Illinois Residential Leasing Agent State Exam

land/real estate

consists of the surface (and anything permanently attached to it), as well as the subsurface and airspace.

surface

what we can see when we look at the property.

subsurface

 the space beneath the surface and extends to the center of the earth.

subsurface rights

include mineral rights, oil and gas rights, and, in some cases, water rights.

airspace

 the space above the surface and extends into infinity.

air rights

the rights to use all of the airspace above the surface.

ex: air rights allow airplanes to fly over someone’s land as long as this use does not unreasonably interfere with the landowner's enjoyment of the property.

property conveyed (PC)

real estate rights that are transferred from one party to another, including both the land and any structures or improvements on it.

PCEED

bundle of rights for real estate ownership

• possession

• control

• enjoyment

• exclusion

• disposition

improvements

Man-made objects that are directly attached to the land (such as a building, a fence, landscaping, streets, sewers, gutters, etc.).

personal property (personalty or chattel)

movable items not permanently attached to the land

• ex: furniture, appliances, and equipment

real property

land and anything attached to it, including buildings and resources.

• permanence: indestructible

• non-homogeneity: unique characteristics of land that distinguish it from other types of property.

• immobility: cannot be moved or is extremely difficult

fixture

Personal property that is permanently attached to real property.

the fixture test

• how the item is attached

• whether the item has been customized to the underlying real property

• the actual intent of the individual attaching the object

• the specific agreement of the parties to the sale or lease

ownership in severalty

owned by one person or entity

concurrent ownership/co-ownership

owned by more than one party

tenancy in common

Multiple owners; ownership interests of a deceased owner can be passed along to the owner’s chosen heirs.

joint tenancy

Equal shares/right of survivorship: if one owner dies, the others will gain their portion of ownership

PITT

• Possession: each co-owner has the right to possess the whole property

• Interest: The deed conveys equal interest to all the parties

• Title: The title is acquired through a single deed

• Time: The deed is executed and delivered at the same time

express contracts

arise from specific oral or written agreements of two or more parties. 

implied contracts

formed by the actions of the parties and are not stated orally or in writing. An implied contract may also consist of terms that the parties understand and accept even though they are not specifically stated in the written document.

Illinois Fraud Act

contracts must be in writing for the sale of land or leases

Unilateral contract

a contract in which one party makes a promise to do something if another party performs a specific act.

bilateral contract

formed when two parties exchange promises.

• ex: apartment lease

executory contract

one in which all of the promises or terms have not yet been fulfilled

discharged/executed contract

when all terms of a contract have been fulfilled

assignment

When a party to a contract allows another individual to assume all of their rights under the contract. 

• similar to subletting, but not the same

novation

when all parties to the contract agree to replace the current contract with a new one that may have different terms or substitute one of the parties.

accord and satisfaction

indicates that the parties have agreed to a change in one or more of the terms of the contract.

Valid contract

Fulfills all the requirements of the law and contains all of the following basic elements

• Consideration: the promise offered in exchange for either an action, another promise, or something of value.

• Legal purpose: A contract does not have legal purpose if either party’s promise consists of an illegal act.

• Offer: explains the terms of the contract

• Acceptance: agrees to the offered terms

• Competent parties: must be of legal age (18 in Illinois), sane and sober, and they must have the authority to take action regarding the property.

Three ways a valid contract can be unenforceeable

• The Statute of Frauds: if contract is longer than 1 year, real estate contracts must be in writing if they are to be enforceable by a court

• The Parol Evidence Rule: prohibits courts from letting oral evidence change the terms of a written contract

• The Statute of Limitations: limits the amount of time a party has to bring action against another party who has committed fraud or violated the terms of a contract (Illinois: must be initiated within 4 years after incident occurs)

void contract

lacks the necessary provisions required by law, binds neither party, and is considered to be no contract at all.

voidable contract

has the elements required of a valid contract but allows one of the parties to withdraw from it.

• ex: minor entering into a written contract

how contracts become voidable

• Misrepresentation: the omission or distortion of facts in the transaction.

  • Contracts signed by parties under duress, menace, or undue influence, or contracts signed by minors, are also voidable. 

  • This means that the minor or injured party can declare the contract void, but the other party cannot.

• Fraud: when one party intentionally misrepresents or conceals facts that are relevant to the contract. When a party commits fraud, the contract is voidable by the innocent party.

• Duress: the actual use of force to induce another to act against their will.

• Menace: the threat to use force to induce someone to act against their will.

• Undue influence: when someone uses their position to influence another party, thereby causing that party to do something they would not have otherwise agreed to do.

rescission

When the aggrieved party agrees to rescind the contract, it is canceled and treated as if it never existed.

monetary damages

• Compensatory damages are intended to return the injured parties to the financial condition they were in before the breach occurred. 

• Punitive damages are intended to punish the party who breached the contract.

specific performance

the party who breached the contract must perform as originally agreed. 

Leasehold estate, leasehold interest, or tenancy

The rights that the tenant acquires in the lessor’s property

tenancy for years

• has a specific timeframe

• does not require notice to terminate; ends upon expiration of specified time period

periodic tenancy

• no specific end date

• automatically renews itself

tenancy at will

• no definite duration

• exists at the will of the parties

tenancy at sufferance

lessee stays on premises after their lease has expired

holdover tenancy

• lessor accepts rent from a tenant whose lease has expired

• treated as month-to-month lease

what goes into a lease?

• consideration

• legal purpose

• offer

• acceptance

• competent parties

• description of the premises

• rights and obligations of each party

• starting date

• time and method of termination

acceptance by ratification

tenant does not sign the ease but takes possession of the premises

assignment and sublet clauses

• assign their rights: tenant transfers all of their rights to another person

• sublet: tenant transfers some of their rights to another person, but not all

purchase option

allows tenant to buy the property

renewal option

gives tenant the right to extend the lease under certain circumstances

first right of refusal option

if the owner receives a better offer, they must give the tenant the opportunity to purchase the property for the same terms

unenforceable clauses

• States that each clause of the lease is a separate clause

• If one is unenforceable, it does not invalidate the others

Fair Credit Reporting Act

• landlord must disclose if they are denying someone based on their credit report and identify the organization that produced the report

• person must give consent to have their credit checked by a landlord

security deposit requirements

• Lessor must send itemized statement of damages if withholding money from deposit, must send the statement within 30 days of vacating. Must refund money within 45 days of vacating

• Lessors of residential buildings with 25 or more units must pay interest annually on security deposits that are held for longer than 6 months

commingling

Illegal; If sponsoring broker acting as PM places a security deposit in a bank account that mixes with personal funds or someone else’s funds

surrender and acceptance

voluntary termination; mutual agreement to terminate lease

actual eviction

lessor initiates court action to have the tenant removed from the premises

written notice for actual evictions

• 5 days: failure to pay rent

• 10 days: declaring a breach in any other term of the lease

• lessor can still pursue eviction, even if the lessee corrects the default

constructive eviction

lessor allows a property to fall into disrepair to the extent that it is uninhabitable

eminent domain

government acquires property from a private owner against the owner’s wishes; must fairly compensate the owner

condemnation action

gov must prove the public’s need or purpose for the property is greater than the owner’s need or purpose for it

mortgage foerclosure

if mortgage predates the lease, foreclosing lender is allowed to terminate the lessee’s rights

lead-based paint regulations

• houses built before 1978 must give tenants a pamphlet explaining hazards of lead and low-cost tips to identify/control any problems resulting from it

• landlords must disclose known hazards to tenants

• are not required to test for lead

radon regulations

• landlords are not required to test for radon

• disclosure is only required when a test confirms its presence

• colorless, odorless, radioactive gas found in basements and crawl spaces

property managers

• represent the owner and optimize the value and income from the property

• supervise maintenance of the property,  protect the physical integrity of the property, and assist tenants on the owner’s behalf

• must have a license to show properties, negotiate leases, and collect rent

exceptions to when a PM needs a license

• live off-site and work for the owner as a regular employee

• they are a resident manager

Dred Scott vs. Sanford (1857)

The Supreme Court ruled African Americans were not citizens and were not entitled to any rights, free or notCivil Rights Act of 1866

Civil Rights Act of 1866

guaranteed property rights to all citizens regardless of race — did not prevent discrimination

Equal Opportunity in Housing Executive Order (1962)

prohibited discrimination in housing that was owned, operated, or assisted by the federal government — did not effect private housing market

Title VI of the Civil Rights Act of 1964

prohibited racial discrimination in programs receiving federal financial assistance — did not effect private housing market

Fair Housing Act (1968)

Banned discrimination based on race, color, religion, or national origin in most types of housing transactions

Fair housing Act (1974)

expanded to gender

when were section 8 low-income housing programs created?

1974

Fair Housing Amendments Act of 1988

added protections for families with children and disabled people

Title VIII (8)

Protects:

• race, color, religion, national origin, and sex

• people with physical or mental disabilities

• familial status - adults with children, pregnant people, etc.

reasonable modifications for disabled persons

landlords are prohibited from refusing to make reasonable accomodations if they are necessary for a disabled person

appropriate criteria for tenant selection

• Rent-to-income ratio

• Credit history

• Rental history

• Household size

When can you file a complaint with the HUD?

up to one year after the violation occured

conciliation agreement

document that details how parties will resolve a dispute. it protects the complainant and the public interest. Once signed, HUD takes no further action, unless they believe the agreement has been breached

complaint referrals

when the HUD refers a complaint to the local or state agency

punishment for discrimination

• Compensate the complainant 

• Provide injunction or other equitable relief

• Pay the federal government a civil penalty to vindicate the public interest

• Pay reasonable attorney’s fees and costs

Real Estate License Act of 2000

if a licensee engages in discrimination, the IDFPR may refuse to issue/renew a license, place them on probation, suspend/revoke licensure, or reprimand/impose a civil penalty not to exceed $25,000

• administered by IDFPR

steering

• when a licensee attempts to direct a prospect to a particular area based on a certain demographic that may be present in that area

• Anytime an agent treats a prospect different based on their status, steering is taking place

Blockbusting/panic peddling

when an agent implies to an owner that people of a certain protected class will be moving into the area. They may insinuate that the entry of these people will result in undesirable consequences

testers

when private groups or government entities pose as a prospective tenant, determining if an agent treats two individuals with equal buying power differently based on their demographics

Discriminatory advertising

• avoid words that imply preferences

• can use words that describe physical characteristics of the property

Americans with Disabilities Act of 1990 (ADA)

• enacted on july 26th, 1990

• protects persons with a disability — mental or physical impairment that substantially limits one or more major life activities

ADA — Title III (1992)

prohibits disability-based discrimination in housing

enforcement of ADA

up to $55k for first violation, $110k for subsequent viiolations

Section 8 Housing Assistant Payments (HAP) Program

• government gives low-income tenants rent subsidies

• helps find decent, safe, and sanitary housing

• more than 3 million families use section 8

• requirements: income is less than 80% of the area’s median

• rent must be within the FMR (fair market rent) to qualify

• refusing to lease to a section 8 tenant is discrimination

Broker License

• Can assist the public in sales or leasing transactions involving all types of real property

• Cannot supervise/sponsor other licensees

• Paid by sponsor

• Must have a sponsor

Managing Broker License

• Can assist the public in sales or leasing transactions involving all types of real property

• Allowed to supervise/sponsor other licensees

• Can collect money directly from the public

• Can sponsor themselves or be sponsored

Residential Leasing Agent (RLA)

• Lease or rent residential real property

• Collect rent

• Negotiate leases

• Cannot work with commercial property

RLA requirements

• 18 years old

• good moral character

• completed high school

• education: 15-hour course

• pass state exam (4 attempts to pass, must retake class after that)

• apply for license

license expiration

• must renew lease every 2 years

• expires july 31st on even-numbered years

• must complete an 8-hour course after first renewal every 2 years

• must retake the state exam if license is expired for more than 5 years

tenant referral fee

• monetary incentive to a current tenant for referring a new tenant

• Compensation to one person in any 12 months cannot exceed $5000 or two months ’ rent, whichever is less

• No one tenant can receive a fee for more than three referrals in 12 months.

agency

legal relationship in which one person represents another

consumer

someone who seeks or receives real estate services

customer

someone who interacts with a licensee for information

• ex: leads

client/principal

someone who is represented by an agent, has a legal relationship with them

• ex: Cagan

designated agency

agent represents only the owner or only the tenant

dual agency

agent represents both the owner and the tenant

stigmatized property

• property that might be undesirable because it was the site of a presumably negative event

  • Suicide, murder, ghost sighting

  • Agents do not have to disclose of these events