Chapter 4

Question 1

Which of these cannot take title as a joint tenant with right of survivorship?

a. Spouses
b. Two friends who are business partners
c. Two relatives who share a house
d. A corporation

Answer 1

d. A corporation

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d. Because a corporation continues indefinitely until terminated by legal action, a corporation may never take title as a joint tenant.

Question 2

When two or more individuals decide to buy a property together, it results in a

a. cooperation.
b. co-ownership.
c. community effort.
d. joint venture.

Answer 2

b. co-ownership.

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When two or more people buy property together, it is called co-ownership. A joint venture is a form of partnership in which two or more people carry out a single business project.

Question 3

Three brothers bought a farm together, and the deed listed only each of their names. What form of ownership are they presumed to have taken?

a. Tenancy by the entireties
b. Joint tenancy with right of survivorship
c. Tenancy in common
d. In severalty

Answer 3

c. Tenancy in common

Question 4

What form of ownership is employed when one person transfers ownership to someone else to hold and manage for a third person?

a. Joint venture
b. Joint tenancy
c. Trust
d. Severalty

Answer 4

c. Trust

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A trust is a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party. Severalty indicates one owner. Joint tenancy is a form of ownership in which, as joint owners die, the surviving owners acquire the deceased tenant’s interest.

Question 5

Two people, each of whom has children from a previous marriage, are now marrying each other. They ask a real estate professional for advice about how to take title. What advice should the real estate professional offer?

a. Tenants in common, so that each one-half in interest would go to each spouse’s children
b. Joint tenancy to protect each other; so that if one dies, the other gets the house
c. Suggest that they wait until the real estate professional finds out how best to advise them
d. Suggest that they consult with an attorney

Answer 5

d. Suggest that they consult with an attorney

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Because the choice of ownership affects the ability to transfer the real estate, has tax implications, and decides rights to future claims, real estate professionals should tell their clients to discuss the issue with an attorney. Real estate professionals are not permitted to give legal advice.

Question 6

A will provided that the local banker take care of the deceased’s estate until the deceased’s children reach age 25. What kind of trust is this?

a. Testamentary trust
b. Living trust
c. Land trust
d. Trust deed

Answer 6

a. Testamentary trust

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a. A testamentary trust is established by will after the trustor’s death. A living trust is established during the trustor’s lifetime. Real estate is the only asset in a land trust. A deed of trust (also called a trust deed) is a financing instrument.

Question 7

What kind of ownership do the horizontal property acts regulate?

a. Cooperatives
b. Condominiums
c. Time-sharing
d. Planned unit development

Answer 7

b. Condominiums

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Condominiums are regulated by a horizontal property act in most states.

Question 8

Shareholders in a cooperative receive shares of stock that entitle them to a

a. common element lease.
b. trust deed.
c. proprietary lease.
d. corporate deed.

Answer 8

c. proprietary lease.

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The proprietary lease is part of the ownership of the cooperative stock and gives the owner the right to occupy a specific apartment. Common elements refer to the property owned jointly by condominium owners.

Question 9

Membership camping is similar to
5/5
a. cooperative ownership.

b. condominium ownership.
c. planned use development.
d. time-share use.

Answer 9

d. time-share use.

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The owner of membership camping purchases the right to use the developer’s facilities, which is similar to a time-share use; however, the owner may not be limited to a specific time as in the case of a typical time-share arrangement.

Question 10

In a large high-rise condominium, each unit is owned by individual owners. The elevators, parking garage, and swimming pool are called
5/5
a. community property.
b. separate property.
c. common elements.

d. proprietary elements.

Answer 10

c. common elements.
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The parts of a property that condominium owners own together are the common elements. Community property is a system of property ownership based on the theory that each spouse has an equal interest in property acquired during the marriage, making a distinction from property acquired before marriage, that is, separate property.

Question 11

Two individuals own an apartment building as joint tenants, sharing equally in the expenses and profits. If one of the co-owners sells that interest by signing and delivering a deed to a buyer, which of these statements is TRUE?

a. The buyer will become a joint tenant with the remaining owner.
b. The buyer and the remaining owner will be tenants in common.
c. The buyer will be a tenant in common with the remaining owner and a joint tenant with the departing owner.
d. The conveyance will be invalid; the two individuals will remain joint tenants.

Answer 11

b. The buyer and the remaining owner will be tenants in common.

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A co-owner can sell whatever the co-owner owns; however, once the unities of time, title, and interest are destroyed, as they are when a joint owner sells that interest, there can no longer be a joint tenancy.

Question 12

In February, a seller conveyed an undivided one-half interest in a parcel of land to a buyer. In March, the seller conveyed the remaining one-half interest to a different buyer. The deed to the second buyer included this statement: “This buyer is to be a joint tenant with the buyer of the other half-interest in the parcel.” Both deeds were recorded. Based on these facts, which of these statements is TRUE?

a. The second buyer and first buyer hold title to the land as joint tenants under the terms of the two conveyances from the seller.
b. The second buyer and first buyer own the land by partition.
c. The second buyer and first buyer are tenants in common.
d. The second buyer owns a half-interest in the land as a joint tenant; the first buyer owns a half-interest in the land as a tenant in common.

Answer 12

c. The second buyer and first buyer are tenants in common.

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Because there are two deeds made at different times, the four unities of joint tenancy have not been met. Therefore, the second buyer and first buyer are tenants in common.

Question 13

Three people own a large parcel of undeveloped land in joint tenancy. One of them wants to build a shopping center on the property, while the other two want to use it as an organic farm. The would-be developer tries to buy the other tenants’ interests, but they refuse to sell. Which of these is the developer’s BEST option?

a. File a suit for partition
b. Begin building a shopping center on one-third of the property
c. Wait for the other two to die
d. File a suit to quiet title

Answer 13

a. File a suit for partition

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When co-owners cannot come to an agreement, they must file for partition in court. The property will not physically be divided; rather, one or more will be given the opportunity to buy the others out. If this is not possible, then the property will be sold, and the proceeds will be divided appropriately.

Question 14

Fee simple ownership of a cottage in a lakefront community includes an undivided percentage interest in a parking lot, a golf course, and a swimming pool, all located in the development. Based on these facts alone, the ownership interest is probably BEST described as a

a. time-share estate.
b. time-share use.
c. condominium.
d. cooperative.

Answer 14

c. condominium.

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It appears that this is condominium ownership, because it includes the cottage as well as an interest in the common elements. Cooperative ownership is ruled out, because the ownership does not have a proprietary lease. It is not a time-share, because it includes more than the right to use the property at specific times.

Question 15

M, R, and N agree to purchase and operate a commercial property as a permanent investment. M and R each contribute $50,000. N contributes $30,000 and agrees to run the business, which the owners call “Property Group Partners.” Neither M nor R has any right to participate in the operation of the venture. Based on these facts, what type of business organization have M, R, and N established?

a. Joint venture
b. Limited partnership
c. General partnership
d. Limited liability company

Answer 15

b. Limited partnership

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A limited partnership limits the participation of the silent partners, but also limits their liability. A general partnership would require that all be equally involved in running the operation and would expose all to liability.

Question 16

Based on the facts in the previous question, if the building on the property collapses, resulting in injury and property damage worth $275,000, what will be M’s liability?

a. None
b. $50,000
c. $91,667
d. $100,000

Answer 16

b. $50,000

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Each of the limited partners is limited in liability to the $50,000 amount of the original investment.

Question 17

All of these are required for a joint tenancy EXCEPT

a. unity of title.
b. unity of ownership.
c. unity of time.
d. unity of possession.

Answer 17

b. unity of ownership.

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To create joint tenancy ownership, four unities are required: possession, interest, time, and title; not ownership.

Question 18

All of these are characteristics of a tenancy by the entirety EXCEPT

a. title may be conveyed only by a deed signed by both parties.
b. the surviving spouse automatically becomes sole owner of the property upon the death of the other spouse.
c. each spouse owns an equal, undivided interest in the property as a single, indivisible unit.
d. the surviving spouse automatically owns one-half of the property acquired during the marriage.

Answer 18

d. the surviving spouse automatically owns one-half of the property acquired during the marriage.

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Under tenancy by the entirety, title may be conveyed only by a deed signed by both parties, each spouse owns an equal, undivided interest in the property, and the surviving spouse automatically becomes the owner upon the death of the other.

Question 19

A trust is created to pay for a student’s college education. An attorney makes payments on behalf of the student directly to the college. Based on these facts, which of these statements BEST characterizes the relationships among the parties to the trust?

a. The attorney is the trustor, the student is the beneficiary, and the creator of the trust is the trustee.
b. The creator of the trust is the trustor, the college is the beneficiary, and the attorney is the trustee.
c. The creator of the trust is the trustor, the student is the beneficiary, and the attorney is the trustee.
d. The creator of the trust is the trustor, the attorney is the trustee, and the college is the fiduciary.

Answer 19

c. The creator of the trust is the trustor, the student is the beneficiary, and the attorney is the trustee.

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c. The creator of the trust is the owner-trustor, the student is the beneficiary, and the attorney is the person who manages the trust—that is, the trustee.

Question 20

A company is a legal entity, created by charter under the laws of the state. The company is managed and operated by a board and is permitted to buy and sell real estate. When one of its directors dies, the company continues to operate. Because of its structure, the company’s income is subject to double taxation. The company is BEST described as a

a. partnership.
b. condominium trust.
c. corporation.
d. limited liability company.

Answer 20

c. corporation.

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The corporation would not be affected if one of the directors dies. The particular tip-off to this answer is double taxation, which applies to corporations.

Question 21

When a corporation takes complete ownership of a property, the ownership is in

a. joint tenancy.
b. tenancy in common.
c. partnership.
d. severalty.

Answer 21

d. severalty.

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Corporations are artificial persons and may hold ownership in severalty.

Question 22

In a tenancy in common, if the fractions of ownership are NOT stated in the deed, how are they determined?

a. The tenants need a judicial decision to determine the fractional shares.
b. The tenants are presumed to hold equal shares.
c. The tenants settle the issue through binding arbitration.
d. The tenants must terminate the tenancy in common through partition.

Answer 22

b. The tenants are presumed to hold equal shares.

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The deed creating a tenancy in common may or may not state the fractional interest held by each co-owner; if no fractions are stated, the tenants are presumed to hold equal shares.

Question 23

In a land trust, the beneficiary is usually also the

a. trustor.
b. trustee.
c. fiduciary.
d. attorney in fact.

Answer 23

a. trustor.

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In a land trust, the beneficiary is usually also the trustor. The beneficiary retains management and control of the real property and has the right of possession and the right to any income.