree. To extend, a new contract is required. Estate from Period to Period When a landlord and tenant enter into an agreement for an indefinite period of time. For specific payment periods: - Month to month - Week to week - Year to year Continued until notice of termination is given Holdover Tenancy When a tenant of an Estate for Years remains in possession after the lease expires and still pays rent. (This becomes an estate from Period to Period once holdover tenancy is established) Notice of Termination of Estates from Period to Period Page | 55 Allows rent to increase or decrease periodically based on changes in consumer price index or different economic indicator Ground lease Landowner leases unimproved and to tenant who agrees to erect a building on the land Lease purchase Tenant wants to purchase property but is unable to do so because of insufficient finances, not having a clear title, or having tax consequences. Sale & Lease Back Agreement Owners of a property sell the place and lease it back again for an agreed period Sale Clause Requires that the tenants be given some period of notice before termination by new landlord Breach of Lease; Landlord may sue tenant for: 1. Post-due rent 2. Damages 3. Other defaults Breach of lease: Damages & Other defaults Landlord can terminate tenancy by giving tenant a 10 day written notice including demand for possession (after 10 days expire, the landlord may sue for possession even if the default is cured) Breach of Lease: Past-due Rent Landlord can serve tenant with a 5 day written notice demanding payment - If rent is still unpaid, they may terminate lease automatically and sue for possession - If rent is paid after 5 days, the lease continues Actual Eviction The legal process that results in the tenant's being physically removed from the leased premises. - Landlord must serve a notice before suing - Landlord must file a forcible entry and detainer action Environmental Hazards & Renters Licensees leasing properties built before 1978 must ensure that landlord's disclose possible lead-based paint/related hazards Referral Fees Landlords can pay a referral fee to tenants if the tenant finds a prospective tenant for a unit in the same building/complex IF: - Tenant refers no more than 3 people in a 12 month period Page | 56 - Receives compensation of no more than $1500 or equivalent to monthly rent (whichever is less) - Doesn't do showings, discuss lease terms, or participates in negotiations Agency Strict, defined legal relationship General agency Relationship between broker/managing broker/leasing agent and the sponsoring broker Law of Agency Defines rights and duties of the principal and the agent Agent Individual who is authorized and consents to represent the interests of another person Brokerage agreement Written (in IL) agreement between sponsoring broker and consumer for licensed activities to be provided to a consumer in return for compensation or the right to receive compensation from another Consumer Person or entity seeking/receiving licensed activities Client Person being represented by licensee Customer Consumer not being represented by licensee Compensation Valuable consideration given by one person/entity to another in exchange for the performance of some activity/service Principal Client to whom the agent gives advise and counsel Fiduciary One who is placed in a position of trust and confidence COLD AC - Care - Obedience - Loyalty - Disclosure Page | 57 - Accounting - Confidentiality The Duty of Care Agents must exercise a reasonable degree of care while transacting the business entrusted to them by the principal The Duty of Care: If the Agent represents the seller, this includes: - Helping the seller arrive at an appropriate listing price - Discovering/Disclosing facts that affect the seller - Properly presenting the contracts that the seller signs - Properly marketing the property and helping the seller evaluate terms/conditions of offers to purchase The Duty of Care: If the Agent represents the buyer, this includes: - Help buyer locate suitable properties - Evaluate the property values, neighborhoods, and property conditions - Financing alternatives and offers/counteroffers with buyer's interest in mind The Duty of Obedience Fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in contract The Duty of Loyalty The principal's interests come first The Duty of Disclosure An agent has the duty to keep the principal informed of all facts or any information that could affect a transaction The Duty of Disclosure includes: - Disclosure of relevant information or material facts that the agent knows (or should've known about) - Obligation to disclose facts that people feel are important in choosing course of action, regardless of whether it's favorable or not to the principal's position Disclosure forms Usually completed by seller before he/she signs listing agreement (or at a time of signing) The Duty of Accounting Licensees are required to deliver true copies of all executed/initialed documents to the people who signed them within 24 hours The Duty of Accounting: In regards to funds Page | 60 General agent Represents principal in broad range of matters related to particular business or activity (brokers/managing brokers to sponsoring broker) Special agent Represents principal only for specific act (sale of a house) Designated Agent Person authorized by sponsoring broker to act as agent of a specific principal Single Agency When an agent or firm represents only one party exclusively in real estate transaction (buyer, seller, landlord or tenant) Property Management Agency Owner may employ a sponsoring broker to market, lease, maintain or manage the owner's property Dual Agency Agent represents two principals in the same transaction Disclosed dual agency dual agency only is allowed if buyer and seller are informed and consent Designated Agency Business model where licensees in an office may represent both buyers and sellers (must be disclosed and put in writing to the client) Illinois Department of Financial and Professional Regulation IDFPR 4 Major Funds Administered through IDFPR: 1. Real Estate License Administration Fund 2. Real Estate Research and Education Fund 3. Real Estate Recovery Fund 4. Real Estate Audit Fund Secretary of the IDFPR Appointed by the governor and oversees the Division of Banking, Financial Institutions, and Professional Regulation (also real estate) IDFPR is responsible for these administrative activities: - Conducting licensing exams - Issuing/Renewing licenses Page | 61 - Preparing all forms, including applications and licenses - Collecting fees from applicants/licensees - Conducts hearings or refusal to renew licenses - imposes penalties for violation of Act - Restores suspended/revoked licenses Real Estate Research and Education Fund A fund maintained by the Illinois State Treasury for research and education at state institutions of higher education or other organizations for research and the advancement of education in the real estate industry. Designated managing broker Supervisory responsibilities for licensees in one or more than one office and has been appointed as such by a sponsoring broker Inactive Status of licensure is prohibited from engaging in licensed activities because the licensee is unsponsored or their sponsoring broker's license is expired, revoked, or suspended. Person Individuals, entities, corporations, etc. Renewal period Period beginning 90 days before expiration of a license Residential Leasing Agent Person empowered/employed by a broker to engage in licensed activities limited to leasing residential real estate Sponsored Broker Certifies to Department the sponsorship of a licensed managing broker, broker, or residential leasing agent Civil Penalty for Unlicensed Practice of Real Estate - Subject to a civil fine (in addition to other penalties) of up to $25,000 for each offense determined by the IDFPR - Fine is assessed by and payable to IDFPR after disciplinary hearing - Must be paid within 60 days after the effective date of the order License Requirements - Must pass written exam - Must be applied for within one year of passing the state test Page | 62 - Failing the test 4 consecutive times requires the applicant to retake the coursework - Must include social security number or tax identification number Broker Requirements - 18 years/older - Be of good moral character - Complete high school - Complete 120 hours of prelicensing and postlicensing education - Pass an IDFPR authorized written exam - Submit a valid application Managing Broker Requirements - 20 years/older - Be of good moral character - Have been a licensed broker for at least 2 consecutive years (out of the preceding 3 years) - Completed high school - Complete 165 hours of instruction - Pass an IDFPR written exam - Submit a valid application Residential Leasing Agent Requirements - 18 years/older - Be of good moral character - Complete high school - Complete 15 hours of prelicensing coursework - Pass an IDFPR written exam Designated Managing Brokers Responsibilities: - Directly handling all earnest money - Escrows - Contract negotiations for all transactions in which the designated agent for the transaction has not completed the 45 hours of post-license education Broker's License Expiration and Renewal: - Broker's licenses expire on April 30th of every even numbered year - May renew license before expiration date by paying a renewal fee of $150 Managing Broker's License Expiration and Renewal: - Managing Broker's licenses expire on April 30th of every odd numbered year - Must pay a renewal fee of $200 Residential Leasing Agents License Expiration and Renewal - Licenses expire on July 31st of every even numbered year - Renewal fee of $100