Comprehensive Study Guide for Real Estate Funds, Fair Housing, and Lease Agreements
Chapter 21: Accounting for Funds and Agency
Trust Account - A trust account is a specific account where all earnest money from clients or customers is held by the real estate broker. - The funds are held in this account until the closing of the transaction. - State law mandates that the broker must maintain a trust account for these funds.
Commingling - Defined as the mixing of clients’ or customers’ funds with an agent’s personal funds. - This practice is prohibited and is a noted legal/ethical violation.
Red Flags - ‘As Is’ conditions of property. - Puffing - Lead-based paint disclosures: Specifically required on homes built prior to . - Home Inspections.
Buyer Agency – Buyer Brokerage Agreement - This represents the exact opposite theory from traditional seller representation. - In this arrangement, the principal or client is the buyer. - The agent owes all care of agency duties to the buyer. - Requirement: In the state of Georgia (GA), this agreement must be in writing. - Specific Document: Exclusive Buyer Brokerage Agreement F04.
The Problem of Dual Agency - There is a natural tendency in brokerage for dual agency to occur. - Dynamics: A salesperson often works closely with the buyer but remains distant from the seller. - Federal Trade Commission (FTC) Study: Finding that of buyers believe the sales agent works for them. - A firm with both seller and buyer agents could represent both sides of the transaction simultaneously.
Solutions to Dual Agency Problems - Designated Agent: A brokerage representing both sides appoints a separate agent for each party (one for the buyer, one for the seller). - Buyer Agent by Law: A salesperson showing a house becomes a buyer agent automatically unless they declare otherwise. - Transaction Broker: Acts as a facilitator who is not an agent for the buyer.
Agency Disclosure - Agency relationships can be created even without written agreements. - Consumers must be informed specifically about who the agent represents to ensure a clear understanding of the agent’s role in a transaction. - Many states now mandate the use of official disclosure forms.
Information and Regulatory Frameworks - Owner disclosure information. - Interstate land disclosure statements. - Antitrust Laws: - Price fixing: Illegal agreement between competitors to set prices. - Boycotting: Illegal agreement to avoid dealing with a specific party. - Errors and Omission (E&O) insurance.
Key Terms - Agent - Boycotting - Commingling - Dual agency - Middleman - Ostensible authority - Price fixing - Principal - Puffing - Third parties
Chapter 22: Fair Housing (Equal Housing Opportunity)
Protected Classes - Race - Color - Religion - Sex - National Origin - Handicap - Familial Status
Fair Housing Specifics - Family status protections. - Handicap protections.
Equal Credit Opportunity Act (ECOA) - Protects against discrimination based on: - Public assistance status - Age - Marital status
Illegal Acts under Fair Housing - Refusing to sell or rent to, deal, or negotiate with any person based on protected status. - Discriminating in the specific terms or conditions for buying or renting housing. - Discriminatory Advertising: Advertising that housing is available only to persons of a certain race, color, religion, sex, or national origin; advertising that excludes those with handicaps; or advertising for "adults only." - Denying or applying different terms or conditions for home loans by commercial lenders. - Denying use of or participation in real estate services, including brokers’ organizations, multiple listing services (MLS), or facilities related to selling/renting. - Engaging in steering or blockbusting.
Steering - The illegal practice of directing home seekers to particular neighborhoods based on their protected class.
Block Busting - The illegal practice of inducing panic selling in a neighborhood for financial gain.
Americans with Disabilities Act (ADA) - Enacted in July . - Primarily deals with commercial property. - Mandates access requirements. - Prohibits discrimination against individuals with disabilities.
Community Reinvestment Act (CRA) - Expands the concept that the needs of the community must be addressed by financial institutions. - Institutions are required to post a CRA notice in their lobby.
Key Terms - ADA - Block busting - CRA - ECOA - Familial status - Handicapped - Protected class - Steering - Tester
Chapter 17: Real Estate Lease
Lease Definition - A legally binding agreement between a landlord and a tenant. - Essential components: Names of the landlord and renter(s), cost of rent, various payment schedules, and other pertinent rules and regulations.
Leasehold Estates and Parties - Lessee: The Tenant. - Lessor: The Owner or Landlord. - Leased Fee Estate: The landlord’s estate in property that has been leased to another. - Leasehold Estate: The rights in real property granted to a tenant by a lease. - Reversion: The right of the owner to retake the property at the end of the leased period.
Types of Estate Periods - Estate for Years: A lease with a specific starting date and a specific ending date. - Estate at Will: A lease that can be terminated at any time by either party. - Periodic Estate: A lease that renews itself automatically at the end of each period. - Tenancy at Sufferance: Occurs when a tenant remains in possession after the lease expires (holdover tenant).
Essential Elements for Valid Leases - Identification of Lessor and Lessee. - Description of the premises. - Agreement to convey and accept possession. - Provisions for rent payment. - Start date and total duration of the lease. - Signatures of the parties involved.
Option Clause - Gives the tenant the right at some future time to purchase or lease the property at a predetermined price. - Commonly referred to as a "lease with the option to buy."
Assignment and Subletting - Assignment: The total transfer of the lessee’s rights to another person. - Sublet: To transfer only a portion of the rights held under a lease. - Sublessee: A lessee who rents from another lessee. - Sublessor: A lessee who rents to another lessee.
Ground Lease - A lease involving land alone. - The lessor is the fee simple owner of the land. - The lessor conveys an estate for years to the lessee, typically lasting from to years. - The lessee pays for and owns the improvements (buildings) constructed on the land. - This arrangement separates land ownership from building ownership.
Quiet Enjoyment - The legal right of possession and use of property without undue disturbance by others. - Tenants are entitled to: - Uninterrupted use of the property. - Use without interference from the owner, property manager, or any third party.
Lease Terminations - Actual Eviction: The legal process used to remove a tenant due to a breach of the lease. Grounds include non-payment of rent, unlawful use of property, or noncompliance with health and safety codes. - Constructive Eviction: Occurs if a landlord defaults on the agreement (e.g., premises become uninhabitable). The tenant can sue for damages, abandon the property, and stop rent payments. In some states, tenants may make repairs themselves and deduct the cost from the rent.
Landlord Access to the Unit - Landlords may enter the premises to: Make repairs, inspect the unit, or show the unit. - Emergency Access: Notice is not required for emergencies including: - Smoke or Fire - Water leaks - Security system issues - Storm damage
Property Management Designations - CPM: Certified Property Manager - RPA: Real Property Administrator - ARM: Accredited Resident Manager - SMA: Systems Maintenance Administrator
Key Terms - Assignment - CPM, RPA - Gross lease - Lessee - Lessor - Net lease - Option clause - Quiet enjoyment - Reversion - Sublessee - Sublessor - Sublet