Sample Test: Maryland Practice Exam Flashcards
A farmer temporarily installs produce coolers in a leased farm stand in order to prevent spoilage. The coolers would be considered which of the following?
a. Trade fixtures that are real property.
b. Trade fixtures that are personal property.
c. Temporary real property.
d. Emblements.
(b) Trade fixtures that are personal property.
Trade fixtures are items of a tenant’s personal property that the tenant has temporarily affixed to a landlord’s real property in order to conduct business. Trade fixtures may be detached and removed before or upon surrender of the leased premises. Should the tenant fail to remove a trade fixture, it may become the property of the landlord through accession. Thereafter, the fixture is considered real property.
Property can be converted from real to personal property and from personal property to real property by means of which processes, respectively?
a. Assemblage and plottage.
b. Application and dissolution.
c. Severance and affixing.
d. Planting and harvesting.
(c) Severance and affixing.
Severance is the conversion of real property to personal property by detaching it from the real estate; affixing, or attachment, is the act of converting personal property to real property by attaching it to the real estate, such as by assembling a pile of bricks into a barbecue pit, or constructing a boat dock from wood
planks.
The highest form of ownership interest one can acquire in real estate is the
a. legal life estate.
b. conventional life estate.
c. defeasible fee simple estate.
d. absolute fee simple estate.
(d) absolute fee simple estate.
The fee simple freehold estate is the highest form of ownership interest one can acquire in real estate. It includes the complete bundle of rights, and the tenancy is unlimited, with certain exceptions. The fee simple absolute estate is a perpetual estate that is not conditioned by stipulated or restricted uses.
The distinguishing feature of a defeasible fee simple estate is that
a. it can be passed on to heirs.
b. it has no restrictions on use.
c. the estate may revert to a grantor or heirs if the prescribed use changes.
d. it is of unlimited duration.
(c) the estate may revert to a grantor or heirs if the prescribed use changes.
The defeasible fee estate is perpetual, provided the usage conforms to stated conditions. Essential
characteristics are: the property must be used for a certain purpose or under certain conditions; and, if the use changes or if prohibited conditions are present, the estate reverts to the previous grantor of the estate.
Maria acquires a property from her uncle Alfonso. When Maria dies, the estate will pass to Alfonso’s other niece, Serena. The type of estate that Maria has in the property is a
a. conventional life estate.
b. legal life estate.
c. fee simple defeasible estate.
d. tenancy by the entireties.
(a) conventional life estate.
A conventional life estate is a freehold estate that is limited in duration to the life of the owner or other
named person. Upon the death of the owner or other named individual, the estate passes to the original owner or another named party. A legal life estate is created by law as opposed to a property owner’s choice.
One difference between a cooperative estate and a condominium estate is that
a. a condominium owner owns a unit of air space whereas the co-op owner owns a proprietary lease.
b. a condominium sale adversely affects other unit owners.
c. the coop owner owns stock and a freehold real estate interest whereas the condominium owner simply a proprietary lease.
d. the condominium owner owns the common elements and the airspace whereas the coop owner only owns the apartment.
(a) a condominium owner owns a unit of air space whereas the co-op owner owns a proprietary
lease.
The owner of a condominium has a fee-simple ownership interest in his/her unit and its air space.
Whereas, a co-op owner has a leasehold, not fee-simple, interest with the property’s corporation.
Since the corporation owns an undivided interest in the cooperative property, debts and financial obligations apply to the property as a whole, not to individual units as in a condominium.
Who are the essential parties involved in an estate in trust?
a. Owner, trustor and lawyer.
b. Owner, trustor and trustee.
c. Trustee, title company, and beneficiary.
d. Trustor, trustee and beneficiary.
(d) Trustor, trustee and beneficiary.
In an estate in trust, a fee owner– the grantor or trustor– transfers legal title to a fiduciary– the trustee– who holds and manages the estate for the benefit of another party, the beneficiary.
A condominium owner enjoys a
a. share in an association that owns one’s apartment.
b. tenancy in common interest in airspace and common areas of the property.
c. fee simple ownership of the airspace in a unit and an undivided share of the entire property’s common areas.
d. fee simple ownership of a pro rata share of the entire property.
(c) fee simple ownership of the airspace in a unit and an undivided share of the entire property’s common areas.
A condominium is a hybrid form of ownership of multi-unit residential or commercial properties. It combines ownership of a fee simple interest in the airspace within a unit with ownership of an undivided share, as a tenant in common, of the entire property’s common elements, such as lobbies, swimming pools, and hallways.
With various types of junior liens, the order of payment priority is generally established according to
a. the date of recordation.
b. what form of tax is in question.
c. the order of disbursement.
d. whether the lien was subordinated.
(a) the date of recordation.
Among junior liens, date of recording determines priority. The rule is: the earlier the recording date of the lien, the higher its priority. For example, if a judgment lien is recorded against a property on Friday, and a mortgage lien is recorded on the following Tuesday, the judgment lien has priority and must be satisfied in a foreclosure ahead of the mortgage lien.
What is a lien-theory state in contrast to a title-theory state?
a. A state in which liens are given priority over other encumbrances.
b. A state in which a mortgagor retains title to the property when a mortgage lien is created.
c. A state in which the holder of a mortgage lien receives title to the mortgaged property until the debt is satisfied.
d. A state in which liens must be recorded to be enforceable.
(b) A state in which a mortgagor retains title to the property when a mortgage lien is created.
In lien-theory states, laws give a lender on a mortgaged property equitable title rather than legal title. The mortgagor in a lien theory state retains legal title.
A property owner has an easement appurtenant on her property. One day the property is sold to another party who is opposed to the easement. Following the closing, this particular form of easement
a. terminates.
b. transfers with the property.
c. transfers with the owner to a new property.
d. becomes a license on the property.
(b) transfers with the property.
The term appurtenant means “attaching to.” An easement appurtenant attaches to the estate and transfers with it unless specifically stated otherwise in the transaction documents.
What fundamental legal purpose is fulfilled by title records?
a. Keeping the county apprised of tax payments.
b. Preventing identity theft.
c. Giving constructive notice of one’s rights and interests in the property.
d. Assembling all relevant documents in a single place.
(c) Giving constructive notice of one’s rights and interests in the property.
Recorded instruments may include deeds, mortgages, liens, easements, sale contracts, and marriage, probate and tax records. The primary purpose of recording and maintaining records of these instruments is to provide constructive notice of the conditions of a property’s title– who owns it, who maintains claims against it.
What is “chain of title?”
a. The list of all parties who have ever owned real estate.
b. The bundle of rights linked to the recorded title to a parcel.
c. A chronology of successive owners of record of a parcel of real estate.
d. Involuntary conveyance of title by statutory rules of descent.
(c) A chronology of successive owners of record of a parcel of real estate.
Chain of title refers to the succession of owners of record dating back to the original grant of title from the state to a private party. It is thus more than a mere list; it is a chronological list as reflected in title records.
Which of the following provides the strongest evidence of marketable title?
a. A general warranty deed.
b. A title certificate.
c. Title insurance.
d. An attorney’s opinion.
(c) Title insurance.
A title insurance policy indemnifies the policy holder against losses arising from defects in the title and is thus generally accepted as the best evidence of marketability after a Torrens certificate, which is not available in every jurisdiction. A signed deed is no evidence of marketability, only of an intent to convey title. An attorney’s opinion and a title certificate, while forms of evidence of marketability, do not guarantee clear title or offer any protection against a defective title.
A store owner enters into a lease that charges rent per square foot, a common area fee, and a portion of the store owner’s gross income from the property. This kind of lease is a
a. triple charge, or triple net lease.
b. proprietor’s lease.
c. percentage lease.
d. retailer’s gross lease.
(c) percentage lease
A percentage lease allows the landlord to share in the income generated from the use of the property. A tenant pays percentage rent, or an amount of rent equal to a percentage of the
tenant’s periodic gross sales.
An owner leases a property to a business in exchange for rent. The tenant is required to pay all operating expenses as well. This is an example of a
a. proprietary lease.
b. percentage lease.
c. gross lease.
d. net lease.
(d) net lease.
A net lease requires a tenant to pay for utilities, internal repairs, and a proportionate share of taxes, insurance, and operating expenses in addition to rent.
A lease automatically terminates under which of the following circumstances?
a. The tenant fails to pay rent.
b. The leased property is foreclosed.
c. The tenant goes out of business.
d. The landlord cancels the lease.
(b) The leased property is foreclosed.
A foreclosure extinguishes all prior interests in a property, including a leasehold.
A county or municipal authority usually grants a certificate of occupancy for new construction only after
a. all contractors’ work has been inspected.
b. all work has been completed for at least sixty days.
c. the construction conforms to building codes.
d. the tax assessor has valued the improvement.
(c) the construction conforms with applicable building codes.
Building inspectors inspect a new development or improvement for code compliance. If the work complies, the municipality or county issues a certificate of occupancy which officially clears the property for occupation and use.
A property owner is precluded by deed restriction from developing a thirty foot boat dock. The limitation prompts the owner to sell to another party. The new owner
a. is free to build the dock since the next door neighbor built a similar dock two weeks later.
b. takes title subject to the same restriction.
c. can build the dock with special permission from the zoning board.
d. may build, since the restriction is extinguished by the sale.
(b) takes title subject to the same restriction.
Deed restrictions attach to the title of the property. Therefore, the restriction passes to the new buyer.
Emily sells Rycole a property containing a deed condition. The condition stipulates that the forested portion of the property must never be razed for development. Three months later, Rycole proceeds to harvest the trees and turn the area into an executive golf course. What recourse, if any, does Emily have under the deed condition?
a. She has the right to re-possess the property because the grantee has violated the condition.
b. The condition has ceased to apply because she allowed the violation to continue for a certain period of time.
c. She can claim the proceeds from the harvested trees.
d. She can force Rycole to sell the property to a new owner who agrees to comply with the condition.
(a) She has the right to re-possess the property because the grantee has violated the condition.
A deed condition may restrict certain uses of a property, much like a deed restriction. However, violation of a deed condition gives the grantor the right to re-take possession of the property and file suit for legal title.
What is the essential purpose of legal descriptions of real property?
a. To create a consistent, unchanging standard for uniquely locating a property.
b. To enable courts and attorneys to calculate property size accurately.
c. To comply with common law for real property.
d. To eliminate cumbersome metes and bounds descriptions.
(a) To create a consistent, unchanging standard for identifying a property’s unique location.
A legal description of real property is one which accurately locates and identifies the boundaries of the subject parcel to a degree acceptable by courts of law in the state where the property is located. The general criterion for a legal description is that it alone provides sufficient data for a surveyor to locate the parcel. A legal description identifies the property as unique and distinct from all other properties.
Which of the following characterizes metes and bounds descriptions?
a. They use meridians and base lines.
b. They identify an enclosed area, beginning and ending at the same point.
c. They use lot and block numbers.
d. They incorporate elevation into the descriptions.
(b) They identify an enclosed area, beginning and ending at the same point.
The metes and bounds description always identifies an enclosed area by starting at an origination point, called point of beginning, or POB, and returning to the POB at the end of the description.
A buyer agrees to all terms of a seller’s offer except the length of time for a contingency to procure financing. The buyer extends the financing period in the offer by one week, signs the form, and mails it back to the seller. At this point, the seller’s offer
a. is void.
b. becomes an executory contract.
c. becomes a counteroffer.
d. has been accepted, since the modification was a contingency.
(a) is void.
By changing any of the terms of an offer, the offeree creates a counteroffer, and the original offer is void. At this point, the offeree becomes the offeror, and the new offeree gains the right of acceptance. If accepted, the counteroffer becomes a valid contract provided all other requirements are met.
Real estate contracts that are not personal service contracts
a. may be assigned.
b. are not assignable.
c. must be in writing.
d. are exempt from the statute of frauds.
(a) may be assigned.
A real estate contract that is not a personal contract for services can be assigned to another party unless the terms of the agreement specifically prohibit assignment. Listing agreements, for example, are not
assignable, since they are personal service agreements between agent and principal. Sales contracts, however, are assignable, because they involve the purchase of real property rather than a personal service.
Which of the following contracts must be in writing to be enforceable?
a. A parol contract.
b. A six-month lease.
c. A two-year lease.
d. An executory contract.
(c) A two-year lease.
A contract may be in writing or it may be an oral, or parol, contract. Certain oral contracts are valid and enforceable, others are not enforceable, even if valid. For example, most states require listing agreements, sales contracts, and leases exceeding one year to be in writing to be enforceable.
Agent Bob, who works for Broker Bill, obtains an owner listing to lease a building. Bill’s other agent, Sue, locates a tenant for Bob’s listing. Broker Bill in this instance is
a. an implied agent.
b. a dual agent.
c. a single agent.
d. a subagent.
(b) a dual agent.
Dual agency occurs whenever a single broker represents both principal parties to a transaction. Here, since Bob and Sue work for Bill, Bill is the dual agent.
A transaction broker should disclose his or her agency relationship to prospective buyers and sellers
a. upon first substantive communication.
b. upon completion of the listing agreement.
c. immediately following completion of any offer.
d. immediately prior to closing.
(a) upon first substantive communication.
The agent must provide written notice to all parties or their agents as soon as substantive communication occurs, which can include initial face-to-face contact.
A transaction facilitator in a residential transaction represents
a. the seller.
b. the buyer.
c. both seller and buyer.
d. neither seller nor buyer.
(d) neither seller nor buyer.
In recent years, the brokerage industry has striven to clear up the question of who works for whom, and who owes fiduciary duties to whom. One solution allows a broker to represent no one in a transaction. That is, the broker acts as a transaction broker, or facilitator, and has no allegiance to buyer or seller.
A principal instructs an agent to inform minority buyers that the property for lease was just leased an hour ago and is no longer available. The agent refuses to comply. In this case,
a. the agent should exercise caution until the listing expires, then decline to renew it.
b. the principal has proposed an illegal act, which should not be obeyed.
c. the agent is liable for breaching the listing terms.
d. the agent may sue the principal for discrimination and misrepresentation.
(b) the principal has proposed an illegal act, which should not be obeyed.
An agent must comply with the client’s directions and instructions, provided they are legal. If the directive is illegal, the agent must also immediately withdraw.
The amount of a real estate broker’s commission is established by
a. agreement among competing brokers.
b. negotiation with clients.
c. the local Board of Realtors®.
d. state real estate license law.
(b) negotiated with clients.
The amount of a broker’s commission is whatever amount the client and broker have agreed to.
A client revokes an exclusive right-to-sell listing two months prior to expiration. The reason stated: the client is too busy to meet with the agent. In this case,
a. the client is criminally liable for negligence.
b. the client may be liable for a commission and marketing expenses.
c. the agent can sue the client for specific performance, even if no customer had been located.
d. the agent must accept the revocation without the possibility of damage recovery.
(b) the client may be liable for a commission and marketing expenses.
With an exclusive right-to-sell listing, if the property sells during the term of the revoked listing, the client is liable for the commission. If the property does not sell, the client is liable for the broker’s actual costs.
A protection period clause in an exclusive listing provides that
a. the owner is protected from all liabilities arising from the agent’s actions performed within the agent’s scope of duties.
b. the agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing’s expiration.
c. agents are entitled to extend a listing agreement’s term if a transaction is imminent.
d. an owner is not liable for a commission if a prospective customer delays in completing an acceptable offer.
(b) the agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing’s expiration.
Many listings include a protection clause stating that, for a certain period after expiration, the owner is liable for the commission if the property sells to a party that the broker procured, unless the seller has since listed the property with another broker.
Real estate advertising must conform to regulatory standards and requirements. One requirement is
a. a broker may only place blind ads in social media outlets.
b. a broker must have all advertising approved by the local real estate board.
c. the advertising must not be deceptive.
d. sales agents may only advertise in their own name.
(c) the advertising must not be deceptive.
Advertising may not be misleading or deceptive in promoting the brokerage or listed properties. Blind ads are also prohibited without exception. Sales agents, moreover, must identify their employer.
The three principal brokerage firms in a market agree to pay sales agents 15% more than any other competitor currently in practice. This is an example of
a. collusion.
b. price fixing.
c. allocation of markets.
d. steering.
(a) collusion.
Collusion is the illegal practice of two or more businesses joining forces or making joint decisions which have the effect of putting another business at a competitive disadvantage.
Two leading agencies jointly agree to raise commissions charged to residential sellers to 7.5% of the sales price. Which of the following is true?
a. This is a perfectly legitimate business practice.
b. The brokers have illegally fixed prices.
c. The brokers have allocated markets.
d. The brokers have engaged in legal collusion.
(b) The brokers have illegally fixed prices.
Price fixing is the practice of two or more brokers agreeing to charge certain commission rates or fees for their services, regardless of market conditions or competitors.
A sale contract contains an open-ended financing contingency: if the buyer cannot obtain financing within a reasonable time, the deal is off. Six months later, the buyer still cannot secure financing. Which of the following is true?
a. The seller may cancel the contract, since it can be ruled invalid.
b. The buyer can continue indefinitely to seek financing, and the seller’s property must remain off the market, since “reasonable” is not defined.
c. The escrow agent is entitled to the buyer’s deposit.
d. The seller can force a lender to commit to a loan under fair financing laws.
(a) The seller may cancel the contract, since it can be ruled invalid.
A contingency that is too broad, vague, or excessive in duration may invalidate the entire contract on the grounds of insufficiency of mutual agreement.
To avoid problems, the statement of a contingency should be explicit and clear, have an expiration date, and expressly require diligence in the effort to fulfill the requirement.
In the event of a buyer’s default, a provision for liquidated damages in a sale contract enables a seller to
a. sue the buyer for specific performance.
b. force the buyer to quitclaim equitable title.
c. sue the buyer for the broker’s marketing expenses.
d. claim the deposit as compensated damages for the buyer’s failure to perform.
(d) claim the deposit as compensated damages for the buyer’s failure to perform.
If a buyer fails to perform under the terms of a sale contract, the breach entitles the seller to legal recourse for damages. The usual remedy is forfeiture of the buyer’s deposit as liquidated damages, provided the deposit is not grossly in excess of the seller’s actual damages.
Which of the following is true of an option-to-buy agreement?
a. The potential buyer, the optionee, is obligated to buy the property once the option agreement is completed.
b. The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.
c. The contract can be executed at no cost to the optionee.
d. It is a bilateral agreement.
(b) The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.
An option-to-buy places the optionee under no obligation to purchase the property. However, the seller must perform under the terms of the contract if the buyer exercises the option. An option is thus a unilateral agreement. Exercise of the option creates a bilateral sale contract where both parties are bound to perform.
If a manufacturer that is the major employer in a small city moves its operations to another city, it is
reasonable to expect
a. a fall in housing demand, but no other changes in the real estate market.
b. a decline in demand for all types of real estate in the real estate market.
c. an immediate fall in the demand for industrial real estate, but no other changes in the real estate market.
d. an immediate decline in the prices for industrial and office real estate, but no impact on the residential market.
(b) a decline in demand for all types of real estate in the real estate market.
Businesses that support the departing company will lay off or fire new employees, causing some to leave town in search of work. Some of these businesses may also have to cease operations. Hence the demand for residential real estate, as well as for commercial and industrial, will decline, and new construction will probably also halt until some other factor increases demand again.
If a commercial real estate market is undersupplied, it is likely that
a. rental prices in that market will fall.
b. rental prices in that market will rise.
c. rental prices will remain stable until equilibrium is reached.
d. construction will increase to the point of equilibrium.
(b). rental prices in that market will rise
An undersupply of commercial properties in relation to demand will most likely increase prices, as renters have fewer choices and less bargaining power.
