broker pe topics - lesson 3 [v5.2]

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Broker Pre-License Topics

Lesson 3

Units: 17, 18, 21, & 22

Property Management, Fair Housing & Environmental Issues



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Policy

3

Leases

Unit 17

Real Estate Institute © 2021

Lesson 3 - (800) 995-1700 InstituteOnline.com



• Identify – the four types of leasehold estates

• Describe – the requirements and general conditions of a valid lease and how a lease may be discharged

• Explain – the rights of landlords and tenants in an eviction proceeding

• Distinguish – between the various types of leases

Learning Objectives

1717



Leases

A lease is a contract between an owner of real estate (lessor) and a tenant (lessee) to transfer the lessor’s rights to exclusive possession and use of the property to the tenant for a specified period of time.

1717



• A landlord retains a reversionary right to possession after the lease term expires.

• The lessor’s interest is called a leased fee estate plus reversionary right.

Leases

1717





• In Illinois, The Statute of Frauds requires leases of over one year to be in writing to be enforceable.

• Verbal leases for one year or less that can be performed within a year of their making are enforceable.

Leases

1717



Estate For Years

Estate From Period-to-Period

Estate At Will

Estate At Sufferance

Leasehold Estates

1717



In ILLINOIS . . . The notices required by statute are: • Tenancy from year to year: at least 60 days’

written notice within the four-month period prior to the last 60 days of the lease period

• Tenancy from month to month: 30 days’ written notice

• Tenancy from week to week: seven days’ written notice

• Farm tenancies from year to year: four months’ written notice, with termination only at the end of the period

Leasehold Estates

1717





Estate For Years -

A leasehold estate that continues for a definite period of time and automatically terminates at the end of that period is called an estate for years.

No notice is required to terminate the estate for years.

Leasehold Estates

1717



Estate From Period-to-Period

Automatically renew unless notice of termination is given by one of the parties.

Leasehold Estates

1717



Estate At Will –

A tenancy of indefinite duration, an estate at will continues until it is terminated by either party giving proper notice.

Leasehold Estates

1717





Estate At Sufferance –

A tenancy that arises when a tenant who lawfully possessed real property continues in possession of the premises without the landlord’s consent after the rights expire.

Leasehold Estates

1717



Requirements of a Valid Lease

• Capacity To Contract• Legal Objective• Offer and Acceptance• Consideration

Lease Agreement

1717



Possession - The covenant of quiet

enjoyment is a presumed promise by the lessor.

Use of Premises - A lessor may restrict a lessee’s use of the premises through

provisions included in the lease.

Improvements -Any alterations

become fixtures, which are the

landlord’s property.

Lease Agreements

1717

Term of Lease - The period for which the lease will run.





In Illinois,

• Compensation for damages

• 5 or more units

• statement listing damages within 30 days

• return security deposit within 45 days

• Interest on deposits

• 25 or more units

• if deposits held at least 6 months

• pay interest every 12 months

Security Deposits

1717



Accessibility -

It is illegal to discriminate

against prospective

tenants on the basis of physical

disability.

Tenants with disabilities must be permitted to

make reasonable modifications to a property at their own expense.

Lease Agreements

1717



The Americans with Disabilities Act (ADA)

–

also applies to commercial,

nonresidential property in which public goods

or services are provided.

Lease Agreements

1717





Maintenance• In ILLINOIS . . . A landlord must deliver and

maintain any residential leasehold free from defects that would render the use of the dwelling unsafe or unsanitary and unfit for human occupancy (implied warranty of habitability).

Destruction of Premises• In leases involving agricultural land, when

improvements are damaged or destroyed, the tenant is obligated to pay rent to the end of the term.

Lease Agreements

1717



Assignment - When a tenant transfers all

leasehold interests to another person.

Subletting - When a tenant transfers less than all the leasehold interests by leasing them to a new tenant.

Lease Agreements

1717



Recording a Lease

• Possession of leased premises is constructive notice of the lessee’s interest. Anyone who inspects the property receives actual notice. Owners of commercial property often record leases.

Options

• A lease may contain an option that grants the lessee the privilege of renewing the lease.

Lease Agreements

1717





Gross Lease - Tenant pays a fixed rental, and

landlord pays all operating expenses.

Net Lease - Tenant pays all or some of the operating expenses in addition to the rent. A common variation is a

triple net lease.

Percentage Lease -Rent is based on a

base fixed rental fee plus a percentage of the gross income. Common type of retail business

lease.

Types of Leases

1717



Variable Leases

Graduated Lease -Provides for specified rent increases at set

dates.

Index Lease - Allows rent to be adjusted

periodically based on changes in the consumer

price index or some other indicator.

Types of Leases

1717



Ground Lease - Involves separate ownership of the

land and buildings. Historically, this type of lease was used in the gas station

business.

Oil and Gas Lease -When an oil company leases land to explore

for oil and gas.

Lease Purchase - Part of the rent is applied toward the purchase

price until the tenant can obtain financing or

purchase the property.

Sale-and-Leaseback -Owners of a property sell the property and

then lease it back again.

Types of Leases

1717





• A lease is terminated when the contract terminates; either when the parties have fully performed their obligations or agree to cancel the lease.

• The lease does not terminate if the parties die or if the property is sold.

• A tenancy may be terminated by operation of law: bankruptcy or condemnation.

Discharge of Leases

1717



• 5-day notice: If the tenant fails to pay the rent, the landlord may

terminate the lease automatically and sue for possession. If the tenant pays the past-due rent, the lease continues in full force.

• 10-day notice: If the tenant’s breach is other than nonpayment of

rent, the landlord may terminate the tenancy by serving the tenant with 10 days’ written notice.

Landlord’s Remedies in IllinoisActual Eviction (called forcible entry & detainer)

Breach of Leases

1717



Tenants’ Remedies -

• If a landlord breaches any clause of a lease agreement, the tenant has the right to sue for damages.

Constructive Eviction -

• If the premises become unusable for the purpose stated in the lease, the tenant may have the right to abandon them.

Breach of Leases

1717





• In Illinois, a landlord must file a Forcible Entry And Detainer Action

• The suit should be filed in the circuit court of the county in which the property is located.

• If the court rules in favor of the landlord, the tenant must then leave the premises.

Evictions

1717



• All persons must have access to housing of their choice without any differentiation in the terms and conditions because of their race, color, religion, familial status, disability, or gender.

• In rental, apply same tenant criteria to everyone.

• Illinois Human Rights Act

More in Unit 21 – Fair Housing

Civil Rights Laws

1717



Lead-Based Paint

1717

The Federal Lead-Based Paint Hazard Reduction Act requires that landlords disclose any possible lead-based paint or related hazards.





ResidentialLeasing Agents

Referral Fees –The IL Real Estate License Act allows

landlords to pay a referral fee to tenants of no more

than $5,000- or two-month’s rent, whichever is

less, in any 12-month period.

Rental-Finding Services

Regulation of the Rental Industry

1717



Quick-Fire Review



• Would you be able to describe the different Leasehold Estates to a Landlord or Tenant?

Quick-Fire Review





• Would you be able to describe the different types of leases available to a Landlord or Tenant?

Quick-Fire Review



Quick-Fire Review



• Generally, an oral lease for five years is illegal.

Quick-Fire Review





• Generally, an oral lease for five years is illegal.

• FALSE!

Quick-Fire Review



• A lease would be terminated by the sale of the leased premises.

Quick-Fire Review



• A lease would be terminated by the sale of the leased premises.

• FALSE!

Quick-Fire Review





• Under a tenancy for years, the term of the lease must be for at least one year.

Quick-Fire Review



• Under a tenancy for years, the term of the lease must be for at least one year.

• FALSE!

Quick-Fire Review



Actual eviction Assignment Cash Rent Constructive Eviction Estate At Sufferance Estate At Will Estate For Years Estate From Period To Period Gross Lease Ground Lease Holdover Tenancy Implied Warranty of Habitability

Key Terms Review

1717





Lease Leasehold Estate Lease Purchase Month-To-Month Tenancy Net Lease Nondisturbance Clause Percentage Lease Rental-Finding Service Reversionary Right Right of First Refusal Security Deposit Sharecropping Sublease

Key Terms Review (cont’d)

1717



• Identify – the four types of leasehold estates

• Describe – the requirements and general conditions of a valid lease and how a lease may be discharged

• Explain – the rights of landlords and tenants in an eviction proceeding

• Distinguish – between the various types of leases

Learning Objectives - Review

1717

45

Property Management

Unit 18





• Identify – the basic elements of a management agreement;

• Describe – a property manager’s functions; and

• Explain – risk management and the role of environmental regulations and the Americans with Disabilities Act in the property manager’s job.

Learning Objectives

1818



Property Management

1818

Property management involves the leasing, managing, marketing, and maintenance of real estate.



In ILLINOIS…• Property management requires a real estate license, and

an individual real estate licensee must perform property management services under the supervision of his or her sponsoring broker.

• The Real Estate License Act of 2000 exempts resident managers from licensure requirements when their primary residence is on the premises being managed.

• Illinois permits individuals whose real estate practice is limited to leasing or renting residential property, collecting rent, negotiating leases, and similar activities to obtain a special Residential leasing agent license instead of the broader-scope broker license.

The Property Manager

1818





Principal Responsibilities 1. Achieve the objectives of the property owners.

2. Generate income for the owners.

3. Preserve and/or increase the value of the investment property.


1818



• Community association management

• Housing for the elderly

• Manufactured homes

• Resort housing

• Concierge services

• Asset management

• Corporate property managers

• Residential leasing agents

New Opportunities

1818



Management AgreementCreates a general agency relationship between the owner and the property manager.


1818





• Budgeting Expenses

• Capital expenditures

• Renting the Property

• Setting rental rates

• Selecting Tenants

• Collecting rents

• Maintaining Good Relations with Tenants

Property Management Responsibilities

1818



Maintaining the Property• Preventive maintenance

• Repair or corrective maintenance

• Routine maintenance

• Construction

Management Functions

1818



Handling Environmental Concerns• A variety of environmental issues, from waste

disposal to air quality, must be addressed by the property manager.

• Property manages should be aware of building related illness (BRI) and sick building syndrome (SBS).


1818





The Americans with Disabilities Act• Title I of the ADA provides for the employment

of qualified job applicants regardless of their disability.

• Title III of the ADA prohibits discrimination in commercial properties.

• The ADA recommends reasonably achievable accommodations to provide access to the facilities and services.


1818



Risk Management

1818

One of the most critical areas of responsibility for a property manager is risk management. The property manager must decide whether it is better to avoid, control, transfer, or retain a risk.



• Security of Tenants

• Types of Insurance

• Claims

• Depreciated or actual cash value

• Current replacement cost

Risk Management

1818





The Management Profession

1818

Most metropolitan areas have local associations of building and property owners and managers that are affiliates of regional and national associations.



Quick-Fire Review



• How would you evaluate a property manager?

Quick-Fire Review





• How would you go about setting rental rates?

Quick-Fire Review



Quick-Fire Review



• A management agreement is to a property manager like a listing agreement is to a broker.

Quick-Fire Review





• A management agreement is to a property manager like a listing agreement is to a broker.

• TRUE!

Quick-Fire Review



• In determining rental amounts, a property manager considers the economic principle of supply and demand.

Quick-Fire Review



• In determining rental amounts, a property manager considers the economic principle of supply and demand.

• TRUE!

Quick-Fire Review





American With Disabilities Act (ADA)

Management Agreement

Management Plan

Multiperil Policy

Property Manger

Risk Management

Surety Bonds

Tenant Improvements

Workers’ Compensation Acts

Key Terms Review

1818



• Identify – the basic elements of a management agreement;

• Describe – a property manager’s functions; and

• Explain – risk management and the role of environmental regulations and the Americans with Disabilities Act in the property manager’s job.


1818

69

Fair Housing

Unit 21





• Identify – the classes of people who are protected against discrimination in housing by various laws

• Describe – how the Fair Housing Act is enforced

• Explain – how fair housing laws address a variety of discriminatory practices and regulate real estate advertising

Learning Objectives

2121



Fair Housing

2121

The purpose of civil rights laws is to create a marketplace in which all persons of similar financial means have a similar range of housing choices.



The Civil Rights Act of 1866 prohibited discrimination in housing based on:

• Race

• Color

Fair Housing

2121





The Federal Fair Housing Act prohibits discrimination based on:

• Race

• Color

• Religion

• Sex

• National origin

• Disability

• Familial status

Fair Housing

2121



In Illinois, Protected Classes Are:

• Age

• Marital Status

• Unfavorable Military Discharge

• Military Status

• Ancestry

• Sexual Orientation

• Order of Protection

Illinois Human Rights Act

2121



Housing discrimination in the private sale of a single-family home is not prohibited if ALL of the following conditions are met:

• The owner does not own more than three single-family homes.

• The owner or a relative was the last person to live in the home.

• The home is sold without the help of a real estate licensee.

• No discriminatory advertising is used.

Fair Housing Exemptions

2121





• Religious Organizations

• 55 or Better - 62 or Over –

Housing intended for persons age 62 or older or housing occupied by at least one person 55 years of age or older per unit (where 80 percent of the units are occupied by individuals 55 or older) is exempt from the familial status protection.

Fair Housing Exemptions

2121



The ADA requires reasonable accommodations in employment and access to goods, services, and public buildings.


2121



• The Fair Housing Act is administered by the Office of Fair Housing and Equal Opportunity (FHEO) under the direction of HUD.

• A complaint may be filed with HUD within 1 year of alleged act.

• The parties may elect civil action in federal court at any time within 2 years of the discriminatory act.

Enforcement Of The Fair Housing Act

2121





Fair Housing Violations

2121

Blockbusting a.k.a. Panic Selling

Encouraging people to immediately list and sell their homes by claiming that the entry of a protected class of people into the neighborhood will have some sort

of negative impact on property values.

Steering a.k.a. Channeling

Guiding home seekers to or away from particular neighborhoods.



Fair Housing - Advertising Rules

2121

HUD distributes anEqual Housing Opportunity poster to be prominently displayed in the sponsoring broker’s office. HUD requires that its fair housing posters be displayed in any place of business where real estate is offered for sale or rent.



Fair Housing Violation

2121

Refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the economic qualifications of the applicants is known as redlining.





Policies or practices resulting in unequal treatment of persons in the protected classes are considered discriminatory regardless of any innocent intent

Intent And Effect

2121



• Implication for Licensees

• Professional Ethics

• Code of Ethics

Fair Housing And Ethical Practices

2121



Quick-Fire Review





• In addition to Illinois and federal fair housing laws, does your community have additional fair housing laws?

Quick-Fire Review



Quick-Fire Review



• In order to file a complaint of discrimination, the complainant must be able to prove that discrimination occurred.

Quick-Fire Review





• In order to file a complaint of discrimination, the complainant must be able to prove that discrimination occurred.

• FALSE!

Quick-Fire Review



• A house for sale was advertised: “Fine executive home in an exclusive neighborhood, suitable for an older couple, near St. Mary’s Church.” This is descriptive of the property for sale and a good ad.

Quick-Fire Review



• A house for sale was advertised: “Fine executive home in an exclusive neighborhood, suitable for an older couple, near St. Mary’s Church.” This is descriptive of the property for sale and a good ad.

• FALSE!

Quick-Fire Review






Blockbusting

Code of Ethics

Ethics

Fair Housing Act

Home Mortgage Disclosure Act

Redlining

Steering

Key Terms Review

2121



• Identify – the classes of people who are protected against discrimination in housing by various laws

• Describe – how the Fair Housing Act is enforced

• Explain – how fair housing laws address a variety of discriminatory practices and regulate real estate advertising


2121

93

Environmental Issues and the Real Estate Transaction

Unit 22





• Identify – the basic environmental hazards a real estate agent should be aware of in order to protect the client’s interests

• Describe – the warning signs, characteristics, causes and solutions for various environmental hazards most commonly found in real estate transactions

• Explain – the fundamental liability issues arising under environmental protection laws

• Distinguish – lead-based paint issues from other environmental issues

Learning Objectives

2222



Environmental Issues

2222

The Illinois Environmental Protection Agency is charged with maintaining and enhancing the state’s air, land, and water quality through education, inspection, regulation, enforcement, and recycling and prevention activities.




2222





Hazardous Substances• Asbestos• Lead-based paint and other lead hazards• Radon• Illinois Radon Awareness Act• Urea-formaldehyde• Carbon monoxide• Mold


2222





2222



• Residential dwellings built before 1978• Landlords must disclose known

information• Sellers must disclose known

information• Buyers have up to ten days to conduct

a risk assessment • Licensees provide buyers and lessees

with HUD pamphlet

Lead-Based Paint

Hazard Reduction

Act


2222







2222





2222





2222







2222





2222



Groundwater Protection

Underground Storage Tanks

MTBE

Illinois -The Leaking Underground Storage Tank

(LUST) program


2222





• Landfills

• Capping

Waste Disposal Sites

2222



Brownfields• Small Business Liability Relief

and Brownfields Revitalization Act


2222



Comprehensive Environmental

Response, Compensation, and Liability Act

(CERCLA)

Superfund Amendments

and Reauthorization

Act (SARA)

Environmental Protection

2222





Discovery of Environmental Hazards

Environmental Auditors

Liability Of Real Estate Professionals

2222



Quick-Fire Review



• Why is it important for a licensee to be aware of environmental hazards? How might environmental hazards impact a transaction?

Quick-Fire Review





Quick-Fire Review



• The Illinois Radon Awareness act requires the seller to provide buyers with a Disclosure of Information on Radon Hazards Form and pamphlet on Radon Testing Guidelines.

Quick-Fire Review



• The Illinois Radon Awareness act requires the seller to provide buyers with a Disclosure of Information on Radon Hazards Form and pamphlet on Radon Testing Guidelines.

• TRUE!

Quick-Fire Review





• Anyone who performs lead abatement or mitigation activities in Illinois without a license is guilty of a Class A misdemeanor.

Quick-Fire Review



• Anyone who performs lead abatement or mitigation activities in Illinois without a license is guilty of a Class A misdemeanor.

• TRUE!

Quick-Fire Review



Asbestos

Brownfield

Capping

Carbon Monoxide

Comprehensive Environmental Response, Compensation, And Liability Act (CERCLA)

Encapsulation

Formaldehyde

Groundwater

Key Terms Review

2222





Innocent Landowner Immunity Landfill Lead Mold Radon Small Business Liability And

Brownfield Revitalization Act Superfund Amendments And

Reauthorization Act (SARA) Underground Storage Tank (UST) Water Table

Key Terms Review (cont’d)

2222



• Identify – the basic environmental hazards a real estate agent should be aware of in order to protect the client’s interests

• Describe – the warning signs, characteristics, causes and solutions for various environmental hazards most commonly found in real estate transactions

• Explain – the fundamental liability issues arising under environmental protection laws

• Distinguish – lead-based paint issues from other environmental issues


2222

120


What did you learn in this class?



121


Read Units:

17, 18, 21, 22

Take Online: Lesson Exam 3

Homework


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broker pe topics - lesson 3 [v5.2]

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