Unit 19 Quiz Questions

Question 1

A property manager’s first responsibility to the owner should be to

a. keep the building’s occupancy rate at 100%.
b. report all day-to-day financial and operating decisions to the owner on a regular basis.
c. realize the highest return possible consistent with the owner’s instructions.
d. ensure that the rental rates are below market average.

Answer 1

Realize the highest return possible consistent with the owner’s instructions.

The role of the property manager is to achieve the objectives of the property owner, generate income for the owner, and preserve and/or increase the value of the investment property

Question 2

The property manager’s relationship with the owner is most similar to that of a

a. tenant with a landlord.
b. cashier with the owner of a store.
c. stockholder with the board of directors of a corporation.
d. sales associate with the employing broker.

Answer 2

Sales associate with the employing broker.

A property manager is hired as a general agent with broad authority for a specific activity and for a long time. A sales associate is usually a general agent for the broker.

Question 3

A written management agreement should include

a. a list of the manager’s duties and responsibilities.
b. a statement of the owner’s personal finances.
c. a statement identifying the manager’s creditors.
d. an allowance for unlimited expenditures.

Answer 3

A list of the manager’s duties and responsibilities

A management agreement establishes owner and manager responsibilities, determining who pays for what, all in keeping with the owner’s purpose. It does not include a statement identifying the owner’s personal finances or the manager’s creditors.

Question 4

If an apartment rents for $1,500 per month and the manager receives a 12% commission on all new tenants, how much will the manager receive when renting an apartment, assuming that this commission is calculated in the usual way?

a. $180
b. $1,500
c. $2,160
d. $3,600

Answer 4

$2160

The manager will receive $2,160:
$1,500 per month × 12 months × 12% = $2,160.

Question 5

What is the annual rent per square foot for a 30 ft × 40 ft property that rents for $2,950 per month?

a. $l.20
b. $2.46
c. $24.65
d. $29.50

Answer 5

$29.50

The annual rent is $29.50 per square foot:
30 × 40 = 1,200 square feet; $2,950 × 12 = $35,400; $35,400 ÷ 1,200 = $29.50.

Question 6

Of these, a high vacancy rate MOST likely indicates

a. rental rates are too low.
b. the property is attractive.
c. building management is effective and responsive.
d. an undesirable property.

Answer 6

An undesirable property.

An elevated level of vacancy may indicate poor management, a defective or undesirable property, or rental rates that are too high for the market or the property.

Question 7

Which of these is an example of corrective maintenance?

a. Seasonal recharge of refrigerant in an air conditioning unit
b. Picking up litter in common areas
c. Repairing a leaking water heater
d. Moving a partition wall to make a larger office

Answer 7

Repairing a leaking water heater.

Repairing a leaking water heater is an example of corrective maintenance, which is fixing what is broken. Seasonal servicing is preventive; picking up litter is routine; moving a partition wall is construction.

Question 8

How can tenants insure their personal belongings in apartments they rent?

a. Pay an extra fee so they are added to their landlord’s commercial insurance
b. Obtain a surety bond
c. Obtain HO-4 or renter’s insurance
d. Obtain errors and omissions (E&O) insurance

Answer 8

Obtain H0-4 or renter’s insurance

A surety bond covers an owner against financial losses resulting from an employee’s criminal acts or negligence.

Question 9

Under the ADA, existing barriers MUST be removed

a. in all public buildings by the end of 2025.
b. only on request from a person with a disability.
c. even though reasonable alternative accommodation is more practical.
d. when removal may be accomplished in a readily achievable manner.

Answer 9

When removal may be accomplished in a readily achievable manner.

Existing barriers must be removed when this can be accomplished in a readily achievable manner with little difficulty and at low cost. One example is ramping or removing an obstacle from an otherwise accessible entrance.

Question 10

A company moved from one part of the city to another. During the move, a truck carrying electronic equipment worth more than $250,000 accidentally ended up in a river, and the equipment was destroyed. Fortunately, the company was insured under several policies. The policy that would most likely cover the computer equipment during the move from one facility to another is a

a. consequential loss, use, and occupancy policy.
b. casualty policy.
c. contents and personal property policy.
d. liability policy.

Answer 10

Contents and personal property policy.

Contents and personal property insurance covers building contents and personal property during periods when they are not actually located on the business premises. Consequential loss is also called loss of rent or business interruption; casualty covers theft, vandalism, machinery damage; liability covers injuries sustained on the premises.

Question 11

Principal responsibilities of the property manager include

a. forcibly removing tenants for nonpayment of rent.
b. generating tax losses for the owner.
c. preserving and/or increasing the value of the property.
d. achieving the objectives of the tenants.

Answer 11

Preserving and/or increasing the value of the property.

The property manager may start eviction proceedings but does not carry out the proceedings, which must be carried out by an officer of the court.

Question 12

What is the purpose of an operating budget for a property manager?

a. It documents the month’s actual income and expenses.
b. It is a guide for the property’s financial performance in the future.
c. It presents current cash flow in a standardized format.
d. It lists the assets, liabilities, and equity of the investment property

Answer 12

It is a guide for the property’s financial performance in the future.

The budget is a forward-looking plan that guides and provides expectations. The cash flow report is a monthly statement that details the financial status of the property. The profit and loss statement documents the actual income and expenses.

Question 13

What type of plan does a property manager implement to manage tenants who are consistently late in paying their rent?

a. Eviction plan
b. Collection plan
c. Foreclosure plan
d. Cash flow plan

Answer 13

Collection plan.

Question 14

One way that property managers meet the goals of ECOA is by

a. disqualifying tenant applicants on the basis of receiving welfare payments.
b. not evaluating certain tenant applicants through the use of credit reports.
c. establishing that certain buildings do not allow children as residents.
d. making sure to use the same lease application for every applicant.

Answer 14

Making sure to use the same lease application for every applicant.

Equality is the key. It is acceptable to use credit reports; however, managers need to require them for all applicants. ECOA prohibits discrimination on the basis of receipt of public assistance, such as welfare.

Question 15

According to the Fair Housing Act, what is steering?

a. Channeling of protected class members to certain buildings or neighborhoods
b. Encouraging people to rent or sell by claiming that certain protected classes of people will have a negative impact on property values
c. An appropriate method to manage risks associated with rental property ownership
d. A method of providing reasonable accommodation for people with disabilities

Answer 15

Channeling of protected class members to certain buildings or neighborhood.

Steering is prohibited under the Fair Housing Act. Blockbusting is encouraging people to rent
or sell by claiming that the entry of certain protected classes of people in an area will have a
negative impact on property values.

Question 16

Which type of insurance coverage insures an employer against MOST claims for job-related injuries?

A. Consequential loss
B. Workers’ compensation
C. Casualty
D. Surety bond

Answer 16

Workers’ compensation.

The answer is workers’ compensation. Workers’ compensation insurance protects employers against claims for on-the-job injuries to their employees.

Question 17

Avoid, control, transfer, or retain are the four alternative techniques of

A. tenant relations.
B. acquiring insurance.
C. risk management.
D. property management.

Answer 17

Risk Management

the answer is risk management. Ways to manage risk are to avoid it (removing source of risk), to control it (take safety measures), to shift or transfer it (insure), or to retain it (increase deductible).

Question 18

Adaptations of property specifications to suit tenant requirements are

A. tax-exempt improvements.
B. tenant improvements.
C. prohibited by most nonresidential leases.
D. generally not a good idea.

Answer 18

Tenant improvements.

The answer is tenant improvements. Tenant improvements are alterations to the interior of the building to meet a tenant’s particular space needs.

Question 19

A guest slips on an icy apartment building stair and is hospitalized. A claim against the building owner for medical expenses may be paid under which of the following policies held by the owner?

A. Workers’ compensation
B. Casualty
C. Liability
D. Fire and hazard

Answer 19

Liability

The answer is liability. Liability insurance protects an insured who becomes obliged to pay (liable) for damage or injury to others.

Question 20

A management agreement will includ

A. all liens on the property
B. the property owner’s tax status.
C.the extent of the manager’s authority.
D.restrictions regarding ages of children.

Answer 20

The extent of the manager’s authority

The answer is the extent of the property manager’s authority. A management agreement shouldinclude an adequate description of the property, compensation arrangements, and what the manager’s authority is to be, but not liens on the property or the property owner’s tax status. Restricting occupancy based on ages of children violates the federal Fair Housing Act and may also violate state and local laws.

Question 21

A property manager is offered a choice of three insurance policies with different deductibles. If the property manager selects the policy with the highest deductible, which risk management technique is being used?

A.Avoiding risk
B. Retaining risk
C. Controlling risk
D. Transferring risk

Answer 21

Retaining Risk.

The answer is retaining risk. The deductible is the part of risk that the insured retains.

Question 22

Asbestos, sick building syndrome (SBS), and lead-based paint are all examples of

A. issues beyond the scope of a property manager’s job description.
B. problems found only in newly constructed properties.
C. issues that arise under the Americans with Disabilities Act (ADA).
D. environmental concerns that a property manager may have to address.

Answer 22

Environmental concerns that a property manager may have to address.

The answer is environmental concerns that a property manager may have to address. These are all environmental issues that might impact any managed property.

Question 23

The manager of a commercial building has many responsibilities in connection with the operation and maintenance of the structure. The manager would normally be considered the agent of

A. the building’s owner.
B. the building’s tenants.
C. both the owner and the tenants.
D. neither the owner nor the tenants.

Answer 23

The building’s owner.

The answer is the building’s owner. The management contract establishes the agency relationship between the property manager and the owner.

Question 24

Which of the following would be considered a variable expense when a manager develops an operating budget?

A. Employee wages
B. Utilities
C. Building repairs
D. Basic operating costs

Answer 24

Building repairs.

The answer is building repairs. Cash reserves are needed to deal with unscheduled or variable expenses such as unexpected building repairs.

Question 25

In MOST market areas, rents are determined by

A. supply and demand factors.
B.the local apartment owners’ association.
C. HUD.
D. a tenants’ union.

Answer 25

Supply and demand factors.

The answer is supply and demand factors. Rents (unless subject to governmental intervention) are controlled by market forces—supply and demand.

Question 26

An apartment complex is severely damaged by a tornado, making it uninhabitable. What type of insurance covers the landlord against the resulting loss of rent?

A. Fire and hazard
B. Liability
C. Consequential loss, use, and occupancy
D. Casualty

Answer 26

Consequential loss, use and occupancy.

The answer is consequential loss, use, and occupancy. Consequential loss policies—also called business interruption insurance—offset loss of rental income due to disasters that keep a property from being used.

Question 27

A property manager hires a full-time maintenance person. While repairing a faucet in one of the apartments, the maintenance person steals some jewelry and the tenant sues the owner. The property manager could protect the owner against this type of loss by purchasing

A. liability insurance.
B.workers’ compensation insurance.
C. a surety bond.
D. casualty insurance.

Answer 27

A surety bond.

The answer is a surety bond. The manager can protect the owner by urging the purchase of a surety bond on the building employee at the time the employee is hired. Property managers usually formulate and recommend insurance plans for an owner’s consideration and decision.

Question 28

Residential leases are usually expressed as

A. an annual or monthly rate per square foot.
B. a percentage of total space available.
C. a monthly rate per unit.
D. an annual rate per room.

Answer 28

A monthly rate per unit.

The answer is a monthly rate per unit. A rental rate for residential space is usually stated as the monthly rate per unit (the entire living space).

Question 29

A property manager repairs a leaking sink. This is classified as which type of maintenance?

A. Preventive
B. Corrective
C. Routine
D. Construction

Answer 29

Corrective.

The answer is corrective. Fixing something that is not working properly (malfunctioning) is making a corrective repair.

Question 30

A property manager who enters into a management agreement with an owner is usually

A. a special agent.
B. a general agent.
C. a universal agent.
D. a designated agent.

Answer 30

A general agent.

The answer is a general agent. While residential real estate brokers are special agents in each transaction, property managers are typically general agents; their work usually continues and involves multiple representations of the same principal (owner/ investor/landlord) because they are involved in ongoing dealings with many tenants.

Question 31

A statement sent to an owner that reflects the entire debt service as an expense is called

A. a profit and loss statement.
B. a cash flow report.
C. a variable expense report.
D. an operating budget statement.

Answer 31

A cash flow report.

The answer is a cash flow report. The profit and loss statement provides a general financial picture based on monthly cash flow reports. Only the interest portion of the debt service is reflected as an expense.

Question 32

An insurance policy package that includes standard commercial property coverage such as fire, hazard, public liability, and casualty is called what kind of policy?

A. Coinsurance
B. Multiperil
C. Universal
D. Surety

Answer 32

Multiperil

The answer is multiperil. Because such insurance addresses several sources of financial loss, it is called a multiperil policy.

Question 33

Removing existing barriers when readily achievable in public buildings, such as adding Braille markings to elevator buttons, is a requirement of which law?

A. Fair Housing Act
B. Equal Credit Opportunity Act
C. Americans with Disabilities Act
D. Regulation Z

Answer 33

Americans with Disabilities Act

The answer is Americans with Disabilities Act. The Americans with Disabilities Act (ADA) requires that places of public accommodation remove existing barriers when readily achievable to provide access to facilities and services.

Question 34

Title III of the Americans with Disabilities Act (ADA) impacts which type of property?

A. Residential
B. Industrial
C. Commercial and public accommodations
D. Privately owned

Answer 34

Commercial and public accommodations.

The answer is commercial and public accommodations. The ADA impacts commercial properties and public accommodations. Type of ownership has no bearing on compliance.

Question 35

In evaluating rental applications, it is important for the property manager to establish consistent criteria for acceptable debt and income ratios in order to be in compliance with

A. federal antitrust laws.
B. the Americans with Disabilities Act.
C. Regulation Z.
D. the Equal Credit Opportunity Act.

Answer 35

the Equal Credit opportunity act.

The answer is the Equal Credit Opportunity Act. A lease is an extension of credit, so the property manager must comply with the provisions of theEqual Credit Opportunity Act (ECOA) and be consistent when evaluating the financial information provided on rental applications.