Ky Real Estate Exam Ch 5 Part 1

Question 1

D: Adequate Supervision

Answer 1

A term used in the real estate license law that requires the principal broker to supervise his/her affiliated associates when they are performing licensed activities to assure they are following the licensing law.

Question 2

D: Agency Consent Agreement form

Answer 2

A form mandated by the real estate licensing law must be completed by licensees notifying buyers and sellers of agency relationships.

There is a buyer’s form to be completed by the selling agent when he/she writes an offer for the buyer, and a seller’s form to be completed by the listing agent at the time of listing and then updated when he/she presents an offer to the seller.

Question 3

D: Business Relationship

Answer 3

As defined by the license law, this is a relationship whereby a licensee and a party are, or have been, in an ongoing business relationship, including any prior representation by the licensee in a real estate transaction.

Question 4

D: Client

Answer 4

The party in an agency relationship, also referred to as the principal, is represented by the agent.

Question 5

D: Comprehensive Listing

Answer 5

In the license law, and in the Uniform Residential Landlord-Tenant Act, this refers to a list of all defects in the property that exists at the beginning and again at the end of the occupancy.

This list is used to determine the amount of security deposit that may be held by the landlord for the damage created by the tenant during the lease.

Question 6

D: Consumer

Answer 6

Pursuant to the license law, this means a person or entity with whom a licensee exchanges information that is public in nature but otherwise does not perform acts of real estate brokerage and with whom no written or oral agency agreement or fiduciary relationship exists.

Question 7

D: Delivery

Answer 7

This term is used in numerous contexts in real estate law.

The term may be used to indicate that a written document has actually been delivered to a person as required by the licensing laws.

Examples of this delivery include delivering the sellers disclosure of property condition form (KRS 324.360), delivering the Agency Consent Agreement form ( 201 KAR 11), and the delivery of all forms signed by a party in a real estate transaction (201 KAR 11).

Actual delivery of documents in other real property contexts requires that certain documents be delivered from one party to the other to consummate the transaction.

These situations require the grantor to deliver the deed to the grantee to convey title, and the mortgagor to deliver the mortgage to the mortgagee to convey a lien interest.

Question 8

D: Exclusive Agency

Answer 8

An agency relationship created in the listing contract in which the seller lists the property with one broker and agrees to pay a commission to that broker for selling the property but retains the right to sell the property himself/herself.

If the seller sells the property the broker is not paid a commission; however, if the broker sells the property then the seller would be required to pay a commission.

Question 9

D: Express Agency

Answer 9

An expressed agreement, either oral or written, in which the principal and agent agree to create an agency relationship.

This is the opposite of an implied agency, which is created by the actions of the agent.

Question 10

D: Family Relationship

Answer 10

Under the licensing law, no known familial relationship between a license and a party to the transaction.

Question 11

D: Implied Agency

Answer 11

An agency relationship created by the actions of the agent.

Opposite of an express agency that is created by agreement of the principal and agent.

Question 12

D: Kentucky Uniform Residential Landlord and Tenant Act

Answer 12

This statute, KRS 383, sets forth regulations that must be followed by landlords in residential rental situations.

The law applies only in the counties/cities in Kentucky that have actually adopted the statute.

However, the licensing laws have incorporated the provisions relating to security deposits into the license law.

A licensee managing or owning residential real estate must comply with KRS 383.580 even if the county/city where the property is located has not adopted the statute.

Question 13

D: Personal Relationship

Answer 13

A relationship defined in the license law is a platonic or non-platonic friendship between a licensee and a party to the transaction.

Question 14

D: Property Management

Answer 14

The license law defines property management very broadly and requires a license for all activities where a person manages property they do not own.

The statute states that property management is the overall management of real property for others for a fee, compensation, or other valuable consideration, and may include the marketing of property, the leasing of property, collecting rental payments on the property, payment of notes, mortgages, and other debts on the property, coordinating maintenance for the property, remitting funds and accounting statements to the owner, and other activities that the commission may determine by administrative regulation.

Question 15

D: Property Management Agreement

Answer 15

The license law requires a written property management agreement between the principal broker and property owner.

The requirements of the property management agreement are outlined in detail in 201 KAR 11.

Question 16

D: Prospective Client

Answer 16

Pursuant to the license law this means a person or entity who has not entered into a written or oral agreement with a principal broker to provide real estate brokerage services, but to whom a licensee offers real estate brokerage services or from whom a licensee receives confidential information related to a contemplated real estate transaction.

Question 17

D: Security Deposit

Answer 17

Money deposited with the landlord to secure the landlord against financial loss due to damage of the premises occasioned by the tenant’s occupancy, other than ordinary wear and tear.

The money is not to be used for unpaid rent without the tenant’s agreement, and must be returned to the tenant at the end of the lease if there is no damage to the property. Under the Uniform Residential Landlord and Tenant Act, there are specific provisions regulating security deposits.

Question 18

D: Transaction Broker

Answer 18

A relationship provided in the license law permits the licensee to perform certain work for a buyer and seller without the licensee representing either party.

Question 19

D: Transactional Brokerage

Answer 19

means a form of brokerage service or services provided to either or both parties to a transaction if the licensee owes to the parties only the duties owed to a consumer and if confidential information is not relayed between the parties by the licensee unless so directed by the sending party.

Question 20

D; Principal

Answer 20

AKA: Client

Is the individual who retains the services of an agent and who authorizes the agent to work on his/her behalf.

Principals may be non-individuals, such as corporations, limited liability companies, churches and governments.

It is important for the agent to know exactly whom he/she represents so as not to get into a conflict of interest.

Question 21

What is the difference between Principal and Principle?

Answer 21

A principal is a person who hires an agent.

The principle is a rule.

Question 22

D: Agency

Answer 22

Is the fiduciary relationship between a principal and agent.

Question 23

D: Fiduciary

Answer 23

Is the person who owes the principal fiduciary duties and is held in a position of special trust and confidence by the principal.

Question 24

D: Consumer

Answer 24

Is the third party in the agency relationship who is not represented.

Although not represented, the consumer is entitled to be treated fairly and honestly.

An agent may do certain tasks for the consumer but should make clear to the consumer that the agent is not the agent for the consumer.

It is the duty of the agent to make it clear!

The agent works with, but not for, the consumer, while the agent works for the client.

Question 25

True or False Adrian and Ralph asked Donna to show them one of her listed properties. When Donna showed them the property, she automatically became their agent.

Answer 25

False Agency relationships are not automatically created.

Question 26

True or False The agent has an affirmative duty to make sure the unrepresented party in a transaction understands that he is unrepresented.

Answer 26

True The agent should make sure the parties are clear on their agency relationships in a transaction.

Question 27

True or False Agents owe fiduciary duties to everyone in the transaction.

Answer 27

False Agents owe fiduciary duties to their clients.

Question 28

True or False The principal is a customer.

Answer 28

False The principal is the client.

Question 29

True or False An affiliate has an agency relationship with her principal broker.

Answer 29

True The principal broker is the principal and the affiliate is the agent in the agency relationship between the principal broker and the affiliate.

Question 30

True or False Agents must be fair and honest with consumer.

Answer 30

True Agents must be fair and honest with consumers, although they do not owe them fiduciary duties.

Question 31

True or False Vivian, the listing agent, told Beth she would help her get the lowest purchase price for the property. That might make Beth think Vivian was her agent.

Answer 31

True

Question 32

True or False Agency relationships are consensual.

Answer 32

True A principal has to agree to be represented and the agent has to agree to represent the principal.

Question 33

True or False Compensation paid by the principal determines whom the agent is representing.

Answer 33

False One party may pay an agent to represent another party. In real estate transactions, the sellers often pay both the seller’s agent and the buyer’s agent.

Question 34

True or False Actions cannot create agency relationship.

Answer 34

False Implied agency relationships are created through actions of the principal and agent.

Question 35

True or False A transaction broker is an agent.

Answer 35

False A transaction broker is a middleman who is a non-agent.

Question 36

True or False The statute of fraud states how long a person has to file a lawsuit.

Answer 36

False

Question 37

True or False A consumer is the third party who is not being represented by the agent.

Answer 37

True The unrepresented party is the consumer and the represented party is the client.

Question 38

True or False Agency relationships must be created in writing.

Answer 38

False Agency relationships can be created orally or by actions.

Question 39

True or False A listing contract is an example of an express agency.

Answer 39

True It is a written express agency.

Question 40

D: Confidential Information

Answer 40

A. information received or sent, verbally or in writing including transaction paperwork and files, by a licensee, that may materially compromise the negotiating position of a client or prospective client. B. Confidential information includes information that is not required to be disclosed by law. 1. Is provided to a licensee by a client or prospective client to a real estate transaction 2. Describes or affects the client or prospective client’s bargaining position or motivation 3. Is designated in writing as confidential by the client or prospective client.

Question 41

D: Universal Agent

Answer 41

Is granted power to do anything in the principal’s name that the principal can do for himself/herself. This agency is normally created with a general power of attorney and continues until revoked.

Question 42

D: General Agents

Answer 42

When acting as a general agent, an agent is given a broad range of authority to act for his/her principal until the end of the contract. General agents run the day-to-day activities for the company’s owner and can bind their principals to contracts. Affiliates are general agents for their principal brokers and property managers are general agents for the owners of the property. Because affiliates are general agents of the principal broker, principal brokers need to make it clear to the affiliates what the affiliates are authorized to do on behalf of the principal broker and the real estate brokerage.

Question 43

D: Limited Agents

Answer 43

AKA: Special Agents Real estate agents are special agents, also referred to as limited agents to their client. This is an agency relationship for a limited purpose. Their representation and authority is limited to one specific act or business transaction, usually the listing contract or buyer agency contract. Real estate agents cannot bind their clients to contracts. Licensees cannot sign offers for their clients who have accepted an offer over the telephone.

Question 44

D: Single Agency

Answer 44

In a single agency relationship, the agent has only one client. The agent represents either the buyer or the seller, or in a property management situation, either the landlord or the tenant. Fiduciary duties run only to one principal in a single agency situation.

Question 45

D: Seller Agency

Answer 45

If the agent is the agent for the seller, this is known as seller agency.

Question 46

D: Buyer Agency

Answer 46

If the agent is the agent of the buyer, this is buyer agency.

Question 47

D: Designated Agency

Answer 47

The principal broker always has the choice regarding what type of agency relationships may be created in his/her office. If the principal broker chooses a designated agency, he/she designates one agent in the company to represent the buyer and one agent to represent the seller, KRS 324.010(14). If a designated agency is used, the broker and his/her designated manager, if there is one, remain dual agents in the transaction. As a dual agent in the designated agency situation, the principal broker and his designated manager, if there is one, must keep all client information confidential. Clearly, the key to designated agency is the confidentiality element. The principal broker has the duty to have processes in place that will assure confidentiality. A licensee must disqualify himself/herself from being appointed a designated agent if he/she learns confidential information. Even if a transaction starts out as a designated agency, the agent could end up being a dual agent if that licensee themselves had both the buyer and the seller in the transaction. A licensee should advise their client of this possibility at the beginning of the representation. If the principal broker chooses to use a designated agency in his/her office, the principal broker must inform the affiliates of the designation procedure. Each client must consent to have a designated agent. This type of agency is not used in many areas outside of Lexington, Louisville, and northern Kentucky.

Question 48

When does a Real Estate Agent have to deliver "A Guide to Agency Relationships" to a prospective client?

Answer 48

1. Prior to entering into a contemplated written agreement to provide real estate brokerage services for compensation with a prospective client. 2. Prior to entering into a contemplated oral agreement to provide real estate brokerage services with a prospective client. 3. Prior to signing an agency consent agreement.

Question 49

D: Prospective Client

Answer 49

Means a person or entity who has not entered into a written or oral agreement with a principal broker to provide real estate brokerage services, but to whom a licensee offers real estate brokerage services or from whom a licensee receives confidential information related to a contemplated real estate transaction.

Question 50

What methods count as Delivery

Answer 50

1. Mail 2. Facsimile Transmission 3. Electronic Mail 4. Hand 5. Other legal means.

Question 51

True or False You mark “business relationship” on the Agency Consent Agreement form because you are in the real estate business.

Answer 51

False Business relationship” relates to a current business relationship or a past real estate transaction.

Question 52

True or False A Guide To Agency Relationships is given to clients.

Answer 52

False It's given to prospective clients.

Question 53

True or False If you are acting as a dual agent and you go to church with the seller, you must always disclose that information to the buyer on the Agency Consent Agreement form.

Answer 53

False Be careful with the word “always” in this question. If you go to a really large church you may not have a personal relationship with the seller; however, if you go to a church with 30 people it is more likely that you will. Each time you are acting as a dual agent, you must consider whether or not your relationship will make you biased in favor of one client over the other client.

Question 54

True or False If dual agency exists, a personal relationship must be disclosed on the Agency Consent Agreement form.

Answer 54

True If the licensee is acting as a dual agent, he/she must disclose a personal relationship with either the buyer or seller.

Question 55

True or False A Guide to Agency Relationships may be sent by email.

Answer 55

True

Question 56

True or False On the Agency Consent Agreement form you mark “family relationship” only for immediate family.

Answer 56

False “Family” relationship is not limited to immediate family only.

Question 57

True or False When you sell your own listing, you will always be a dual agent.

Answer 57

False There’s that word again – “always.” It is likely you will be a dual agent when you sell your own listing, but it is not “always.”

Question 58

True or False Licensees must ask the consumer to sign A Guide to Agency Relationships and if the consumer refuses, the licensee cannot work with the consumer.

Answer 58

False It is true that the licensee must ask the consumer to sign A Guide to Agency Relationships, but it is false that if the consumer refuses to sign the form the licensee cannot work with the consumer. In that case, the licensee should deliver the form to the consumer and make a note on the file copy that the consumer refused to sign the form.

Question 59

Prior to entering into a written agreement to provide real estate brokerage services or completing, or directing the completion of, a contract, offer, or lease for a real estate transaction, what does the real estate agent need to do?

Answer 59

1. The licensee shall complete and deliver the Agency Consent Agreement to the prospective client 2. Seek and obtain written consent to the Agency Consent Agreement from the prospective client.

Question 60

How many parts of the Agency Consent Agreement must be completed by the real estate agent?

Answer 60

1 part

Question 61

Explain the 4 parts of the Agency Consent Agreement.

Answer 61

Part 1. is to be completed if the transaction involves two different brokerages. If Part I of the form is appropriate, the only thing to fill out on the form is the agent’s name, the brokerage name, and the principal broker’s name. Part 2. is the appropriate section if the transaction involves two agents in the same brokerage. At this point, you must know if your brokerage practices designated or dual agency. Obviously, if two agents from the same brokerage are involved in the transaction, it will be an in-house transaction. If the office practices designated agency, the box under “Designated Agency” is checked and the name of the agent representing the buyer and the name of the agent representing the seller will be written in the blank, along with the brokerage. If dual agency is being used in the transaction, the box under “Dual Agency” is marked and the names of the agents are written in the blank. This is the section that calls for an explanation of any personal, family, or business relationship that might exist. The licensee should write the information on the blank lines. There have been complaints that the lines are too small. Remember, disclosure is the purpose. If you need to do so, write in the margins. Don’t fail to disclose because the lines are too small! Part 3. is for transactions involving only one licensee. In this event the licensee will either be a dual agent, seller’s agent, or buyer’s agent. The agent’s name should be filled in with the name of the brokerage. If the licensee is selling his/her own listing, it is likely that the licensee will be a dual agent. In that case, the block should be marked and the personal/family/business question should be answered. It is possible that the licensee is not a dual agent. If the licensee is selling a FSBO, he/she is likely a buyer’s agent. If so, that block would be marked. It could be that the buyer does not want representation and the agent is only representing the seller. In that case, the seller block will be marked. And, of course, it could be that the licensee is only completing the paperwork and is not representing anyone, which means the “neither” block would be marked. If the section paragraph of this form applies, the personal/family/business question does not need to be answered. Remember, that is only for dual agency relationships. On some rare occasions an agent might not have any client and would act purely as a transaction broker. If that happens they would use section Part IV of the form. Part 4. Part IV to act as a transaction broker puts themselves at risk. As a non-agent, or transaction broker, the agent only completes paperwork and does not give any real estate advice or representation. Although legal, this relationship can be a problem because real estate agents have a tendency to be too helpful and talk too much. Although some states allow the agents to locate property and give advice, that is not true in Kentucky. All the agent can do is complete the paperwork with information provided by the buyer and seller. At the point the agent starts giving information or advice, he/she has changed from the role of transaction broker to undisclosed agent. It may even be an undisclosed dual agency situation if he/she is talking and giving advice to both parties.

Question 62

How long does the Real Estate Agent keep a copy of the Agency Consent Agreement?

Answer 62

5 years

Question 63

What are the exceptions to the Agency Consent Agreement?

Answer 63

There are exceptions to the Agency Consent Agreement requirements for transactions involving auctions and commercial transactions. Although the forms are not required, an agency relationship between the agent and consumer should be discussed and created.

Question 64

What duties are owed to a consumer?

Answer 64

1. Good Faith | 2. Fair Dealing

Question 65

What duties are owed to a prospective client?

Answer 65

1, Good Faith 2. Fair Dealing 3. The duty of confidentiality

Question 66

If the agent is the buyer where does it have to be disclosed at? If the agent is the seller where and how do they disclose that fact?

Answer 66

A close reading of the statute requires that when the agent is a buyer the writing has to be on the sales contract; however, when the agent is the seller, the disclosure has to be in writing, but not specifically on the sales contract. A licensee who is acting for himself as either the buyer, seller, landlord, or tenant must inform the party that he is an agent representing himself/herself and not an agent for a third party. An agent working for himself/herself and not disclosing the status would be known as an “unknown principal,” which is a license law violation.

Question 67

True or False The first part of the Agency Consent Agreement form is for cooperative sales.

Answer 67

True Part I is to be used when the property is listed by one brokerage and the offer is from a different brokerage.

Question 68

True or False Part II requires the agent mark either dual agency or designated agency.

Answer 68

True Part II is the section of the form that relates to in-house transaction where two agents in the same brokerage are involved in the transaction.

Question 69

True or False You use the same Agency Consent Agreement form for the buyer and seller.

Answer 69

False The form is specific to the client. You use one form for the buyer and one for the seller.

Question 70

True or False You can re-use the Seller’s Agency Consent Agreement for each offer, because the offers are all on the listed property.

Answer 70

False

Question 71

True or False When you have a married couple, only one of them needs to sign the Agency Consent Agreement form.

Answer 71

False All sellers and buyers must sign the Agency Consent Agreement forms.

Question 72

True or False The unrepresented person in the transaction is known as the consumer.

Answer 72

True The represented party is the client and the unrepresented party is the consumer.

Question 73

True or False Consumers are owed the same fiduciary duties as clients.

Answer 73

False Consumers are not owed fiduciary duties.

Question 74

True or False If an agent is acting as a transaction broker, he/she marks “neither” in Part II.

Answer 74

False

Question 75

True or False Agency Consent Agreement forms are kept by the principal broker for three years.

Answer 75

False Agency Consent Agreement forms must be kept for five (5) years.

Question 76

True or False The Agency Consent Agreement form is a three-part form and you must complete each section.

Answer 76

False The Agency Consent Agreement is a four part form and you only complete one section and leave the other two blank.

Question 77

What are the 3 tasks of a property manager?

Answer 77

1. achieve the goals of the owners 2. generate income 3. preserve and increase the value of the property

Question 78

D: Property Managent

Answer 78

The overall management of real property for others for a fee, compensation, or other valuable consideration, and may include the marketing of the property, the leasing of property, collecting rental payments on the property, payment of notes, mortgage, and other debts on the property, coordinating maintenance for the property, remitting funds and accounting statements to the owner, and other activities that the commission may determine by administrative regulation.

Question 79

What are the 3 exceptions to the licensing requirements for property management?

Answer 79

1. If the property manager receives the use of a rental unit as his/her primary compensation. 2. if he/she is a regular employee of the owner or the broker who has the management contract. 3. Is that the statute specifically excludes community association managers and the management or business activities of not-for- profit community associations, which includes townhouse, condominium, homeowner, or neighborhood associations.

Question 80

D: Regular Employee

Answer 80

A regular employee is ‘an employee who works for an employer, whose total compensation is subject to withholding of federal and state taxes and FICA payments, and who receives from the employer a fixed salary governed by federal wage guidelines that is not affected by specific real estate transactions.”

Question 81

The property management agreement shall contain?

Answer 81

1. the business name and address of the licensee’s brokerage 2. the name and address of the property owner 3. the address of the property being managed 4. the number of units being managed 5. the beginning and ending dates of the agreement 6. a provision stating whether or not there is an automatic annual renewal 7. the method for early termination 8. the amount of, and method for computing, licensee compensation 9. the amount of, or method for determining, the minimum security deposit for each unit 10. the name and address of the bank where the security deposits will be held 11. the account number for account holding security deposits 12. procedures for returning or retaining security deposits 13. a statement of whether or not the property manager may pay expenses relating to managing the property 14. date when the licensee will send an account to the owner 15. a copy of the form lease 16. certification by owner that he/she has received a copy of the agreement. 17. signatures, with date, of all owners and the principal broker

Question 82

What is the difference between a property management agreement and a listing contract?

Answer 82

The lease that is attached to the management agreement must contain the name and address of the bank where the security deposit is being held, the security deposit account number, and the provisions for retaining or returning the security deposit.

Question 83

True or False The license law requires that compensation for property management be based on a per unit amount.

Answer 83

False The license law requires the property management agreement to include a compensation provision, but the law does not indicate in any way how the compensation will be determined. As discussed throughout this class, the principal broker decides all compensation issues without input from any other broker or the KREC. To do otherwise, would be a violation of the anti-trust laws.

Question 84

True or False Kentucky license law gives specific instruction on what items must be included in the property management agreement between the owner and principal broker.

Answer 84

True

Question 85

True or False The property management agreement must have attached a copy of a lease authorized by the owner.

Answer 85

True In addition, the name of the bank and account number where the security deposits are to be held must be included.

Question 86

True or False Like the listing contract, all owners must sign the property management agreement for it to be enforceable.

Answer 86

True The Statute of Frauds applies to the property management agreement. Additionally, the license laws on advertising state that a property cannot be publicly promoted without the written permission of all of the owners.

Question 87

True or False There are exceptions to property managers being required to have a real estate license.

Answer 87

Ture One is a property manager who is the regular employee of the owner or the broker who has the management contract; another is a property manager who receives the use of a rental unit as his/her primary compensation.

Question 88

True or False The property management agreement is between the owner and the affiliate who is managing the property.

Answer 88

False The property management, like the listing contract, is an agreement between the property owner and the principal broker, not the affiliate.

Question 89

True or False Property management involves only leasing property and collecting the rents.

Answer 89

False Property management includes many tasks are that performed for rental property that does not belong to the licensee.

Question 90

True or False Property owners must receive a copy of the agreement once it is signed.

Answer 90

True The license law requires that a copy of signed documents be given the person signing the document immediately upon being signed. This law applies to property management documents, as well as documents used to list and sell property.

Question 91

True or False A property management agreement may not automatically renew and must be extended at the end of the year.

Answer 91

False Unlike listing contracts, a property management agreement may contain an automatic renewal clause.

Question 92

True or False A property manager automatically has the authority to spend up to $500 for repairs without approval from the owner.

Answer 92

False The property management agreement must provide whether or not the property manager may pay expenses relating to the property.

Question 93

Money received by the property manager on behalf of the owner must be deposited A. with undue delay. B. monthly. C. immediately. D. without unreasonable delay.

Answer 93

D. without unreasonable delay. Without unreasonable delay, which is defined by the license law to be within three (3) business days.

Question 94

At the termination of the property management agreement, the property manager has how many days to send the owner a final accounting.

Answer 94

60 Days

Question 95

Property managers must provide an accounting to the owner on a ,what basis?

Answer 95

Monthly Basis

Question 96

Under the Uniform Residential Landlord Tenant Act, the security deposit A. must be equal to at least one month’s rent. B. must be kept in a separate security deposit account. C. should not be returned until the landlord receives a demand from the tenant. D. may be used for rent.

Answer 96

B. must be kept in a separate security deposit account.

Question 97

Under the Uniform Residential Landlord Tenant Act, the lease must contain A. the number of children who will live in the house. B. an automatic renewal. C. the name of the bank and the account number where the security deposit is held D. a termination clause allowing termination for a penalty of no more than two (2) month’s rent.

Answer 97

C. the name of the bank and the account number where the security deposit is held The Uniform Residential Landlord Tenant Act requires the tenant be notified of the name of the bank and the account number where the security deposit is being held.

Question 98

An employee, who does not have a real estate license, is managing property for the employer. Which of the following is true? A. The employee may opt to pay his federal and state income tax instead of having the employer withhold them, because he does not have a real estate license. B. The employee must be paid wages that cannot be based on the number of units rented. C. The employee may be paid for units rented. D. The employee must get a real estate license without delay.

Answer 98

B. The employee must be paid wages that cannot be based on the number of units rented. In order for the employee to fall under the non-licensed exception for acting as a property manager, the employee cannot be paid per unit and must be wages regardless of units rented. The employer must also deduct federal and state income tax and must pay social security and unemployment taxes.

Question 99

Ture or False Principal brokers may or may not require their affiliates to manage their rental property through the brokerage.

Answer 99

True The principal broker may require affiliates to handle personal rental property through the brokerage, or they may agree that the affiliate can manage his/her rental property outside the brokerage.

Question 100

Ture or False Licensees, managing their personally owned real estate, must disclose in any contract they sign, that he/she has a real estate license, even if the license is in escrow.

Answer 100

True

Question 101

Ture or False The E&O insurance may not cover property management activities for the licensee’s personal real estate.

Answer 101

True Licensees, who have personal rental property that they manage, should check with their E&O insurance carrier to see if they have coverage for property management activities for their personal real estate.

Question 102

Ture or False Principal brokers must adequately supervise their affiliates and that includes property management activities.

Answer 102

True The principal broker’s duty to adequately supervise extends to the affiliate’s property management activities.

Question 103

Ture or False When a licensee advertises his/her personal rental property that is not listed with the principal broker, he/she must state in the advertisement that he/she has a real estate license.

Answer 103

False If the rental property is not listed with the principal broker, the affiliate who owns the property is not required to advertise owner/agent. However, the affiliate must indicate in the lease that he/she has a real estate license.

Question 104

Ture or False Security deposits are for damage to property beyond normal wear and tear, and not for unpaid rent.

Answer 104

True Security deposits cannot be kept for unpaid rent unless the tenant agrees, or the tenant leaves owing rent and does not demand within thirty (30) days that the security deposit be returned.

Question 105

Ture or False A principal broker with a property management division in the brokerage must have property management funds in a separate escrow account or clearly state which funds in the regular escrow account are for property management activities.

Answer 105

True It must be clear which escrow funds are for the general brokerage and which ones are for property management activities.

Question 106

Ture or False A principal broker can never be liable for actions of his affiliate when the affiliate is managing his/her own rental property.

Answer 106

False The license law says the principal broker must adequately supervise his/her affiliates. It does not limit that requirement. And if the affiliate misleads the consumer into believing the principal broker is involved in the property management, the principal broker may have liability. As we discussed thorough-out the whole course, if you see the word “never” be very careful with your answer. In real estate, most things are “never” never!

Question 107

Ture or False License law relating to advertising applies only to property listed for sale.

Answer 107

False License law and regulations relating to advertising apply to all advertisements placed by a brokerage, principal broker, and affiliates, regardless of the type of property or type of transaction.

Question 108

Ture or False For a principal broker to enforce his/her right to collect a property management fee, because of Kentucky Uniform Residential Landlord Tenant Act the property management agreement must be in writing.

Answer 108

False

Question 109

True or False Kentucky license law requires a final accounting to the owner within 60 days after the end of the management agreement.

Answer 109

True During the term of the property management agreement, a monthly accounting, per unit, must be provided the owner.

Question 110

True or False Money belonging to others received by the principal broker must be deposited into his/her escrow account within five (5) business days.

Answer 110

False Money must be deposited “without unreasonable delay,” which is defined in the license law as three (3) business days.

Question 111

True or False Security deposits may be kept in the principal broker’s escrow account.

Answer 111

False

Question 112

True or False A property manager's primary obligation is to please the tenants.

Answer 112

False The property manager has a fiduciary duty to the owner, not the tenants.

Question 113

True or False Kentucky license law requires a written property management agreement between the owner and principal broker.

Answer 113

True The agreement must be in writing and must be between the owner and the principal broker, not the affiliate.

Question 114

True or False A property manager may spend up to $500 for repairs without the owner’s permission under Kentucky license law.

Answer 114

False The property management agreement between the owner and principal broker must spell out specifically if the property manager can spend any money without the owner’s permission.

Question 115

True or False Property management records must be kept by the principal broker for three (3) years.

Answer 115

False Like brokerage records, property management records must be kept five (5) years.

Question 116

True or False The property management agreement is between the owner and the principal broker.

Answer 116

True A property management agreement is like a listing contract. Although the affiliate may be working directly with the owner, the agreement is with the principal broker.

Question 117

True or False Security deposits are not rent.

Answer 117

True Security deposits are to pay for damage to property that occurred during the tenant’s occupancy that were beyond normal wear and tear.

Question 118

True or False Under Kentucky law, a copy of the lease must be attached to the property management agreement.

Answer 118

True That is one of the requirements in the license law outlining what must be included in a property management agreement between the owner and principal broker.

Question 119

True or False Under the Kentucky Uniform Residential Landlord Tenant Act a comprehensive listing of any defects in the property must be prepared prior to the tenant moving into the property.

Answer 119

True The form commonly referred to as the “walk-through checklist” must be prepared prior to the tenant’s occupancy and used when the tenant moves out to compare changes in the property for the purpose of deducting amounts for repairs from the security deposits.

Question 120

True or False In Kentucky, the property management agreement must have a beginning date and ending date and may not contain an automatic extension clause.

Answer 120

False The agreement must have a beginning and ending date, but it may also contain an automatic extension clause.

Question 121

True or False The Kentucky license law requires a monthly accounting for each unit managed even if the same owner owns them all.

Answer 121

True A monthly accounting for each unit, regardless of the owner, is required.

Question 122

True or False If a licensee is managing property in Kentucky, the security deposit provisions of the Kentucky Uniform Residential Landlord Tenant Act applies to all property being rented, even if the county has not adopted the Act.

Answer 122

True

Question 123

True or False Kentucky licensees must follow the security deposit provisions of the Uniform Landlord Tenant Act even if they are managing property in a county where it has not been adopted.

Answer 123

True This is also true if they are managing their personal real estate.