Chapter 3 Types of Owners and their Employment Relationships

Question 1

Which of the following is a major disadvantage of operating as a general partnership?

a. it is difficult to balance the needs of multiple partners
b. agreeing on a single contract takes a significant amount of time
c. there is no liability protection for the partners
d. the partners are responsible for negotiating amendments

Answer 1

c. there is no liability protection for the partners

Question 2

Dual agency can properly occur when:

a. the agent’s intention is to benefit all principals
b. any third parties are made aware of and consent to it
c. two agents work on the same project together
d. all principals are made aware of an consent to it

Answer 2

d. all principals are made aware of an consent to it

Question 3

Under the agent’s duty to disclose information, if someone gives information to the agent, what is the position of the principal?

Answer 3

Under the law, the principal is considered to have that information too.

Question 4

By calling an employee a drunk or a drug addict, the employer:

a. violates company policy
b. risks liability to that employee for defamation
c. can fire an employee
d. can administer a drug test

Answer 4

b. risks liability to that employee for defamation

Question 5

Define sexual harassment.

Answer 5

Unwelcome behavior of a sexual nature

Question 6

What is the degree of personal liability for a corporation’s shareholders?

Answer 6

As a general rule the stakeholders in a corporation will have no personal liability for any of the corporation’s liabilities.

Question 7

Which of the following responsibilities of an agent supports a fiduciary relationship?

a. duty to disclose information
b. duty to account for any funds that come to an agent’s possession
c. duty not to act adversely to the principle’s interests
d. All of the above

Answer 7

d. All of the above

Question 8

What factors are important in a real estate investor’s choice of legal entity?

Answer 8

legal liability protection
income tax questions
transferability of interests and access to capital markets
governance issues
formation and dissolution costs and formalities

Question 9

Limited Liability Companies combine limited liability for their owners and _______.

a. favorable income tax treatment
b. legal protection against fraud
c. lack of flexibility to add amendments
d. coverage under common law

Answer 9

a. favorable income tax treatment

Question 10

Joint tenancy would fall under which of the following categories?

a. direct ownership
b. legal entity ownership
c. indirect ownership
d. concurrent ownership

Answer 10

d. concurrent ownership

Question 11

In general, an LLC will ______ of the entities liabilities, whether in tort or contract.

a. be strictly liable for some
b. be liable for all
c. not be liable for the most expensive
d. not be liable for any

Answer 11

d. not be liable for any

Question 12

Who can end the term of employment for any lawful reason in an at-will employment relationship?

Answer 12

Either the employer or the employee

Question 13

Why are limited liability companies (LLCs) preferred for investing in commercial real estate?

Answer 13

They offer many desirable features of both partnerships and corporations by combining limited liability for it’s owners with favorable income tax consequences.

Question 14

What term describes the person who entrusts and authorizes another to act on his or her behalf?

Answer 14

the principal entrusts and agent to act his behalf

Question 15

If co-owners of real property form a partnership and include property in the partnership, then:

a. additional considerations will need to be accepted
b. partnership law will govern the partners rights regarding the property
c. partnership law will not affect the property rights
d. laws applicable to the three types of tenancies will also apply here

Answer 15

b. partnership law will govern the partners rights regarding the property

Question 16

What are some special cases where contracts of employment have been implied?

Answer 16

Situations where the employer has made statements to employees and applicants-often include statements in employee handbooks.

Question 17

What is a fiduciary relationship?

Answer 17

A relationship where the agent is bound by obligations of good faith, honesty, and loyalty toward the principal in matters that come within the bounds of the agency relationship.

Question 18

Which of the following is a regular responsibility of the management of real property?

a. selling part of the property
b. leasing some of the property
c. supervising day-to-day operations
d. making significant capital improvements

Answer 18

c. supervising day-to-day operations

Question 19

What is the major drawback of operating as a general partnership?

Answer 19

There is no liability protection for partners.

Question 20

What most often determines the governance method for real estate ownership?

Answer 20

The number of owners and the extent to which each one wants to participate in the management of the entity

Question 21

What is an agent?

Answer 21

One entrusted and authorized to act for another (a principal)

Question 22

Which of the following describes the increasing attitude of many courts regarding the responsibilities of companies and their employee handbooks?

a. companies should update their handbooks annual and post them online
b. companies are not responsible for upholding terms set in the handbooks
c. companies have a duty to honor the terms of the handbook
d. companies should draft their handbook by a committee of stakeholders

Answer 22

c. companies have a duty to honor the terms of the handbook

Question 23

Which of the following describes quid pro quo sexual harassment?

a. sexual conduct that interferes with a person’s job performance
b. sexual demands as a term or condition of employment
c. sexual advances that create an offensive work environment
d. intimdating sexual behavior.

Answer 23

b. sexual demands as a term or condition of employment

Question 24

List and describe the three major forms of real property ownership.

Answer 24

direct individual ownership-proerty is owned by one individual

direct concurrent ownership-property is owned by two or more individuals and held as either tenants in common, joint tenants, or tenants by the entirety

Indirect ownership-property is indirectly owned by one or more individuals through one of various legal entities (LLCs, REITs, general partnership, etc.)

Question 25

The agency relationship is fiduciary, meaning that it requires:

a. a consideration such as salary
b. general authority to conduct business
c. disclosure to third parties
d. conditions of trust and confidence

Answer 25

d. conditions of trust and confidence

Question 26

In at-will employment, the term of employment can ordinarily be ended for any reason by:

a. either party
b. the employer only
c. the employee only
d. an arbitrator

Answer 26

a. either party

Question 27

Which of the following is NOT a factor that affects the choice of ownership structure?

a. formation and dissolution costs and formalities
b. transferability of interests and access to capital markets
c. income tax consequences
d. type of agency

Answer 27

d. type of agency

Question 28

Under current ownership, how are rents received from leasing the property divided among the owners?

Answer 28

In accordance with their respective ownership percentages

Question 29

What is the basis for discharging an employee for substances abuse?

Answer 29

The underlying basis is job performance and violation of company policy and not moral objections to drug and alcohol use.