ILLINOIS REAL ESTATE
LEASING AGENT
LICENSE PREPARATION
SEVENTH EDITION
Real Estate Institute
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(800) 995-1700
ILLINOIS REAL ESTATE
LEASING AGENT
LICENSE PREPARATION
SEVENTH EDITION
Copyright 1997 – 2015 by Real Estate Institute
All rights reserved. No part of this book may be reproduced, stored in a retrieval
system or transcribed in any form or by any means (electronic, mechanical,
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Estate Institute.
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presented in this text are those of the author and other contributors, and are
subject to local, state and federal laws and regulations, court cases, and any
revisions of the same. The reader is encouraged to consult legal counsel
concerning any points of law. This book should not be used as an alternative to
competent legal counsel.
Printed in the United States of America.
P6
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Real Estate Institute
6203 W. Howard
Niles, IL 60714
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TABLE OF CONTENTS
Chapter
Page
1. Real Property and Ownership
1
2. Real Estate Contracts
5
3. Real Property Leases
15
4. Fair Housing Laws
33
5. License Law and Agency
55
Appendix:
Scenarios and Guidance for Practice
88
Glossary
98
CHAPTER 1
Real Property
and
Ownership
I – REAL PROPERTY AND OWNERSHIP
REAL PROPERTY
Although the terms “land,” “realty,” “real property” and “real estate” each have
specific legal definitions, they are often used interchangeably when discussing
the rights and laws pertaining to property rental or lease transactions.
Land, or realty, consists of the surface (and anything permanently attached to
it), as well as the subsurface and airspace. The surface is what we can see when
we look at the property. The subsurface is 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 is the space above the
surface and extends into infinity. Air rights are the rights to use all of the
airspace above the surface. For example, 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.
All of these rights can be separated and bought and sold individually. The term
“land” is generally accepted to include these rights and the rights to all things that
are permanently attached to the land.
Man-made objects that are directly attached to the land (such as a building, a
fence or landscaping) are known as improvements. Improvements also include
man-made, publicly-owned structures, such as streets, sewers, gutters and
utilities within a reasonable distance of a specific parcel of land.
Real property can be defined by its distinction from personal property. Personal
property (also called personalty or chattel) includes all movable items or objects
that are not permanently attached to land. While personal property is movable,
real property is fixed. In fact, real property has three distinguishing
characteristics:
Permanence. (It is indestructible.)
Non-homogeneity. (It is unlike every other parcel of land.)
Immobility. (It cannot be moved or is extremely difficult to move.)
Illinois includes residential leasing as one of the transactions covered by the Real
Estate License Act. However, the courts consider the rights acquired through a
lease to be personal property rights rather than rights to real property.
We can also distinguish between real property created by nature and property
that begins as personal property but becomes real property through its
subsequent attachment to land. Personal property that is permanently attached
to real property is referred to as a fixture. Once an item of personal property
becomes a fixture, it takes on the characteristics of real property and is
considered real property.
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A fixture is included in the sale or lease of the land and improvements unless it is
specifically excluded by agreement of the parties. It is not always obvious
whether an object is or is not a fixture, so various tests can be applied to
determine its status.
The tests to determine whether a particular item is a fixture may include:
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.
You can probably think of various items that would leave questions as to whether
they are fixtures belonging to the landlord or personal property belonging to the
tenant. If there is any chance that the status of an item will be questioned or
argued, you should specify the status of the property as real or personal at the
start of the transaction.
There is an important exception to the rules that determine whether personal
property is or is not a fixture. An item of personal property does not become a
fixture if it is attached to real property for a business purpose. Items such as
sinks in a barber shop or walk-in freezers in a food store that are installed by a
tenant remain personal property owned by the tenant and are called trade
fixtures. Be aware, however, that leasing agents in Illinois are only allowed to be
involved in the leasing of residential property. They cannot be involved in the
leasing of commercial property.
OWNERSHIP
Ownership of real estate can be held by an individual or by a group of individuals.
Ownership by one person or entity is referred to as ownership in severalty.
Ownership by a group is referred to as concurrent ownership and can take
many different forms. In your role as a leasing agent, the kind of ownership will
be important only to the extent that you state it properly when completing various
documents.
Tenancy in common and joint tenancy are the most common forms of ownership
used by groups of individuals who wish to hold concurrent ownership. Other
methods can include forming a business entity (such as a corporation, a
partnership, or trust) that will hold title to the property. In joint tenancy, the
ownership interests of a deceased owner become the property of the surviving
owners. In tenancy in common, ownership interests of a deceased owner can
be passed along to the owner’s chosen heirs.
Be aware that tenancy in common and joint tenancy are forms of ownership. In
both cases, the use of the word “tenancy” does not signify that a transaction will
involve a lease. Leases transfer the right of possession of real property rather
than the ownership of it. Leases will be discussed in detail later in this text.
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CHAPTER 1 EXAM
REAL PROPERTY AND OWNERSHIP
1. Real property includes:
a.
b.
c.
d.
trade fixtures.
encroachments.
leases.
air space.
2. Air rights are defined as:
a.
b.
c.
d.
extending into infinity.
beginning at the roofs of buildings.
land rights lighter than the surface soil.
non-owned property.
3. Land ownership includes:
a.
b.
c.
d.
yard furniture.
subsurface rights.
leases.
personal property.
4. Anything affixed to the land with the intent of being permanent is:
a.
b.
c.
d.
chattel property.
real property.
personal property.
forever real.
5. Which of the following is a test of whether an item is a fixture?
a.
b.
c.
d.
Length of ownership.
Size of the object.
Value of the item.
Method of attachment.
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CHAPTER 2
Real Estate Contracts
II – REAL ESTATE CONTRACTS
When we interact with people, we often make promises regarding conduct and
what we will or will not do. When we are involved in a business transaction, these
promises are put in writing and become contracts. Contracts can therefore be
described as legally binding promises.
Contracts may fall under several classifications. For example, contracts can be
implied or express.
Implied contracts are 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. For example, when a second-floor apartment is rented in a three-story
building, the tenants assume that the landlord will allow them access to the
stairway. Meanwhile, the landlord assumes that the tenants will use the stairway
to get to the apartment. Nothing about the use of the stairway is specifically
stated or written in the lease, so an implied contract exists.
Express contracts arise from specific oral or written agreements of two or more
parties. When the parties agree specifically to the duration of a lease (whether
orally or in writing), they are entering into an express contract.
Contracts can also be classified as unilateral or bilateral. A unilateral contract is
a contract in which one party makes a promise to do something if another party
performs a specific act. In a unilateral contract, only one party (the one who
makes the promise) is obligated to act. Furthermore, that party is not obligated to
fulfill their promise unless the other party decides to perform the act specified in
the offer. For example, a notice offering a reward for the recovery of a lost dog is
a unilateral contract. No one is obligated to look for the dog. However, if
someone does find and return the dog, the owner must pay the reward as
promised by the notice.
A bilateral contract is formed when two parties exchange promises. For
example, an apartment lease is a bilateral contract wherein a tenant promises to
pay rent in exchange for the owner’s promise to provide the apartment.
A contract can be classified as either executory or executed. An executory
contract is one in which all of the promises or terms have not yet been fulfilled. A
contract is considered executed when all of its promises or terms have been
fulfilled.
Another way of saying that terms of a contract have been executed is to say that
the contract has been discharged. The contract is said to have been discharged
when all parties have performed as promised.
A person can also discharge his or her duties or rights under a contract through
assignment, novation, or accord and satisfaction. Assignment of a contract
occurs when a party to a contract allows another individual to assume all of their
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rights under the contract. An assignment can be made without the consent of the
other parties unless it is prohibited by the terms of the contract.
A novation occurs when all parties to the contract agree to a substitution of one
of the parties to the contract by creating a new agreement.
Accord and satisfaction indicates that the parties have agreed to a change in
one or more of the terms of the contract. Although accord and satisfaction
involves changes to the parties’ obligations, the parties to the contract stay the
same.
Contracts can also be categorized by their level of legality. For example, a
contract might belong in any one of the following categories:
Valid.
Void.
Voidable.
A valid contract is one that fulfills all the requirements of the law and contains all
of the following basic elements:
Consideration.
Legal purpose.
Offer.
Acceptance.
Competent parties.
Consideration is the promise offered in exchange for either an action, another
promise or something of value.
A contract does not have legal purpose if either party’s promise consists of an
illegal act.
When tenants or buyers want to enter into an agreement to rent or purchase
property, they make an offer explaining the terms they would like the seller or
landlord to agree upon. Acceptance is accomplished when the seller or landlord
agrees to the terms of the offer. The combination of an offer and its acceptance
is sometimes referred to as “agreement of the parties,” “meeting of the minds” or
“mutual consent.”
Offer and acceptance are essential to the existence of a contract. When an
offeror (person making an offer) communicates an offer to the offeree (person
receiving the offer), the offeree has the option of accepting or rejecting the offer.
An offer remains open for acceptance by the offeree until the expiration of a
specified time limit or until it is rescinded by the offeror. The offeror has the right
to rescind the offer until the offeror has received notice of acceptance by the
offeree.
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Sometimes, the offeree may wish to reject the specific offer received but would
be willing to accept a similar offer of slightly different terms. If the offeree
communicates these changes to the offeror, it is called a “counteroffer.” Note that
a counteroffer is a rejection of the original offer.
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.
Be aware that a valid contract is sometimes unenforceable. An unenforceable
contract may be considered a valid, binding contract by the parties but is not
enforceable in a court of law. For example, a valid but unenforceable contract
would exist if it does not comply with a state’s statute of frauds.
The statute of frauds requires that real estate contracts be in writing if they are
to be enforceable by a court. In Illinois, leases with terms of one year or less are
an exception to the statute of frauds and can be enforced even if they are
unwritten. However, oral leases of more than one year are unenforceable by a
court. Leases that are intended to last for more than one year will only be
enforceable if they are in writing.
The parol evidence rule is tied to the statute of frauds. The word “parol” means
“oral,” and the parol evidence rule prohibits courts from letting oral evidence
change the terms of a written contract. The court looks only “to the four corners
of the document.” In other words, all intended parts of an agreement must be
included in the written contract, and no additional oral agreements will be
enforced by the court.
Contracts are also governed by a state’s statute of limitations. 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. The time
period varies depending on the type of action being brought before a court.
In contrast to a valid contract, a void contract lacks the necessary provisions
required by law, binds neither party and is considered to be no contract at all. A
contract is also void if it is for an illegal purpose or lacks other essential
elements. However, there is an exception for contracts involving minors.
Although a contract with a minor lacks competent parties, the contract is
considered voidable rather than void.
In general, a voidable contract has the elements required of a valid contract but
allows one of the parties to withdraw from it. A voidable contract usually arises
from a case in which one party to the contract is injured by the other party. The
injured party (the party that has been wronged) may choose to void the contract.
Contracts are created when parties mutually agree to specific terms and
conditions. The mutual consent must be a “real consent,” meaning that the
parties’ knowledge of the terms and conditions of the contract is accurate. If any
party to a contract does not have complete knowledge, mutual consent fails to
exist and the contract becomes voidable. Lack of mutual consent may arise from
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misrepresentation, fraud, duress, menace or undue influence. It can also result
from one of the parties being a minor.
Misrepresentation is the omission or distortion of facts in the transaction.
Misrepresentation creates a voidable contract, and the party who relied upon the
misrepresentation is allowed to withdraw from the contract. 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 occurs 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, menace, and undue influence are often confused. Duress is the actual
use of force to induce another to act against his or her will. Menace is the threat
to use force to induce someone to act against his or her will. Undue influence
occurs when someone uses their position to influence another party, thereby
causing that party to do something they would not have otherwise agreed to do.
When one of the parties to a contract violates the terms of the agreement without
a legal reason, a breach of contract (or default) occurs. When aggrieved parties
choose not to ignore the breach and cannot solve the problem through accord
and satisfaction, they must turn to other legal remedies.
When a breach of contract occurs, the aggrieved party might take any of the
following actions:
Rescind the contract.
Ask a court to award monetary damages.
Enforce specific performance.
When the aggrieved party agrees to rescind the contract, the contract is
cancelled and treated is as if it never existed. Through rescission of the contract,
the parties are simply returned to the positions and conditions that existed prior
to execution of the contract.
As an alternative, the aggrieved party can seek action through the court system
in the form of monetary damages (money damages). Monetary damages can be
compensatory or punitive. 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.
A final option is specific performance. When a court enforces specific
performance, the party who breached the contract must perform as originally
agreed.
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CHAPTER 2 EXAM
REAL ESTATE CONTRACTS
1. A contract is void if it:
a.
b.
c.
d.
has an illegal purpose.
is a contract for the purchase of luxuries by a minor.
is not in writing.
has not been recorded.
2. The law that requires certain contracts be in writing in order to be
enforceable is the:
a.
b.
c.
d.
Statute of Frauds.
Statute of Limitations.
Law of Equity.
Law of Accord.
3. Every real estate contract must have a(n):
a.
b.
c.
d.
grantor and a grantee.
legal description.
acknowledgement by a notary.
offer and acceptance.
4. The landlord is offering his apartments for rent, month-to-month. He plans to
cancel all leases in three months to begin a major renovation. The landlord
tells the tenants he foresees no change and that they can expect to remain in
the building as long as they choose. The landlord’s statement:
a.
b.
c.
d.
constitutes fraud.
is an innocent misrepresentation.
is a mistake.
cannot constitute fraud because it is a statement of opinion.
5. If the tenant signs the contract under duress, menace or undue influence, the
contract is usually:
a.
b.
c.
d.
voidable by the tenant.
voidable by the owner.
void.
enforceable.
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6. The statute of frauds requires that real estate contracts be:
a.
b.
c.
d.
assignable to another person.
signed by the parties’ attorneys.
notarized by a country official.
in writing in order to be enforceable.
7. After the tenant and the landlord have signed a rental contract, the landlord
changes her mind and defaults. The tenant sues the landlord to force her to
go through with the lease contract. This is known as a suit for:
a.
b.
c.
d.
damages.
specific performance.
rescission.
forfeiture.
8. Which of the following best describes a contract that is voidable?
a.
b.
c.
d.
A contract that has no legal effect.
A contract that is oral.
A contract that has not been signed.
A contract that lets one of the parties withdraw from it.
9. A tenant makes an oral offer to lease a house from an owner for two years.
The owner orally accepts the offer. Which of the following statements is true?
a.
b.
c.
d.
It is a unilateral contract.
The contract is a void contract.
The contract is unenforceable.
The contract is an illegal contract.
10. Which one of the following is essential to the creation of a contract?
a.
b.
c.
d.
Signatures.
Fixtures.
Enforceability.
Acceptance.
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11. An owner rents a farm to a tenant for one year. To be valid, the contract must
include:
a.
b.
c.
d.
a novation.
meeting of the attorneys.
accord and satisfaction.
consideration.
12. When two or more persons enter into a contract, either orally or in writing, it
is called:
a.
b.
c.
d.
an express contract.
an implied contract.
an executed contract.
a unilateral contract.
13. A contract that results when a promise is exchanged for a promise is called
a(n):
a.
b.
c.
d.
bilateral contract.
unilateral contract.
executed contract.
valid contract.
14. If a contract is made under duress, it is:
a.
b.
c.
d.
null and void.
void.
voidable.
unenforceable.
15. A person less than 18 years of age has just signed a contract. The legal
status of this contract is:
a.
b.
c.
d.
voidable.
valid.
unenforceable.
void.
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16. Mutual consent requires:
a.
b.
c.
d.
an offer without acceptance.
no fraud or misrepresentation.
an express offer and implied agreement.
an implied offer and implied agreement.
17. A contract that binds one party but contains a defect that gives the other
party the right to withdraw is called a:
a.
b.
c.
d.
voidable contract.
void contract.
binding contract.
valid contract.
18. An offer must be accepted in order to:
a.
b.
c.
d.
satisfy the statute of frauds.
satisfy the statute of limitations.
form a valid contract.
cause accord and satisfaction.
19. To “assign” a contract for the sale of real estate means to:
a.
b.
c.
d.
record the contract with the county recorder’s office.
transfer one’s rights under the contract.
permit another broker to act as agent for the principal.
allow the seller and the buyer to exchange positions.
20. From a legal standpoint, a counteroffer:
a.
b.
c.
d.
is not an option.
assigns the offer.
is a rejection.
is a chattel offer.
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CHAPTER 3
Real Property
Leases
III – REAL PROPERTY LEASES
Residential leasing agents must be familiar with lease agreements beyond the
generalities of contract law discussed in the preceding chapter. We will begin our
discussion of leases by defining the following basic terms:
Lease.
Lessor.
Lessee.
Leasehold estate.
Rent.
A lease is a bilateral contract in which the lessor promises to provide exclusive
possession of the property to the lessee in return for the lessee’s promise to pay
rent. The lessor is the owner or landlord giving the lease, and the lessee, or
tenant, is the person receiving the lease. The terms “lessee” and “tenant” have
identical meaning and are interchangeable. Rent is the money paid for the use of
leased property.
The rights that the tenant acquires in the lessor’s property can be referred to as a
leasehold estate, leasehold interest or tenancy. The rights the tenant acquires
through a lease attach to the property rather than the lessor. Therefore, the sale
of the property or the transfer of ownership due to the death of the lessor does
not affect the lease.
Residential leases can take various forms. The forms of leases are classified as
tenancy for years, periodic tenancy, tenancy at will, tenancy at sufferance and
holdover tenancy. In some instances, leases are referred to as “estates”; the
terms “tenancy for years” and “estate for years” mean the same thing and can be
interchanged.
A tenancy for years has a specific timeframe. Despite its name, a tenancy for
years can be for any length of time: hours, days, weeks, months or years. A
tenancy for years does not require notice to terminate; the lease period ends
upon the expiration of the specified time period. State law does not require
landlords to send termination notices. A tenancy for years lasts for a specific and
definite period of time, and it is unaffected by the sale of the property or its
conversion into condominiums. It is also unaffected by the death of the landlord
or the tenant.
A periodic tenancy has no specific ending date. A periodic tenancy
automatically renews itself and goes from period to period, as in a week-to-week,
month-to-month or year-to-year lease.
A tenancy at will has no definite duration and exists at the will of the parties. In
this instance, the lessor allows tenants to remain on the premises as long as they
choose, but the lessor retains the right to terminate the lease at the lessor’s
discretion. Similarly, the tenants may terminate the lease at any time.
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A tenancy at sufferance is created when a lessee who was once entitled to
occupy the premises (such as a tenant whose lease term has expired) stays after
his or her rights have ended, thereby wrongfully possessing the owner’s property.
A holdover tenancy is created when a lessor accepts rent from a tenant whose
lease has terminated. Acceptance of rent is considered to be ratification of the
tenant's right to continue occupying the property. In Illinois, holdover tenancies
are treated as month-to-month leases.
The elements essential to the formation of a lease include the same elements
required of all contracts plus some additional requirements:
Consideration.
Legal purpose.
Offer.
Acceptance.
Competent parties.
Description of the premises.
Rights and obligations of each party.
Starting date.
Time and method of termination. (Unless otherwise stated in the lease, it
is presumed that rent is due at the end of the lease term.)
In order to be enforceable in a court of law, the lease must also be compliant with
the statute of frauds. Leases for a year or less can be written or oral and still be
enforceable. Leases for more than one year are only enforceable if they are in
writing.
Written leases generally require the signatures of both the lessor and the lessee.
Acceptance can be presumed if the tenant does not sign the lease but takes
possession of the premises. This is called acceptance by ratification and is
recognized by the courts.
There are a number of other topics covered by additional clauses in most
residential leases. Some of the most common clauses are listed below:
Assignment and sublet clauses.
Repair and maintenance clauses.
Improvements clauses.
Destruction clauses.
Clauses regarding renewal or purchase options.
Provisions of law clauses.
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Unenforceable clauses.
Clauses regarding security deposits.
Termination clauses.
Tenants may assign or sublet their rights. When a tenant assigns his or her
rights, the tenant transfers all of his or her rights to another person. When
tenants sublet, they are transferring less than all of their rights under the lease
and will retain some portion of their interest. For example, a tenant might
sublease his or her apartment to another person for a period shorter than the
original lease term. Or the tenant might sublease only part of the space (such as
a bedroom) to a roommate. In a sublease, the original tenant continues to pay
rent to the landlord while receiving rent from the sublessee. A sublease is also
called a “sandwich lease” because the original tenant becomes “sandwiched”
between the original lessor and the sublessee. In practice, most landlords limit
the tenant’s right to sublet or assign through specific language in the lease.
Repair and maintenance clauses should clearly state which repairs or
maintenance tasks are the responsibility of the lessor and which repairs or
maintenance tasks are the responsibility of the lessee. Under most residential
leases, tenants are responsible for any damage they cause, and the landlord is
responsible for all other maintenance and repairs.
The improvements clause states the lessor’s and the tenant’s rights to make
improvements to the property. The improvements clause can help avoid
arguments over whether tenant improvements do or do not become fixtures.
The destruction clause describes which rights and responsibilities the lessor
and lessee have if the property becomes partially or completely destroyed. Most
often, the lessor is given the choice to either terminate the lease or repair the
damage within a reasonable time period.
Options are contractual agreements that keep an offer open for a specified
period of time. Options might include a purchase option (which gives the tenant
an opportunity to buy the property) or a renewal option (which gives the tenant
the right to extend the lease term under certain circumstances). Some options
are only available if the tenant pays a fee for them. If the option expires without
being utilized, the fee generally won’t be refunded to the tenant.
Most standard residential leases have a clause stating how the lease can or
cannot be renewed. This clause usually specifies that the lease can only be
renewed by written agreement of both parties. Generally, periodic leases that
renew automatically are for short terms and are not in writing.
Purchase options can take various forms since they can include any terms
agreeable to both the owner and tenant. The most common type of option gives
the tenant (optionee) the right to purchase the property from the landlord
(optionor) at a specific price during a specific period of time. This type of option
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specifically gives the tenant the right to decide whether or not to purchase the
property with no further action by the landlord.
Another type of option grants the tenant the first right of refusal. The first right of
refusal operates differently than the option described above. The first right of
refusal applies only if the owner receives an acceptable offer to purchase his or
her property from someone other than the tenant. Under this type of option, if the
owner receives an acceptable offer from someone other than the tenant, the
owner must give the tenant the opportunity to purchase the property on the same
terms being offered by the other party.
An option may, in some instances, also call for a portion of the rent (paid prior to
the exercise of the option) to be applied toward the purchase price, but this is not
always the case. Options and their terms are always negotiable between the
parties.
Provisions of law include statements required by local, state and federal laws.
Fair housing and human rights provisions are included, along with other rules we
will be discussing in other sections of this text.
The unenforceable clause states that each clause of the lease is a separate
clause. If one clause is unenforceable or incorrect, it will not invalidate or affect
any other part of the lease.
Leasing agents should be familiar with the types of lease provisions or clauses,
but they must never actually draft them. That would be the unauthorized practice
of law. Leasing agents and all licensees are permitted only to fill in the blanks on
pre-printed forms that are commonly used by the local real estate community.
Even in cases where they represent landlords, leasing agents must be aware
that a variety of laws and local ordinances grant consumer protections to tenants.
In fact, many leasing professionals believe it is good practice to provide copies of
these laws and ordinances to all tenants. If tenants have questions about their
rights, a leasing agent should not discourage them from speaking with an
attorney.
FAIR CREDIT REPORTING
Before entering into a lease, a landlord will usually have the applicant fill out an
application and may charge an application fee. Before running a credit check, the
landlord must obtain the applicant’s written permission.
Many landlords investigate the credit histories of potential tenants by reviewing
credit reports or other kinds of consumer reports. Someone with a legitimate
business need (and permission from the individual) can investigate a person’s
credit history by obtaining a report from a consumer reporting agency.
For identification purposes, a report might include a person’s name, address,
phone number, Social Security number and other general information that may
be applicable and available to the reporting agency. It might list existing and
cancelled accounts that the person has been authorized to use, credit limits,
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outstanding and repaid debts, bankruptcies, tax information, overdue childsupport payments and more, depending on the individual’s financial obligations.
Individuals are now legally entitled to a free copy of their credit reports from each
of the three credit bureaus every year. The free report can be obtained either
over the internet or by mail.
One of the most significant federal laws regarding credit reports and other
consumer reports is the Fair Credit Reporting Act. Under the law, a landlord who
takes adverse action against a potential tenant because of the contents of a
report (such as by denying an application or charging higher rent) must inform
the tenant. A landlord who takes adverse action is also required to identify the
organization that produced the report and provide the organization’s contact
information. According to Experian (one of the three main credit reporting
agencies in the United States), landlords are allowed to give tenants a copy of
their report. However, many owners encourage tenants to obtain copies on their
own.
The Federal Trade Commission has summarized the law’s consumer protections
in the following manner:
Individuals must be told if information in their report has been used against
them.
Individuals can find out what is in their report.
Individuals can dispute inaccurate information with the agency that issued
the report.
Inaccurate information must be corrected or deleted. However, the
reporting agency is not required to remove accurate unfavorable data from
a report unless it is outdated or cannot be verified.
Individuals can dispute inaccurate items with the source of the information.
Reporting agencies cannot report inaccurate or outdated information.
Access to reports must be limited. Reporting agencies can only provide
reports to those parties (creditors, landlords, employers) who have a valid
need for the information.
Consent is required for reports that are provided to employers.
An individual may choose to exclude his/her name from reporting
agencies’ lists for unsolicited credit and insurance offers.
SECURITY DEPOSITS
The security deposit is money taken from the tenant/lessee at the time the
lease is created in order to protect the landlord/lessor in the event that the tenant
damages the property or does not pay all the rent before vacating the premises.
Security deposits are regulated by both state and local laws in Illinois. All
residential leases address the handling of security deposits and the amount of
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interest accruing on the deposit. In Illinois, security deposits are not included in
the list of elements necessary for the formation of valid leases.
There are two requirements for all security deposits in Illinois. First, a lessor of
residential property of five or more units cannot withhold any portion of a security
deposit to cover property damage unless an itemized statement of damages is
sent to the lessee. Lessees must receive the statement within 30 days after they
vacate, and copies of repair receipts must be furnished within 30 days after the
statement is delivered. If the statement or receipts are not given, the landlord
must return the full security deposit within 45 days of the tenant vacating. If a
court finds that the landlord did not comply with these rules, the landlord must
pay the tenant double the security deposit plus all attorney fees.
Second, lessors of residential buildings that have 25 or more units must pay
interest annually on security deposits that are held longer than six months. The
rate must be the same as the interest paid on a minimum deposit passbook
savings account of the state’s largest commercial bank with its main banking
center in Illinois. This interest can be paid in cash or as credit on the rent. If a
court finds a landlord guilty of withholding security deposit interest, the owner
must pay the tenant a sum equal to the security deposit plus the tenant’s court
costs and all attorney fees. The payment of annual interest is not required if the
tenant is in default.
Sponsoring brokers acting as property managers must place security deposits in
bank accounts that are separate from their own funds and separate from the
landlord’s funds. These bank accounts can be referred to as “special accounts,”
“trust accounts” or “escrow accounts.” The sponsoring broker is not allowed to
mix his or her own funds with funds that belong to other people. A sponsoring
broker who places his or her own funds in the same account as the tenants’ or
owners’ funds is engaging in commingling and is violating license law.
LEASE TERMINATIONS AND EVICTIONS
Whether a lease will terminate by voluntary or involuntary termination will be
stated in the termination clause. When a lease terminates, the right to possess
the property is returned to the lessor.
Voluntary termination of a lease is automatic upon expiration of its term or
through surrender and acceptance at any time during its term. Surrender and
acceptance indicates the mutual agreement of parties to terminate the lease.
Involuntary termination can occur after there is a breach of a condition in a
contract through actual eviction or constructive eviction. Involuntary termination
also occurs when the government exercises its power of eminent domain or in a
mortgage foreclosure or bankruptcy proceeding.
Actual eviction occurs when the lessor initiates court action to have the tenant
removed from the premises. In Illinois, before the lessor can begin the eviction
process, written notice must be given to the tenant through registered or certified
mail with return receipt, posted on the premises, or delivered in person to the
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lessee or anyone 13 years of age or older who resides at the premises. Illinois
law requires a five or 10-day notice period before court action can begin. A fiveday notice can only be used if the default is due to a failure to pay rent. If the
past-due rent is not paid within five days of the notice being received by the
lessee, the lessor can bring action to terminate the lease. If the rent is paid within
the five-day period, the lease continues uninterrupted. A-10 day notice is
required before the lessor can declare a default for a breach of any other term of
the lease. After the 10-day period, the lessor can begin action to terminate the
lease.
The lessor can continue to pursue eviction even if the lessee corrects the default
after the statutory period. When the required notice period has ended, the lessor
can bring suit. The suit is called a “forcible entry and detainer action.” The court
issues a writ of execution if judgment is for the owner. This allows the lessor to
order the sheriff to perform an actual eviction or a sanctioned removal of the
lessee from the premises.
A constructive eviction may result if a lessor allows a property to fall into a
state of disrepair to the extent that it becomes uninhabitable. If the lessor violates
the lease terms by failing to make repairs in a reasonable amount of time, the
tenant may vacate the premises. If the owner files suit to collect rent due for the
remainder of the lease term, the tenant can argue a constructive eviction
defense, essentially claiming that the landlord’s actions amounted to the
equivalent of an eviction.
The government may exercise authority under the power of eminent domain to
acquire property from a private owner against the owner’s wishes. The court
action taken by the government to seize property under eminent domain is called
a condemnation action. To win a condemnation action, the government must
prove to the court that the public’s need or purpose for the property is greater
than the owner’s need or purpose for it. However, the government must pay fair
compensation to the owner of the property. In certain cases, a tenant may also
be entitled to such compensation. If the government wins the suit, the lease is
terminated.
A mortgage foreclosure can also cause termination of a lease. If the mortgage
being foreclosed predates the lease, the foreclosing lender is allowed to
terminate the lessee’s rights. If the lease predates the mortgage, the lender
cannot terminate the lease.
At the discretion of a court, a bankruptcy of either the lessor or the lessee can
terminate the lease. Individual circumstances will dictate the court’s decision.
Drug Houses
The office of the Illinois Attorney General has published the following information:
“Illinois law allows the state to pursue civil action against the owners of drug
houses. Under the Controlled Substance and Cannabis Nuisance Act, a
nuisance is any place where controlled substances are unlawfully sold,
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possessed, served, delivered, manufactured, cultivated, given away or used
more than once within a period of one year.
“When a drug house is identified, the law requires that authorities send notice of
the nuisance to the owner. The owner has 14 days from the date of mailing, or
seven days from personal service, to appear at the state's attorney’s office and
arrange to take action to abate the nuisance. If the owner does not comply or
fails to appear within the designated time period, the law allows the state to file a
civil suit to prevent the owner from using the property for up to a year. The law
also allows the state to remove and sell any moveable property and fixtures
within the property that contributed to drug activity.”
Landlords are also given the right to post a five-day notice of eviction if their
property is being used for unlawful purposes or if a tenant is charged with
committing a Class X felony on the premises. Examples of Class X felonies
include aggravated criminal sexual assault, armed robbery and various major
drug crimes.
LEAD-BASED PAINT REGULATIONS
The Environmental Protection Agency (EPA) and the Department of Housing and
Urban Development (HUD) help to ensure that the public has adequate
information to prevent lead-based paint poisoning. Sellers and landlords of
housing built before 1978, when lead-based paint was widely used, are required
by law to give their respective buyers and tenants a pamphlet explaining the
hazards of lead-based paint, as well as practical, low-cost tips to identify and
control any problems resulting from the use of lead-based paint.
Lead-Based Paint in Housing
Approximately three-quarters of the nation's housing stock built before 1978
(approximately 64 million dwellings) contain some lead-based paint. When
properly maintained and managed, this paint poses little risk. However, 1.7
million children have blood lead levels above safe limits, mostly due to exposure
to lead-based paints.
What Does Lead Poisoning Do to Children?
Lead poisoning causes permanent damage to the brain and other organs and
may also cause learning and behavioral problems. For example, recent research
has linked lead exposure to juvenile delinquency. Lead may also cause abnormal
fetal development in pregnant women.
Background
To protect families from exposure to lead in paint and the contaminated dust and
soil it generates, Congress passed the Residential Lead-Based Paint Hazard
Reduction Act of 1992. Section 1018 of this law directed the EPA and HUD to
require the disclosure of known information on lead-based paint and lead-based
paint hazards before the sale or lease of most housing built before 1978.
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What Is Required
Before ratification of a contract for sale or lease:
Sellers and landlords must disclose known lead-based paint and leadbased paint hazards and provide available reports to buyers or tenants.
Sellers and landlords must give buyers and renters the EPA/CPSC/HUD
pamphlet “Protect Your Family From Lead in Your Home.”
Home buyers (but not lessees) will get a 10-day period to conduct a leadbased paint inspection or risk assessment at their own expense, if desired.
The number of days can be changed by mutual consent.
If an offer to purchase or lease a property is made before the required
disclosures, the owner must make the disclosures before accepting the
offer and give the potential buyer or tenant time to amend the offer.
Sales and leasing contracts must include certain language to ensure that
disclosure and notification actually take place. Sellers, lessors and real estate
agents share the responsibility for ensuring compliance.
What the Rule Does Not Require
No testing, removal or abatement of lead-based paint is required.
This law does not invalidate leasing and sales contracts.
What Type of Housing Is Covered?
Most private housing, public housing, federally-owned housing and housing
receiving federal assistance.
Which Kinds of Housing Are NOT Covered?
The following kinds of housing are not covered by the law:
Housing built after 1977.
Zero-bedroom units, such as efficiencies, lofts and dormitories.
Leases for less than I00 days, such as vacation houses or short-term
rentals.
Housing exclusively for the elderly (unless there are children living there).
Housing for the disabled (unless there are children living there).
Rental housing that has been inspected by a certified inspector and found
to be free of lead-based paint.
Houses being sold because of foreclosure.
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Why Isn't Housing Built After 1977 Included?
Congress chose not to cover post-1977 housing because the Consumer Product
Safety Commission banned the use of lead-based paint for residential use in
1978.
What Is the Effect on States and Local Governments?
Those states and local jurisdictions that already require disclosure and
notification will be largely unaffected, since the federal law compliments existing
requirements. For example, states can use their own hazard information
pamphlets approved by the EPA. Enforcement will be carried out jointly by the
EPA and HUD and therefore will not burden local resources.
What Should I Do If I'm Selling?
Give buyers the pamphlet.
Give buyers a 10-day opportunity to test for lead, if desired.
Disclose all known lead-based paint and lead-based paint hazards in the
house (and provide buyers with any available reports).
Include standard warning language as an attachment to the contract.
Complete and sign statements verifying completion of requirements.
Retain the signed acknowledgment for three years.
What Should I Do If I Am a Landlord Renting Out a Dwelling?
Give renters the pamphlet.
Disclose all known lead-based paint and lead-based paint hazards in the
dwelling unit (and provide renters with any available reports).
Include standard warning language in the lease or as an attachment.
Complete and sign statements verifying completion of requirements.
Retain the signed acknowledgment for three years.
Do I Have to Give the Pamphlets to All My Existing Tenants?
No, but the pamphlet must be provided when the lease is renewed, as is the
case for new tenants.
What About Non-English Speaking Buyers or Renters?
The disclosure has to be in the same language as the contract.
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Do I Have to Check My House For Lead Before I Sell It?
No, but you do have to give buyers a 10-day opportunity to have a test done if
desired.
Do I Have to Correct Any Lead Hazards That Are Found?
No. Nothing in the law requires an owner to remove lead paint or correct
hazards. The law also does not prevent the two parties from negotiating hazard
reduction as a contingency. This will be handled in the same way as any other
housing defect.
Where Can Lead-Based Paint Inspection Services Be Found?
The pamphlet provides phone numbers of state agencies that can help identify
certified inspectors or risk assessors. County, city and other local health and
environmental agencies may also have such lists.
State-certified, lead-based paint inspectors and risk assessors must be used to
qualify for an exclusion from this regulation. Over 21 states now have such
certification laws. If your state does not currently have a certification program,
you can use a certified inspector or risk assessor from another state.
Agent Responsibilities
Agents must ensure that:
Sellers and landlords are aware of their obligations.
Sellers and landlords disclose the proper information to buyers and
tenants.
Sellers give buyers the 10-day opportunity to conduct an inspection (or
another mutually agreed-upon period).
Leases and sales contracts include proper disclosure language and
proper signatures.
What Is the Agent's Responsibility If the Seller or Landlord Fails to Comply
With the Law?
Agents must comply with the law if the seller or landlord fails to do so. However,
the agent is not responsible if an owner conceals information or fails to disclose
the information.
Do I Have to Get a Lead Test If I'm Buying a House?
No. This law only gives you the right to have one if you want. If you get a test,
you must pay for it (or negotiate with the seller as to who will pay for it).
Can the 10-Day Inspection Period Be Waived?
Yes. The buyer and seller can choose any time period they want, as long as it is
by mutual consent, or the buyer may waive the 10-day opportunity altogether.
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If I Am Renting, Do I Also Have the Right to Test For Lead?
No. The 10-day inspection period is limited to sales transactions. But nothing in
the law prevents the renter from negotiating an inspection or risk assessment
with the landlord or lessor before rental.
What Happens If Sellers, Lessors or Agents Fail to Comply With the Law?
Under the law, they can be sued for triple the amount of damages. They may
also be subject to civil and criminal penalties. By clarifying the duties of all
parties, this law helps to prevent misunderstandings about responsibilities while
making sure that buyers and renters have the information they need to protect
themselves and their children.
PROPERTY MANAGEMENT
The responsibilities of a good landlord go beyond collecting the rent and fixing
the occasional plumbing problem. Marketing, accounting and fostering good
relationships with tenants are only a few of the additional tasks that must be
addressed by owners of income-producing properties. Rather than tackle all of
these tasks on their own, many owners hire property managers to do the work for
them. Responsive management, a desirable location and good amenities can all
produce a healthy vacancy rate.
A property manager’s job is to represent the owner and optimize the value and
income from the property. There might be a short-term goal of increasing monthly
cash flow, a long-term goal of increasing the property’s market value or both.
Through agreements with property owners, a property manager often can show
property to tenants, negotiate leases and collect rents. Those activities all require
a real estate license. Therefore, individuals in Illinois need a license if they
manage a property that they do not own. There are a few exceptions to this rule:
An individual whose primary residence is at the property and who is
performing any of the above tasks for either the owner or the property’s
licensed manager is called a “resident manager” and does not need a
license.
Someone who lives offsite and works for the owner as a “regular
employee" does not need a license. (A regular employee is anyone who is
considered an employee for tax purposes and works, on average, at least
20 hours per week.)
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Property managers are commonly expected to supervise maintenance of the
property, protect the physical integrity of the property and assist tenants on the
owner’s behalf. In performing those duties, the manager is expected to avoid
self-interest and act in ways that best serve the owner. However, a property
manager should have a clear understanding of what the owner expects. A
manager who makes decisions without proper authority may be exposing an
owner to unacceptable risks. Here are a few of the many issues that should be
addressed in the management contract with the owner:
Is the manager allowed to negotiate leases, and to what extent?
Must the owner be given notice before certain maintenance tasks are
performed?
Is the manager responsible for hiring employees or independent
contractors to perform work at the property?
Is the manager responsible for purchasing and maintaining insurance for
the owner?
Is the manager responsible for setting rental rates?
Does the manager have the authority to approve or reject applicants and
to evict tenants for lease violations?
Who will be responsible for paying expenses?
Who will hold security deposits?
The issues mentioned above (as well as any other serious matter that could
affect owners or tenants) should be addressed in written agreements between
the owner and the manager.
While working under a sponsoring broker and performing the tasks of a property
manager, leasing agents must be clearly aware of which activities the
management agreement allows or requires them to perform. They must also be
mindful of their obligation to represent the best interests of the owner while still
treating tenants honestly and fairly.
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CHAPTER 3 EXAM
REAL PROPERTY LEASES
1. A lease for a six-month term would be classified as a:
a.
b.
c.
d.
tenancy for years.
periodic tenancy.
tenancy at will.
tenancy at sufferance.
2. The tenant leases a property from the landlord for a one-year term from
January through December. The tenant transfers his interest to a friend for
the month of June while he will be traveling for business reasons. The tenant:
a.
b.
c.
d.
has assigned his lease.
has sublet the property.
has no liability.
cannot make a partial transfer of his interests in the property.
3. A tenant signs a one-year lease for an apartment unit. After three months,
the tenant is transferred to a different city by his company and asks to be
released from the lease. The landlord agrees. This is called:
a.
b.
c.
d.
a tenancy at will.
a surrender and acceptance.
a tenancy at sufferance.
an abandonment.
4. The term "lessor" is used to describe:
a.
b.
c.
d.
any party to a lease.
a holder of a less-than-freehold estate.
a person who manages rentals.
the landlord.
5. A month-to-month tenancy is classified as:
a.
b.
c.
d.
an estate for years.
an estate at will.
an estate at sufferance.
a periodic estate.
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6. An owner sells his property. There is no clause in the lease that covers the
situation. What happens to the existing lease?
a.
b.
c.
d.
The lease is terminated by the sale.
The lease remains in effect, and the sale of the property is prohibited.
The lease must be honored by the new owner.
The lease is terminated by the sale, but the tenant has priority over other
applicants in obtaining a new lease on the premises that she occupied.
7. If the rental payment date is not stated in the lease, the rental payment is due
on the:
a.
b.
c.
d.
first day of each month.
last day of each month.
first day of the lease term.
last day of the lease term.
8. In Illinois, an oral lease for a term of one year is:
a.
b.
c.
d.
enforceable.
enforceable only if the lessor is a resident of Illinois.
unenforceable under the Statute of Frauds.
unenforceable under the Statute of Limitations.
9. A tenant is delinquent on her rent payment for an apartment located in
Illinois. The lessor desires to terminate the lease. The lessor should give the
tenant a:
a.
b.
c.
d.
5-day notice.
10-day notice.
30-day notice.
writ of notice.
10. A lease is automatically terminated by:
a. the taking of the property under eminent domain for the purpose of
constructing an artificial lake.
b. bankruptcy of the lessee.
c. foreclosure of a mortgage which was recorded after the lease was made.
d. the voluntary sale of the leased fee estate.
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11. A tenant rented an apartment from an owner. The lease has expired.
The owner asks the tenant to vacate the premises, and the tenant refuses.
The tenant is occupying the apartment as a:
a.
b.
c.
d.
trespasser.
tenant at sufferance.
tenant at will.
joint tenant.
12. Which of the following is enforceable through the court?
a.
b.
c.
d.
An oral 15-month lease.
A parol lease for any length.
An oral 5-day notice to terminate.
An oral month-to-month lease.
13. A lease conveys the right of possession and use to the:
a.
b.
c.
d.
lessee.
lessor.
grantee.
grantor.
14. A valid, written lease will be terminated by:
a.
b.
c.
d.
death of the lessor.
sale of the leased premises.
court eviction of the tenant.
imprisonment of the tenant.
15. A tenancy for years:
a.
b.
c.
d.
continues until notice of termination.
requires no notice to terminate.
requires six months’ notice to terminate.
cannot be terminated.
16. A right of possession for a fixed term that allows for automatic renewals for
additional terms is called:
a.
b.
c.
d.
an estate for years.
a tenancy by the entireties.
an estate at will.
a periodic tenancy.
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17. A rental contract gives the tenant:
a.
b.
c.
d.
right of possession.
temporary ownership.
a freehold estate.
right to encumber.
18. Failure to pay rent would be grounds for:
a.
b.
c.
d.
eminent domain.
constructive eviction.
retaliatory eviction.
actual eviction.
19. Upon termination of a rental contract:
a.
b.
c.
d.
ownership reverts to the lessor.
possession is returned to the lessor.
possession is returned to the lessee.
ownership reverts to the lessee.
20. A written lease for six months, with no option for renewal, is classified as:
a.
b.
c.
d.
a periodic estate.
an estate at sufferance.
an estate at will.
an estate for years.
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CHAPTER 4
Fair Housing Laws
IV – FAIR HOUSING LAWS
Real estate licensees can avoid housing discrimination problems by fully
understanding fair housing rules and regulations. To that end, we begin with a
brief history of civil rights and housing discrimination in the United States.
Housing discrimination in America can be traced back to the first colonial
settlements. In the Jamestown colony of the early 1600s, black and white
indentured servants were treated differently. Enslavement of people of African
descent became increasingly common as the colonies grew. For the most part,
society did not consider slavery immoral.
Neither the Declaration of Independence nor the American Revolution produced
any rights or freedom for black Americans. Prior to the Civil War, the courts
refused to recognize any rights for any persons of African descent. Article I of the
U.S. Constitution considered slaves as “three-fifths” of a person for purposes of
determining a state's population for representation in Congress. Even those
states that had abolished slavery treated blacks as inferior. In Dred Scott vs.
Sanford (1857), the U.S. Supreme Court ruled that persons of African descent
were not “citizens” of the United States and therefore were not entitled to any
rights. According to the court, black people had no rights by law that white people
were bound to respect. The court stated that this principle applied to all black
persons regardless of whether they were slaves or free.
The abolitionist movement gained strength in the period leading up to the Civil
War. On paper, Abraham Lincoln's Emancipation Proclamation began the end of
slavery, but it did little to advance civil rights. At the end of the Civil War, the
Thirteenth Amendment was enacted to permanently abolish slavery, and it gave
Congress authority to enact appropriate legislation in order to enforce the
amendment. The first such legislation was the Civil Rights Act of 1866, which
guaranteed property rights to all citizens regardless of race. The act provided that
all citizens shall have the same rights to inherit, purchase, sell or lease real and
personal property. The Fourteenth Amendment, ratified in 1868, prohibited state
governmental discrimination, and the Fifth Amendment's due process clause was
newly interpreted to prevent racial discrimination by the federal government.
Soon thereafter, the nation's commitment to civil rights deteriorated. For over a
century, the courts only prohibited racial discrimination by state governments,
such as racial zoning or the enforcement of racially restrictive real property
covenants. The 1866 law had no impact on private discrimination.
In November 1962, President Kennedy authorized the first federal antidiscrimination initiative of the 20th century by signing the Equal Opportunity in
Housing executive order. It prohibited discrimination in housing that was owned,
operated or assisted by the federal government. The order required federal
agencies to actively prevent discrimination based upon race, color, creed or
national origin. Still, the Equal Opportunity in Housing order had limited impact on
the housing market.
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In 1964, Congress enacted Title VI of the Civil Rights Act of 1964, which
prohibited racial discrimination in programs receiving federal financial assistance.
Once again, this law had little effect since it did not prohibit discrimination in the
private housing market.
However, in 1968, two historic events forever changed the housing market. First,
in April, Congress enacted the Fair Housing Act (Title VIII of the Civil Rights Act
of 1968). This law banned discrimination on the basis of race, color, religion or
national origin in most types of housing transactions. The act also includes legal
remedies to counteract housing discrimination, including private discrimination.
Second, in June, the U.S. Supreme Court rendered its decision in Jones vs.
Alfred H. Mayer Co., and held that the Civil Rights Act of 1866 banned private, as
well as governmental, racial discrimination in housing. Thus, the Civil Rights Act
of 1866 was given new life and could be used to deter racial discrimination.
The Fair Housing Act prohibits private discriminatory acts, including the refusal to
rent or sell real estate, discrimination during sale or rental transactions,
blockbusting, and discrimination in real estate advertising. In 1974, the Fair
Housing Act was expanded to prohibit discrimination on the basis of gender.
Section 8 low-income housing programs were also created in 1974.
On September 13, 1988, President Reagan signed the Fair Housing
Amendments Act of 1988. The amendment became effective on March 12,
1989.
The 1988 amendment made major changes to Title VIII, including the addition of
two more protected classes to the Fair Housing Act: families with children and
handicapped persons. The amendment also modified the procedure for
registering complaints with the Department of Housing and Urban Development
(HUD) and effectively granted HUD greater authority to enforce the Fair Housing
Act. The amendment removed a cap on punitive damages and increased the
ceiling on available damages and civil penalties. The amendment also increased
the scope of Title VIII so that it now applies to real estate loans for repairs and
improvements, certain secondary finance market activities and real estate
appraisals.
TITLE VIII
Our current federal fair housing law is the Fair Housing Act passed in 1968,
together with amendments passed in 1974 and 1988.
The Fair Housing Act protects the following classes in all states:
Race.
Color.
Religion.
National origin.
Sex.
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Physical or mental handicap. (Some examples of conditions protected by
the law are:
o Hearing, mobility and visual impairments.
o Chronic alcoholism.
o Mental illnesses.
o Mental impairments.
o AIDS-related illnesses.)
Familial status. (The term “familial status” applies to situations involving:
o An adult who lives with someone under the age of 18.
o Someone who is pregnant.
o An adult who has or will have custody of a child.)
SUMMARY OF THE FAIR HOUSING ACT:
The Fair Housing Act, including the 1988 amendment, provides that it is unlawful
to do the following based on race, color, religion, sex, familial status, national
origin or handicap:
Refuse to sell or rent a dwelling after an offer has been made.
Refuse to negotiate for the sale or rental of a dwelling
Offer different terms, conditions or privileges to people who wish to buy,
sell or rent a dwelling.
Indicate a preference for certain kinds of buyers, sellers or renters in an
advertisement or in other ways. (Be aware that private owners who might
otherwise be exempt from the Fair Housing Act cannot engage in
discriminatory advertising.)
Misrepresent the availability of a dwelling.
Encourage people to buy or sell property because of the kinds of people
who live (or might live) in the neighborhood.
Deny access to a facility that relates to the selling or renting of dwellings.
Deny membership in real estate associations or multiple listing services.
Coerce, intimidate, threaten, or interfere with people (such as apartment
applicants) who are exercising their right to fair housing opportunities.
Coerce, intimidate, threaten, or interfere with someone (such as a real
estate licensee or attorney) who is helping someone exercise their right to
fair housing opportunities.
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DISCRIMINATORY
DWELLINGS
REPRESENTATIONS
ON
THE
AVAILABILITY
OF
Under the Fair Housing Act, it is unlawful to provide inaccurate or untrue
information about the availability of dwellings for sale or rental based on a
person’s race, color, religion, sex, handicap, familial status or national origin.
HUD's regulations list the following five actions that are prohibited if performed
because of race, color, religion, sex, handicap, familial status or national origin:
Indicating through words or conduct that a dwelling available for
inspection, sale or rental has been sold or rented.
Representing that instruments such as deeds, trusts or leases, which
purport to restrict the sale or rental of dwellings because of a protected
class, preclude the sale or rental of a dwelling to any person of a protected
class.
Enforcing covenants or other deed, trust or lease provisions that preclude
the sale or rental of a dwelling to any person within a protected class.
Limiting information, by word or conduct, regarding suitably priced
dwellings available for inspection, sale or rental.
Providing false or inaccurate information regarding the availability of a
dwelling for sale or rental to any person, including testers, regardless of
whether such person is actually seeking housing. In other words, random
testing by governmental agents is allowed.
These five items are only the most obvious examples of the law’s prohibitions.
The law also prohibits other discriminatory activities not listed above.
PROHIBITIONS AGAINST DISCRIMINATION BASED ON DISABILITY
The Fair Housing Amendments Act of 1988 extends Title VIII to protect the
physically and mentally disabled. The Fair Housing Act provides that it is unlawful
to discriminate in the sale or rental of a dwelling, or to otherwise make
unavailable or deny a dwelling, to any buyer or renter based on the disability of:
The buyer or renter.
A person residing in or intending to reside in the dwelling after it is sold,
rented or made available.
Any person associated with the buyer or renter.
The law also prohibits discrimination against any person in the terms, conditions
or privileges of the sale or rental of a dwelling, or in the provision of services or
facilities in connection with such dwelling, based on disability. The disabilities
covered under the Fair Housing Act include hearing, mobility and visual
impairments, chronic alcoholism, chronic mental illness, AIDS and AIDS-related
illness and mental retardation.
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REASONABLE MODIFICATIONS OF EXISTING PREMISES
If modifications are necessary to provide a disabled person with full enjoyment of
the existing premises, the Fair Housing Act obligates any person, such as a
landlord, to permit the disabled individual to make "reasonable" modifications to
the premises at the individual’s expense. The premises covered by the law
include the dwelling and common-use areas.
In the case of a rental, the landlord may, where it is reasonable to do so, require
the renter to agree to restore the interior of the premises to the condition that
existed before the modification, reasonable wear and tear excepted. In general, a
request to restore property to its previous condition is unreasonable if the
disabled tenant’s modifications haven’t impacted the owner’s or a future tenant’s
enjoyment of the premises.
The landlord is prohibited from refusing to make reasonable accommodations in
rules, policies, practices or services if they are necessary for the disabled person
to use the housing. Reasonable accommodations would include a landlord
allowing a tenant to have an assistive animal like a guide dog even if the current
rules do not allow pets.
REASONABLE OCCUPANCY STANDARDS UNDER THE FAIR HOUSING
ACT
Governmental Occupancy Standards
The Fair Housing Act does not limit the applicability of any reasonable "local,
state or federal" restrictions on the maximum number of occupants permitted to
occupy a dwelling unit. According to HUD, this exemption is intended to allow
“reasonable" governmental limitations on occupancy as long as these limitations
are applied to all occupants and do not arise from discrimination on the basis of
race, color, religion, sex, handicap, familial status or national origin.
The preamble to HUD's final rule implementing the Fair Housing Amendments
Act of 1988 provides some insight into the use of governmental occupancy
standards. Although the law specifically provides that nothing in it limits the
applicability of any reasonable federal restrictions regarding the maximum
number of occupants, HUD has determined that the statutory or legislative
history of the act does not indicate any Congressional intent to develop a national
occupancy code.
Although HUD has developed occupancy guidelines for use by participants in
HUD housing programs, these guidelines are designed to apply to only those
types and sizes of dwellings in HUD programs. The HUD guidelines may not be
reasonable for dwellings that have different available space and configurations
than those dwellings found in HUD-assisted housing.
Private Occupancy Standards
HUD rules reflect the belief that the law shall permit an owner or manager of
housing to restrict the number of occupants who may reside in a particular
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dwelling. Accordingly, in appropriate circumstances, HUD's rules permit owners
and managers to develop and implement "reasonable" occupancy standards
based on the number and dimensions of sleeping areas and the overall square
footage of the dwelling.
HUD cautions that any such non-governmental restrictions will be carefully
examined to ensure that they do not operate unreasonably to limit families with
children or discriminate against other protected classes.
HUD also allows governmental authorities to set occupancy standards based on
health and safety considerations.
TENANT SELECTION
Leasing agents must be cautious and strictly adhere to the qualifications process
permitted under fair housing law when interviewing a prospective tenant.
The criteria used to select tenants should be objective, consistent and relevant to
the applicant’s ability to fulfill the obligations of tenancy. Appropriate criteria may
include:
Rent-to-income ratio.
Credit history.
Rental history.
Household size.
Rental applications must conform to the Fair Housing Act. To ensure compliance,
leasing agents should be careful to use only the most current application form
supplied by their sponsoring broker.
During the interview process, leasing agents must be careful about what
questions they ask a prospective tenant. Below is a list of both prohibited and
permissible questions:
Questions you cannot ask include:
o Do you have a physical disability?
o Have you ever suffered a serious illness?
o Do you have a mental disability?
o Are you able to live independently?
o Have you ever used drugs or alcohol?
o Have you ever filed any personal injury lawsuits or workers
compensation claims?
o How many children are in your family?
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Questions you can ask include:
o Have you ever been convicted of any drug-related or alcoholrelated activity? If yes, please explain.
o Have you ever engaged in the sale of illegal drugs?
o Do you currently engage in the use or sale of illegal drugs? If yes,
please explain.
o Are there any money judgments pending against you? If yes,
please describe.
o Have you ever declared bankruptcy?
o Have you ever been evicted from a rental property? If yes, please
explain.
o How many people will be living in this rental property?
Remember: if you ask one prospect any of these questions, you must ask all
prospects the same questions.
EXEMPTIONS FROM AND LIMITATIONS TO THE FAIR HOUSING ACT
The Fair Housing Act covers most types of housing. However, the law contains
several important exemptions, including single-family homes sold or rented by a
private owner and housing operated by religious organizations and private clubs.
The basic exemptions and limitations to the Fair Housing Act are as follows:
1. Private Owner Exemption. The Fair Housing Act does not apply to:
A. The private sale of a single-family home if ALL of the following
conditions are met:
The owner does not own more than three single-family
homes.
The home is sold without the help of a real estate licensee.
No discriminatory advertising is used.
The owner either was the most recent occupant of the home
OR has not already used this “private owner” exemption
during the previous 24 months.
B. Rooms or units in dwellings containing living quarters occupied
or intended to be occupied by no more than four families living
independently of each other, if the owner actually maintains and
occupies one of such living quarters as his/her residence. (This
exception is known as the “Mrs. Murphy’s Boarding House
Rule.”) However, this exemption only applies if no discriminatory
advertising is used.
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2. Religious Organizations. The Fair Housing Act does not prohibit
limitation of the sale, rental, or occupancy of dwellings in noncommercial properties owned or operated by a religious organization,
or owned by a nonprofit institution that is operated by a religious
organization, to persons of the same religion or from giving preference
to such persons. If membership in a religion is denied to any protected
class, this exemption does not apply.
3. Private Clubs. The Fair Housing Act does not prohibit a private club
from limiting the rental or occupancy of lodging that it owns or operates
to its members, or from giving preference to its members, provided that
the club is not open to the public.
4. Occupancy Standards. The Fair Housing Act does not limit the
applicability of any "reasonable" local, state, or federal restrictions
regarding the maximum number of occupants permitted to occupy a
dwelling.
5. Drug Conviction. The Fair Housing Act does not prohibit
discrimination against a person because that person has been
convicted, by any court of competent jurisdiction, of the illegal
manufacture or distribution of a controlled substance.
6. Health and Safety. The Fair Housing Act allows a landlord to refuse to
rent to a "handicapped" person if that person's occupancy constitutes a
threat to the health and safety of other persons.
7. Housing For Elderly. The Fair Housing Act provides that the
provisions regarding “familial status” do not apply to duly qualified
“housing for older persons.” This means that qualified properties are
not required to accept tenants who qualify, based on age, if the tenants
have a minor living with them.
It is important to remember, however, that even discriminatory actions that are
exempt from the Fair Housing Act will still be in violation of the Civil Rights Act of
1866 if they are based on race.
ENFORCEMENT
Where to File a Complaint
Discriminatory acts covered by the Fair Housing Act should be reported to HUD.
Once a complaint has been received, HUD takes the following actions:
Notifies the alleged violator (the “respondent”) of the complaint and
permits that person to submit an answer.
Investigates the complaint to determine if the Fair Housing Act has been
violated.
Notifies the complainant if the investigation cannot be completed within
100 days of receiving the complaint.
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When to File a Complaint
Complainants have up to one year after an alleged violation to file a complaint
with HUD.
Conciliation
HUD will try to resolve the situation by proposing a conciliation agreement. A
conciliation agreement must protect both the complainant and the public interest.
If an agreement is signed, HUD will take no further action. However, if HUD has
reasonable cause to believe that a conciliation agreement has been breached, it
will recommend that the U.S. Attorney General file suit against the breaching
party.
Complaint Referrals
If HUD determines that the state or local agency in which the complaint was filed
has the same fair housing powers as HUD, the complaint is referred to that
agency for investigation, and the complainant is notified of the referral. That
agency must begin work on the complaint within 30 days, or HUD may assume
responsibility for its processing.
What If Help Is Needed Quickly?
If immediate help is necessary to stop a serious problem caused by a Fair
Housing Act violation, HUD may be able to assist the complainant as soon as the
complaint is filed. Then, HUD may authorize the Attorney General to go to court
to seek temporary or preliminary relief, pending the outcome of the complaint, if
either of the following statements is true:
Irreparable harm is likely to occur without HUD’s intervention.
There is substantial evidence that a violation of the Fair Housing Act has
occurred.
Example: A builder agrees to sell a house but, after learning the buyer is black,
fails to fulfill the terms of the agreement. The buyer files a complaint with HUD.
HUD may authorize the Attorney General to go to court to prevent a sale to any
other buyer until HUD investigates the complaint.
What Happens After a Complaint Investigation?
If HUD finds reasonable cause to believe that discrimination has occurred, the
complainant is informed. The case is heard in an administrative hearing within
120 days unless either party wants the case to be heard in federal district court.
Either way, there is no cost to the filer of the complaint.
The Administrative Hearing
If the case goes to an administrative hearing, HUD attorneys will represent the
complainant. The complainant may also choose his/her own attorney. An
administrative law judge (ALJ) considers evidence from the complainant and
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the respondent. If the ALJ decides that discrimination has occurred, the
respondent can be ordered:
To compensate the complainant for actual damages, including humiliation,
pain, and suffering.
To provide injunctive or other equitable relief (for example, to make the
housing available to the complainant).
To pay the federal government a civil penalty to vindicate the public
interest.
To pay reasonable attorney’s fees and costs.
Federal District Court
If the complainant or the respondent chooses to have the case decided in federal
district court, the Attorney General will file a suit and litigate it on the
complainant’s behalf. Like the ALJ, the district court can order relief and award
actual damages, attorney’s fees and costs. In addition, the court can award
punitive damages.
Complainant May Also File Suit
The complainant may also file suit in federal district court or state court within two
years of an alleged violation. If the complainant cannot afford an attorney, the
court may appoint one. Suit may be brought even after a complaint has been
filed, as long as the complainant has not signed a conciliation agreement and an
ALJ has not started a hearing. A court may award actual and punitive damages,
as well as attorney’s fees and costs.
Other Tools to Combat Housing Discrimination
If there is noncompliance with the order of an administrative law judge,
HUD may seek temporary relief, enforcement of the order or a restraining
order in a United States Court of Appeals.
The Attorney General may file a suit in federal district court if there is
reasonable cause to believe a pattern or practice of housing discrimination
exists.
DISCRIMINATION IN BROKERAGE SERVICES
The Fair Housing Act declares that it is unlawful to discriminate when providing
real estate brokerage services. Specifically, the law prohibits denying a person
who is a member of a protected class access or membership to, or participation
in, any multiple listing service, real estate brokers' organization or other service,
organization, or facility relating to the business of selling or renting dwellings. The
law also prohibits discrimination against any person in the terms or conditions of
such access, membership, or participation, if such discrimination is based on
race, color, religion, sex, handicap, familial status or national origin.
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ILLINOIS HUMAN RIGHTS ACT
The Illinois Human Rights Act protects additional classes of individuals not
protected under federal law. A list of protected classes under both federal law
and the Illinois Human Rights Act follows:
Federal
Race.
Color.
Religion.
National origin.
Sex.
Physical or mental handicap.
Familial status.
Through the Illinois Human Rights Act, Illinois also prohibits discrimination
based on:
Age.
Ancestry.
Sexual orientation.
Marital status.
Military status.
Unfavorable discharge from military service.
Order of protection status.
Although our study includes only federal and state regulations, a leasing agent
must also be aware if any villages, cities or municipalities in which they work
have local fair housing legislation.
REAL ESTATE LICENSE ACT OF 2000
The Real Estate License Act of 2000 contains provisions for disciplining Illinois
licensees who violate fair housing laws. If a licensee engages in discrimination,
the Illinois Department of Financial and Professional Regulation (IDFPR) may:
Refuse to issue or renew a license.
Place a licensee on probation or suspend or revoke licensure.
Reprimand or impose a civil penalty not to exceed $25,000
REAL ESTATE LICENSEES AND FAIR HOUSING LAWS
Real estate licensees play a major role in the process of providing fair housing
and equal opportunity for everyone in this country. A real estate professional’s
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prominent position in assisting the public with the purchase and sale of property
can expose him or her to potential claims of unfair housing practices.
Blockbusting, panic peddling and steering are of particular concern.
BLOCKBUSTING, PANIC PEDDLING AND STEERING
Blockbusting and panic peddling are terms that are typically used
interchangeably, even though they had somewhat different meanings in the past.
Panic peddling occurs when a real estate licensee attempts to induce an owner
to sell a property by implying that people of a particular protected class are
moving, or are going to move, into the neighborhood. For example, an agent
might warn a prospective seller of an impending change in the neighborhood
composition with respect to race, color, religion, sex or national origin. The agent
might also insinuate that the entry of these individuals will result in undesirable
consequences for the neighborhood or community, such as a lowering of
property values, an increase in criminal or antisocial behavior or a decline in the
quality of schools or other services or facilities. The agent’s actions would be
viewed as panic peddling in either of these instances.
Steering occurs when a licensee attempts to direct a prospect to a particular
area based on, for example, the person’s race, color, sex, religion, national
origin, handicap or familial status. Intentionally steering a minority prospect to an
area in which there are no minorities is also illegal. All prospects must be given
the opportunity to choose from the entire inventory of available housing.
It is important to recognize that a leasing agent who selects units to be shown to
a prospect based on the prospect belonging to a protected class is also steering.
An example of this would be an agent showing only first-floor units to a disabled
prospect who is using a wheelchair or walker while showing other prospects units
on all floors. Anytime an agent treats prospects differently based upon their
status in a protected class, steering is taking place.
Testers
Private groups and various governmental entities can monitor a licensee’s
behavior through the use of testers. Testers can help to determine if licensees
are violating any fair housing laws or regulations.
Essentially, testers are individuals who pose as prospective tenants and, by
working in pairs, can determine if a licensee treats two individuals with equal
buying power differently based on race, color, sex, familial status, marital status,
religion, national origin or disability. Testers do not have to admit they are testers,
even if asked directly. Testers may even proceed to enter into a contract before
acknowledging their status as testers.
A tester will report any unequal treatment regardless of the services offered to
either individual. Remember: the fair housing laws do not emphasize better
treatment of individuals belonging to a protected class. They emphasize equal
treatment for all individuals.
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Advertising and Fair Housing
The Fair Housing Act outlaws almost every discriminatory notice, statement or
advertising that relates to the sale or rental of housing. This advertising rule even
applies to those otherwise exempt under the law.
The Fair Housing Act makes it unlawful to discriminate in the sale, rental, or
financing of housing, or in the provision of brokerage and appraisal services,
because of a person’s protected class. The Fair Housing Act makes it unlawful to
make, print or publish (or cause to be made, printed, or published) any notice,
statement, or advertisement, with respect to the sale or rental of a dwelling, that
shows an intention to indicate any preference, limitation or discrimination based
on an individual belonging to a protected class.
It is recommended that licensees use the equal housing logo in all display
advertising. It is a good policy to use the logo on your business cards and
stationery as well as in newspaper and magazine advertising. (Classified ads do
not require using the logo since the publisher is required to place a notice
regarding equal housing at the beginning of that section of the publication.) HUD
has also created a special “equal housing opportunity” poster, which must be
prominently displayed in all real estate offices.
Sometimes, it may be difficult to determine exactly what constitutes
discriminatory advertising. There have been claims by some fair housing
organizations that ads using terms such as ”master bedroom” or “in-law
apartment” are discriminatory.
HUD has addressed these issues at the request of the National Association of
Realtors. HUD issued a statement that stopped short of listing every word or
phrase that can or cannot be used in advertising materials. However, HUD did
offer guidance by saying that words implying preferences are to be avoided, and
words describing physical characteristics of the property are permissible.
Signs
Federal fair housing law considers signs a form of advertising. Therefore, signs
advertising real estate must conform to the same standards as those mentioned
previously.
Local governments have dealt with signs in various ways. Some municipalities
believe the placing of signs, in and of itself, can amount to a violation. Placing too
many signs in an area can become a form of panic peddling. Other local
governments believe that sign limitation laws violate fair housing laws because
they limit the public’s ability to find out which properties are available.
Currently, there is no federal or state law limiting the number of signs allowed or
the length of time signs can be displayed on a property in Illinois.
Record Keeping
Good records could save you if you are ever accused of violating fair housing
laws. Intent to discriminate is not required for you to be found guilty of
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discrimination. If words or actions result in discrimination, a licensee may be
found guilty regardless of intent.
Good record keeping can help you prove that you did not intend to discriminate.
Records that show consistency in the equal treatment of all prospects may help
to prove that your intent was to avoid discrimination.
THE AMERICANS WITH DISABILITIES ACT OF 1990 (ADA)
The Americans With Disabilities Act was enacted on July 26, 1990, and is the
country’s first comprehensive civil rights law for the protection of persons with
disabilities. The ADA must be obeyed by private employers and providers of
public accommodations and makes it unlawful for them to commit intentional acts
or omissions that cause discrimination against physically or mentally disabled
persons.
Nonresidential and public goods and services, including public transportation and
telecommunications by common carriers, must be accessible to the disabled.
Employers and private entities must provide reasonable accommodations for
employees and/or persons with disabilities seeking employment.
Who Is Covered Under the ADA?
A person with a disability is defined as one who:
Has a mental or physical impairment that substantially limits one or more
major life activities.
Has a record of such impairment.
Is regarded as having such impairment.
If a person cannot talk, walk, hear, see, think or independently care for him/her
self, the individual is considered to have substantial limits on “major life activities”
and is covered under the ADA. The act does not provide a list of disabilities; the
only stipulation is that the disability must substantially limit a person’s life activity.
For example, an epileptic whose condition is regulated by prescription medication
would not be significantly limited by his/her epilepsy and would therefore not
qualify for any special accommodations.
Examples of a “disability” include physical or mental impairments to vision,
speech, hearing or orthopedics. The law does not apply to short-term illness,
pregnancy or predisposition to illness. Homosexuality, bisexuality,
transsexualism, transvestitism or other sexual orientations are not considered
disabilities. Neither are gambling, kleptomania, pyromania or the use of illegal
drugs.
Obesity and scars are not generally covered under the ADA, but a person with
morbid obesity or major facial disfigurement due to an accident or birth defect
could be covered by the ADA if the individual suffers discrimination or physical
limitations as a direct result. Also, if someone is discriminated against based on a
perceived disability that the person does not actually have – such as AIDS – or if
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a person is discriminated against for living with someone who has AIDS, the
individual is protected under the ADA.
Public Accommodations and Services Operated By Private Entities
Title III of the ADA, which went into effect in 1992, prohibits all private entities
that own, operate or lease a place of public accommodation from
discriminating against an individual on the basis of a disability. Place of public
accommodation means a privately owned business or facility that affects
commerce and falls within at least one of the following categories:
Place of lodging.
Establishments serving food or drink.
Places of exhibition or entertainment.
Place of public gathering.
Sales or rental establishments.
Service establishments.
Stations used for specified public transportation.
Places of public display or collection.
Places of recreation.
Places of education.
Social service center establishments.
Places of exercise or recreation.
The ADA requires owners and tenants of public accommodations to remove
barriers and make “readily achievable modifications,” meaning easily
accomplished with minimum difficulty or expense, to ensure that disabled
individuals have equal opportunity for access. An owner of a non-compliant
facility would be wise to have a written plan outlining future modifications for
accommodating the disabled.
Since they are serving the public, real estate sales and leasing offices must
comply and be accessible under the ADA.
Places of Lodging
It may not always be clear what falls under “other places of lodging” in the ADA.
The intent was to include single-room occupancy hotels or mixed-use
nonresidential accommodations (transient lodging) used for short-term stays but
to exclude solely residential facilities that are operated or used for long-term
residences (which are covered under fair housing laws). To determine if a facility
is included under the ADA, consider the answers to the following questions:
Does the facility resemble a hotel or motel-type operation?
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Are public services available for residents of the facility?
Does a landlord-tenant ordinance apply to the facility?
Enforcement
The ADA allows a victim of discrimination, or a potential victim of discrimination,
to take civil action. The U.S. Attorney General can bring suit if a pattern of
discrimination exists or is of public importance.
In cases of public accommodation discrimination, the maximum civil award is
$55,000 for a first violation and $110,000 for subsequent violations, plus
attorney’s fees. The plaintiff may also seek injunctive relief, requiring businesses
to modify their facilities or existing policies or practices.
The good faith efforts of the non-complying party will be considered during
determination of a civil penalty.
SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM
The federal government, through HUD’s Office of Housing, provides assistance
to low-income tenants through rent subsidies. The program leasing agents are
most likely to become involved with was created by Section 8 of the U.S.
Housing Act of 1937.
The Section 8 Housing Assistance Payments (HAP) program is a rent subsidy
program that assists eligible, low-income families in obtaining decent, safe and
sanitary housing. It consists of various subprograms designed to reflect the
different types of housing (new construction, substantial rehabilitation, moderate
rehabilitation, existing) and delivery mechanisms available. More than three
million families are assisted under the Section 8 program. The subprograms
share many of the same features.
Families receive the benefit of a rental subsidy, known as a “housing assistance
payment,” equal to the difference between their share of the rent and the rent
charged by the owner. Adjustments are made if the rent does not include all
utilities.
Owners, who may be public or private, receive the housing assistance payments
directly from HUD or from a Public Housing Administrator (PHA) that administers
the program on HUD’s behalf for a fee.
Eligible families and individuals must be low-income families, which are families
with incomes no higher than 80 percent of the area median. A large majority of
eligible families are low-income families whose incomes are no higher than 50
percent of the area median.
The units must be maintained by the owner in decent, safe and sanitary
condition. If not, the owner does not qualify to receive the HAP payment.
Rents must be within the fair market rent (FMR) for the area and type of housing.
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If a landlord affiliated with the Section 8 program chooses not to renew a tenant’s
lease, he or she must provide an acceptable reason to HUD.
Eligible tenants who wish to live at Section 8-eligible housing can receive
financial assistance through the Section 8 Voucher Program. Eligible families can
select their own units from the housing stock available within the jurisdiction of
the PHA. Additional details are listed below:
Vouchers may be issued only to low-income families, families already
assisted under the 1937 Act, families with incomes up to 80 percent of the
area median that are physically displaced by rental rehabilitation program
activities, and families that qualify to receive a voucher in connection with
one of the federal government’s HOPE home ownership grant programs.
There is no limit on the rent for the unit a family selects, thereby giving
families more freedom in choosing units. However, the rent charged by the
owner must be reasonable in relation to the rent charged for comparable
unassisted units.
Assistance is equal to the difference between the tenant contribution (30
percent of adjusted income) and the payment standard set by HUD. If the
family selects a unit renting for more than the payment standard, the
family pays the excess. If the family selects a unit renting for less than the
payment standard, the family keeps the difference by paying a lower
percentage of its income for rent. (Families are subject to a minimum rent
of 10 percent of their gross income.)
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CHAPTER 4 EXAM
FAIR HOUSING LAWS
1. The Civil Rights Act of 1866 prohibits discrimination in the sale or rental of
property on the basis of:
a.
b.
c.
d.
race.
race, color, religion or national origin.
race, color, religion, national origin or sex.
race, color, religion, creed, national origin, sex or handicap.
2. Which of the following is a violation of the Illinois Human Rights Act but not
the Fair Housing Act:
a. Refusing to rent a room in a single-family home to persons of a different
race.
b. Refusing to rent to families with children under age 14.
c. Refusing to rent to a married couple.
d. A sale “by owner” of a second property without the use of a real estate
broker.
3. Which one of the following administers the federal Fair Housing Act of 1968?
a.
b.
c.
d.
Department of Housing and Urban Development.
Department of Health, Education and Welfare.
Department of Education and Registration.
Superintendent of Government Affairs.
4. Which one of the following is exempt from the provisions of fair housing
laws?
a. A private club for only black Americans that provides lodging for its
members.
b. A religious organization giving preference in the sale or rental of housing
to its members.
c. The owner of two single-family residences advertising for adults only.
d. The owner of a five-unit apartment building advertising for adults only.
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5. The practice of encouraging prospective tenants to avoid certain areas
because of the racial or religious composition of the neighborhood is best
described as:
a.
b.
c.
d.
testing.
steering.
blockbusting.
conciliating.
6. Which one of the following is prohibited under the Fair Housing Act of 1968?
a.
b.
c.
d.
Steering.
Testing.
Pre-qualifying.
Accommodation.
7. An owner suddenly pulls a property off the market after being informed by the
agent that he had received a full-price offer from a minority party. The agent
then informs the offeror that the home has been removed from the market
and is unavailable. Which party or parties, if any, have violated fair housing
laws?
a.
b.
c.
d.
The agent only.
The owner only.
The agent and the owner.
Neither agent nor owner.
8. The first line of a homeowner's advertisement appearing in the company
newsletter reads “For Rent to Asians Only.” Pursuant to the Fair Housing Act,
this is an example of illegal:
a.
b.
c.
d.
blockbusting.
discrimination.
redlining
steering.
9. An owner of a single-family house, owning less than three such houses, may
sell or rent without being subject to the provisions of the Fair Housing Act if
he:
a.
b.
c.
d.
does not use a broker and does not own other property.
uses a broker and owns two other properties.
uses a broker and does not own other property.
does not use a broker and owns eight other properties.
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10. The Americans With Disabilities Act:
a.
b.
c.
d.
applies to only vacant apartments.
became law in 1866.
applies to places of public accommodation.
requires changes to all buildings regardless of cost.
11. Which of the following is the responsibility of a leasing agent under the 1968
Fair Housing Act?
a.
b.
c.
d.
To show all available units to all prospects regardless of price.
To treat all prospects equally regardless of race.
To treat all prospects equally regardless of financial ability.
To keep readily accessible first-floor units available for handicapped
tenants.
12. Complaints about discrimination may be brought:
a.
b.
c.
d.
to the Secretary of State.
directly to court.
to the NAR.
to the NRA.
13. If a minority prospect asks to be shown apartments in white neighborhoods,
agents should:
a. choose and show apartments in white neighborhoods.
b. show apartments in geographical areas requested regardless of racial
makeup.
c. ignore the prospect and show apartments they think suit the prospect’s
needs.
d. show the prospect which areas are white and let the person choose one.
14. The Fair Housing Act states that it is illegal to discriminate against any
person because of race, color, religion, national origin, sex, familial status or
handicap:
a.
b.
c.
d.
in advertising the renting of commercial property.
in all secured financing of housing and commercial property.
in only the sale of the housing.
in the sale or rental of housing.
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15. The broker's obligation in regard to equal opportunity in housing is:
a. to replace white residents with minority homeowners.
b. to avoid any acts that would make housing unavailable to someone
because of color.
c. to practice fair housing in a discriminatory way.
d. to discriminate only to preserve the stability of a neighborhood.
16. The Civil Rights Act of 1968 and its amendments:
a.
b.
c.
d.
provide only financial penalties when violence is threatened or used.
make it illegal to report discrimination without proof.
make it illegal to intimidate or interfere with people renting apartments.
provide mandatory criminal penalties for all offenses.
17. A black prospect walks into a real estate office. The leasing agent should:
a.
b.
c.
d.
show the prospect apartments in a white neighborhood.
show the prospect apartments in neighborhoods the agent chooses.
show the prospect apartments in a black neighborhood.
show the prospect apartments in neighborhoods the prospect chooses.
18. A landlord in Illinois would be allowed to reject a tenant on the basis of the
tenant:
a.
b.
c.
d.
testing positive for HIV.
being a parent to a child under age 12.
having several large and unpaid debts.
receiving an order of protection against someone.
19. A black prospect made an offer. Did the broker violate the law by telling the
seller that the prospect is black?
a.
b.
c.
d.
No, because he has a duty to tell his principal about all material facts.
No, because his primary duty is to the seller.
No, because it should not have mattered.
Yes, because it should not have mattered.
20. The goal of the Fair Housing Act is:
a.
b.
c.
d.
each family gets a larger home.
cooperative housing opportunity.
lower prices for housing.
equal housing opportunity.
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CHAPTER 5
License Law
and
Agency
V – LICENSE LAW AND AGENCY
In Illinois, licensees engaged in the real estate business must follow and abide by
the requirements set forth in the Real Estate License Act of 2000. This law is
administered by the Illinois Department of Financial and Professional Regulation
(“IDFPR”).
Real estate professionals working in the real estate business and earning
compensation for assisting in real estate transactions must hold a real estate
license. (Compensation is anything of value that is given in exchange for real
estate services.) The real estate activities to be performed will determine whether
an individual will need a residential leasing agent license, a broker license or a
managing broker license.
Real estate broker licenses may be issued to individuals or legal entities such as
corporations, partnerships, and limited liability companies. An individual or
business entity with a broker license can assist the public in sales or leasing
transactions involving all types of real property. However, a broker license does
not allow someone to supervise or sponsor other licensees. A broker license also
does not allow someone to collect compensation for brokerage services directly
from the public or from other sponsoring brokers. All brokers must collect all
compensation for brokerage services through their sponsor.
Like broker licensees, an individual or business entity with a managing broker
license can assist the public in sales and leasing transactions involving all kinds
of real property. However, managing brokers are the only real estate licensees
who are allowed to supervise other licensees. Every real estate office must have
a managing broker who is appointed to supervise the office’s other licensees.
Similarly, a managing broker license is required if an individual or business entity
wishes to act as a sponsoring broker. A sponsoring broker is allowed to enter into
agreements and collect compensation directly from the public. Anyone with a
broker license or leasing agent license must be sponsored by a managing
broker. Managing broker licensees can sponsor themselves or be sponsored by
another managing broker.
Unlike brokers and managing brokers, leasing agents can only engage in
activities directly associated with residential real estate leasing. Some of these
activities include leasing or renting of residential real property, collecting rent,
negotiating leases, and attempting, offering, or negotiating to lease, rent, or
collect rent for the use of residential real property. Leasing agents cannot
perform these activities if the property being leased is commercial property.
When entering the industry, an individual may practice as a leasing agent without
a license for a period of 120 days, as long as he or she is sponsored by a
managing broker. The leasing agent must also be enrolled in a pre-license class
within 90 days, successfully complete the course and state examination, and
make application for a license within the said 120 days. Student leasing agents
and their sponsoring brokers must register with the IDFPR within 24 hours of
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employment. According to state rules, the option to work for up to 120 days as a
sponsored but unlicensed leasing agent is available no more than once during
any two-year period.
Leasing agent candidates must be 18 years of age or older, of good moral
character, have successfully completed high school or the equivalent, complete
15 hours of instruction in an approved course of study relating to the leasing of
residential real property, and successfully complete a written examination
authorized by IDFPR. A leasing agent candidate is allowed four attempts to pass
the state examination. If the candidate is not successful after four attempts, he or
she must repeat the 15-hour pre-licensing course before attempting the
examination again.
Upon successfully passing a state real estate license examination, the applicant
is given a document entitled “Sponsor Card and 45-Day Work Permit.” Before
practicing real estate, a broker or leasing agent applicant must have a
sponsoring managing broker. Both the sponsoring managing broker and
applicant sign the Sponsor Card and 45-Day Work Permit, indicating their mutual
agreement. The original is sent to IDFPR by U.S. Mail with the appropriate fees.
One copy is kept by the sponsoring broker and is kept in the office where the
permanent license certificate will be placed. A second copy is given to the
applicant to be carried at all times when practicing as a licensee.
Assuming the application meets all requirements, IDFPR will issue, within 45
days of application, a license certificate to be kept at the sponsoring broker’s
place of business and a pocket card to be carried by the licensee.
If at any time a sponsoring broker decides to withdraw sponsorship of a licensee
(or if the licensee chooses to terminate sponsorship), the managing broker will
sign and enter a date of termination on the license certificate. A copy of the
terminated license certificate is sent to IDFPR by the managing broker, and the
original license is given back to the licensee.
A licensee is considered to be on “inoperative” status when not sponsored by a
licensed managing broker. An inoperative license cannot be renewed unless the
licensee is sponsored by a licensed managing broker. Until the license becomes
active again, a licensee on inoperative status cannot engage in licensed
activities. The licensee may become active at any time prior to a renewal date by
finding a new sponsor. The new sponsor will submit a newly completed Sponsor
Card and 45-Day Work Permit and submit the original to IDFPR.
If a licensee does not renew, the license is put into non-renewed status. A
license can only be kept on non-renewed status for the two-year renewal period
after the license has expired. If the licensee seeks renewal within that two-year
renewal period, the renewal requirements are the same as those for renewal of
an active license except for the additional payment of late fees. However, if the
license remains in non-renewed status for more than the two-year period
following expiration, the licensee must fulfill the entire licensing procedure all
over again.
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Leasing agent licenses expire on July 31st of even-numbered years. After their
first renewal, residential leasing agents are required to complete six hours of
continuing education during each succeeding two-year renewal cycle. Managing
broker licenses expire on April 30th of odd-numbered years. It is important for
leasing agents to be aware of their sponsoring broker’s license expiration date
because if the sponsoring broker fails to renew on time, the leasing agent is
considered to be practicing without a license, and can be fined or disciplined.
When a sponsoring broker has his or her license suspended or revoked, all
licensees sponsored by that broker must stop working or seek sponsorship by
another managing broker. Likewise, if a sponsor’s license becomes inoperative,
sponsored licensees must stop working until they find a new sponsor.
The law lists the following exceptions to licensing requirements:
Any person, company, or related employees, if managing property owned
or leased by that person or entity.
Someone acting under a power of attorney. (Someone acting under a
power of attorney is known as an “attorney-in-fact.”)
Someone acting under the power of a court order.
A resident manager of a residential property who occupies a unit on the
premises as a primary residence.
Government employees acting in the course of their duties.
Multiple Listing Services.
Not-for-profit referral services.
State regulated utilities and their employees.
Newspapers and other advertising media offering related real estate
services.
In general, someone who receives referral fees in connection with a real estate
transaction must be licensed. However, the law also allows owners or their
agents to pay referral fees to an existing tenant who is referring a prospect to the
same building or complex in which the tenant lives. These referral fees are
limited in the following ways:
The tenant may only refer the prospect and do nothing more.
Compensation to any one tenant in any 12-month period cannot exceed
$1,500 or one month’s rent, whichever is less.
Any one tenant cannot receive a fee for more than three referrals in a 12month period.
Rental Finding Services
The administrative rules for the Real Estate License Act contain many
requirements for “rental finding services.” A rental finding service is a business
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that either helps tenants find rentable properties or helps owners find tenants.
Anyone who operates a rental finding service must be licensed as a broker or
managing broker. Anyone who works for a rental finding service must also have
the appropriate license based on their duties and activities.
Before accepting fees or any other compensation, rental finding services must
give a copy of their service contract to the consumer who will be receiving
services. If the business will be helping a tenant find a unit, the contract must
contain the following provisions:
The term of the contract.
The total amount to be paid for the services to be performed and a clear
designation of the amount paid in advance of the performance of the
services.
In a typeface that is larger than the balance of contract, a statement
regarding the refund or nonrefund of the fee paid in advance that shall
include:
o The precise conditions, if any, upon which a refund is based.
o The fact that the conditions shall occur within 90 days from the date
of the contract.
o The fact that the refund shall be paid no later than 10 days after
demand, provided the check has been honored.
The type of rental unit desired, the geographical area requested, and the
rent the prospective tenant is willing to pay.
A detailed statement of rental finding services to be performed by the
licensee.
A statement that the contract shall be null and void if information
concerning possible rental units or locations furnished by the licensee is
not current or accurate with respect to the type of rental unit desired. A
listing for a rental unit that has not been available for rent for over two
days shall be prima facie proof of not being current.
A statement that information furnished by the licensee concerning possible
rental units may be up to 2 days old.
A statement requiring the licensee to refund all fees paid in connection
with the contract if the contract is null and void for any reason. The
licensee shall not impose any condition for the refund, and the contract
shall state when the refund will be paid.
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In addition, rental finding services that are serving tenants must give the tenants
the following information about each unit in writing:
The name, address and the telephone number of the owner of each rental
unit, or the owner’s authorized agent.
A description of the rental unit.
The amount of rent requested.
The amount of security deposit required.
A statement describing utilities that are located in the rental unit and
included in the rent.
The occupancy date and the term of lease.
A statement setting forth the source of the rental information (i.e., owner,
agent).
All other information that may reasonably be expected to be of concern to
the prospective tenant.
Rental finding services must also be aware of certain advertising requirements. A
rental finding service cannot list or advertise any rental unit without the express
written authority of the owner or agent of each unit.
AGENCY RELATIONSHIPS
Agency is the legal relationship created when one person represents another.
When an agent represents someone, the person being represented is known as
the “principal.” It is as though the agent is the principal’s replacement. Agency
law provides that the agent is expected to advise and be an advocate for his or
her principal. The principal is also known as the client.
In our study of current agency laws in Illinois, you will see that the overall goal is
to protect the public interest and ensure that anyone involved in a real estate
transaction has an understanding of the relationship in which they are involved.
In their relationships with the public, leasing agents must be clear about whether
they are representing the tenant or the landlord.
An individual working as a real estate managing broker, broker or leasing agent
may serve the public in a variety of ways. A real estate broker working for a
managing broker can (1) list property, thereby representing sellers or lessors; or
(2) prospect for buyers or lessees, and help buyers or lessees look for properties
to buy or rent, thereby representing buyers or lessees.
Leasing agents may represent tenants or owners. When a leasing agent
represents only the owner or only the tenant, the licensee is practicing
designated agency.
A consumer is a person or entity who is seeking or receiving real estate
brokerage services. By law, an Illinois real estate licensee is generally presumed
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to be representing any consumer with whom he or she interacts. A consumer
who is represented by a licensee is the licensee’s client.
In some cases, a licensee can interact with a consumer without forming an
agency relationship or turning the person into a client. For example, exceptions
apply when the licensee is only performing “ministerial acts” or when the
consumer and the sponsoring broker have agreed to a different relationship in
writing. Ministerial acts are administrative or informative activities that do not rise
to the level of representation. The following tasks are ministerial:
Responding to phone inquiries about availability and pricing of brokerage
services.
Responding to phone inquiries about the price or location of property.
Attending an open house and responding to questions about the property.
Setting an appointment to view property.
Responding to questions from customers who walk into a licensee’s office
and ask about particular properties or the availability of brokerage
services.
Accompanying an appraiser, inspector, contractor or similar third party on
a visit to a property.
Describing a property or its condition in response to an inquiry.
Completing business or factual information for a consumer on an offer or
contract to purchase on behalf of a client.
Showing a client through property being sold by an owner on his or her
behalf.
Referral to another broker or service provider.
Even if a licensee is performing ministerial acts and has no intention of
representing a particular tenant or owner, the lack of an agency relationship must
be disclosed in writing. When a licensee is merely performing ministerial acts on
behalf of a consumer (or when the consumer is being represented by another
licensee), the consumer is known as a customer.
Being forthcoming about whom you represent is important because it helps make
your loyalties clear. If you intend to only represent an owner in a leasing
transaction but don’t make this clear to a prospective tenant, the tenant might be
misled and disclose things to you that harm his or her negotiating position. If you
are working with consumers but do not intend on representing them, the lack of
an agency relationship must be disclosed early enough to prevent them from
sharing confidential information with you.
Although real estate licensees typically represent only one party in a transaction,
it is sometimes possible for an individual licensee to represent all parties at the
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same time. Leasing agents who represent both the owner and the tenant in the
same transaction are practicing dual agency.
Since a dual agent cannot be fully loyal to two parties at once, clients in dual
agency relationships are receiving limited service. With this in mind, the law
requires a licensee to receive written consent from both parties before acting as
a dual agent. The state-approved form for obtaining consent appears later in this
book.
Many of the specifics regarding agency relationships can be found in the Real
Estate License Act. The principal purpose of the law is to set standards for
licensees and protect the public.
A summary of the law appears on the following pages. Full copies of the law and
the IDFPR’s administrative rules are available at the Real Estate Institute and
Illinois Department of Financial and Professional Regulation websites.
Summary of
The Real Estate License Act of 2000 (As Amended January 2010)
ARTICLE 5 - LICENSING AND EDUCATION
Leasing Agent License
A leasing agent license only allows licensees to work in the leasing of residential
property. The leasing agent’s functions include showing residential property,
negotiating leases and collecting rents. Brokers and managing brokers do not
need to obtain a leasing agent license to perform these activities.
Each leasing agent must have a sponsoring broker. Leasing agents can work
before receiving a license if they have a sponsoring broker who issues a 120-Day
Student Leasing Agent Permit/Application, submit this permit to the IDFPR, and
work toward obtaining a license.
Social Security Number on All License Applications
The law requires that the applicant’s Social Security number appear on the
application for any original or renewal license.
Application For Leasing Agent License
Leasing agent applicants must submit a completed application along with an
appropriate fee.
Requirements For a Leasing Agent License
Leasing agent applicants must satisfy the following criteria:
Be at least 18 years of age.
Be of good moral character.
Have a high school diploma or its equivalent.
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Complete the 15-hour leasing agent pre-license course.
Pass the state licensing examination.
Required Licenses and Ownership Restrictions
The law allows individuals, corporations, partnerships and limited liability
companies to hold real estate licenses. All officers, partners and managers of
real estate brokerage businesses must hold a broker license or a managing
broker license. All employees of these organizations who provide real estate
services must hold the appropriate license for the tasks they perform.
Exemptions From Licensing Requirements
The requirement to hold a real estate license does not apply to the following
individuals or legal entities:
Any owner selling or leasing his or her own property.
Any regular employee assisting the owner in the management, sale or
lease of the owner’s property.
Any individual acting under a power of attorney (“attorney in fact”).
An attorney at law in the performance of his or her duties.
Any person acting as a(n):
o Receiver.
o Trustee in a bankruptcy.
o Administrator.
o Executor.
o Guardian.
Anyone acting under the authority of a court.
A “resident manager” (a manager who lives at the property), whether
employed by the owner or by a broker who manages the property.
State and federal officers and employees while acting in an official
capacity.
Multiple listing services.
Employees of public utilities and railroads while acting in an official
capacity.
People who operate businesses that advertise real estate but do not
engage in any other activities that would require a license.
Tenants receiving referral fees for referring other tenants in the same
property (if they make no more than three referrals in a 12-month period,
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receive no more than $1,500 or one month’s rent for the referrals and do
not engage in any other real estate activities.)
Some companies specifically registered to do business regarding timeshare or
real estate exchange are exempt from licensure.
Auctioneers are exempt under certain circumstances while doing their jobs. Hotel
operators who are governed under other Illinois laws are exempt, too.
A lack of good moral character can prevent an individual from holding a real
estate license.
For those who are required to be licensed, no activity requiring a license may be
performed prior to a valid sponsor card or student leasing agent card being
issued.
Requirements For a Broker License
Broker licensee applicants must meet the following requirements:
Be 21 years of age or older (or at least 18 if the applicant has completed
four semesters of college with emphasis on real estate.)
Be of good moral character.
Complete high school or its equivalent.
Complete 90 hours of coursework plus 30 hours of post-license education.
Pass a state-authorized examination.
Apply on proper forms and submit the appropriate information and fees.
Attorneys are exempt from the education requirements of this section.
No activity requiring a broker license may be performed prior to a valid sponsor
card being issued.
Licenses must be available to the public at the sponsoring broker’s place of
business.
Requirements For a Managing Broker License
Any licensee acting as a self-sponsored broker or named as a managing broker
must hold a managing broker license. Managing broker applicants must have the
following qualifications:
Be 21 years of age or older.
Be of good moral character.
Have been licensed at least two out of the preceding three years as a real
estate broker.
Complete high school or its equivalent.
Complete 45 hours of managing broker pre-license education.
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Pass a state-authorized examination.
Apply on proper forms and submit the required information and fees.
Attorneys are exempt from the education requirements of this section.
A broker can be appointed and begin functioning as a managing broker for 90
days while fulfilling the education and examination requirements.
Licensing Exams
To obtain any real estate license in Illinois, an applicant must pass an authorized
examination. Fees paid for exams are not refundable. If an individual does not
take an examination at the appointed time, all fees are forfeited.
Application for a license must be made within one year of passing the
examination. Brokers and leasing agents must find a sponsoring broker within
this time period as well. Otherwise, the applicant must take the exam again.
Transcripts showing successful completion of the required pre-license education
can be used to sit for the exam within four years after they are issued.
An applicant is permitted four attempts to pass a licensing exam using the same
transcript. After four unsuccessful attempts, the applicant must repeat all of the
required education.
The department can hire or assign individuals or entities to prepare and
administer exams.
Sponsoring Licensees
When a sponsoring broker chooses to sponsor a new or inoperative licensee, the
sponsoring broker must require proof of licensure from the new employee. The
sponsoring broker is required to issue a sponsor card and send a copy of the
card and required fee to the IDFPR within 24 hours of issuance. At the same
time, the sponsoring broker is required to send the department proof of the
person’s eligibility for licensure.
To terminate the relationship between a sponsoring broker and another licensee,
the sponsoring broker must complete the following tasks:
Sign the licensee’s license indicating the date of termination of
sponsorship.
Make copies of the license.
Return the original license to the licensee.
Mail a copy of the terminated license to the IDFPR within two days of
termination.
Upon receipt of the copy of the terminated license, the IDFPR places the
licensee on inoperative status until the licensee associates with another
sponsoring broker. (If an inoperative licensee misses a renewal date, the license
is placed on non-renewed status.)
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Change of Address
Each licensee must keep the department informed of his or her current address.
Offices
A sponsoring broker maintaining a place of business in Illinois must display a
sign identifying it as a real estate office.
Any sponsoring broker maintaining more than one office in Illinois must acquire
and display a branch office license for each additional office. All offices must
have the same name as (or indicate their relationship to) the main office. The
department must be notified of any change in the status or location of a branch
office.
To receive a branch office license, the sponsoring broker must name a managing
broker for each office. When there is a change of branch managers, the
department must be notified within 15 days.
When a licensee is appointed managing broker by a sponsoring broker (or leaves
a sponsor and self-sponsors), the licensee must either already hold a managing
broker license or meet all licensing requirements within 90 days. The department
must be notified within 15 days of the loss of a managing broker or the death of a
sole proprietor. A request can be made for the department to allow the business
to continue to operate until a new managing broker is found. When there is a
death of a managing broker, the department may grant up to 60 days to finish
necessary obligations and close the business.
Expiration and Renewal of Licenses
An expired license may be renewed as a late renewal during the two-year period
following the date of expiration. A late renewal fee may apply. After this two-year
period, the expired license cannot be renewed. (Exemptions exist for people
serving in the armed forces.) The law calls for a reinstatement process for
licenses that have been expired for no more than five years. However, as of the
date of this printing, the rules for how this will work have not been published.
Pocket Cards
The department must issue each licensee a pocket card indicating the licensee’s
status. The licensee must carry this pocket card or a copy of the sponsor card
(which acts as a 45-day work permit) when engaged in real estate activity. A
licensee must show the card when asked.
Records For Sponsoring Brokers
The department must maintain a list of all current licensees. Upon request, the
department must furnish a sponsoring broker with a list of all licensees who are
sponsored by the broker. The department must furnish each sponsoring broker
with a notice of renewal for all his or her sponsored licensees.
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Out-Of-State Reciprocity
Illinois allows out-of-state licensees and offers reciprocity to licensees in other
states who meet a list of requirements. A nonresident licensee must agree in
writing to follow Illinois law when doing business here.
Fees
License fees are set by rule.
Continuing Education Requirements
Continuing education is required of most licensees. Some licensees are exempt
from this requirement:
Attorneys registered to practice in Illinois.
Licensees in the armed services.
Elected state or federal officials.
Employees of the department.
The details of continuing education requirements are more fully detailed in the
administrative rules that accompany the law:
Leasing agents are required to complete six hours of continuing education
for each renewal period.
Broker licensees are required to complete 12 hours of continuing
education for each renewal period.
Managing broker licensees are required to complete 12 hours of
continuing education for each renewal period. Managing brokers are also
required to complete 12 hours of broker management continuing
education for each renewal period.
Continuing education credit cannot be earned for taking pre-license or postlicense education courses.
Continuing education credit earned in other states may be submitted for approval
in Illinois but must meet all Illinois requirements.
Complying With Continuing Education Requirements
When renewing a license, licensees must certify that they have completed their
required continuing education. Each licensee must maintain evidence of having
completed the required education.
Prohibited Continuing Education Topics
Sales and office skills are unacceptable topics for continuing education credit.
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ARTICLE 10 – COMPENSATION AND BUSINESS PRACTICES
Payment of Compensation
Sponsoring brokers may pay compensation directly to other sponsoring brokers.
This includes referral fees to sponsoring brokers from other states.
No sponsored licensee may accept compensation from a broker who is not his or
her sponsor, except under one special circumstance: A broker may pay
compensation directly to a licensee sponsored by another broker if the licensee
is a former employee. The payment must be to complete compensation earned
while employed by the former sponsor.
Licensed Personal Assistants
A personal assistant is a licensed or unlicensed person who has been hired to
assist a licensee. An unlicensed assistant cannot engage in real estate activities
that require a license. A licensed personal assistant must receive compensation
from the same sponsor as the licensee being assisted.
Disclosure of Compensation
Regarding compensation, a licensee must disclose the following information to a
client in writing:
The sponsoring broker’s compensation in the transaction.
The sponsoring broker’s policy with regard to sharing compensation with
other brokers.
All compensation that the licensee may earn from third parties through the
transaction.
Any ownership interest of 1 percent or more that the licensee has in a
non-public company (if the licensee is referring the client to that company).
If applicable, that the sponsoring broker will be receiving compensation
from both the buyer and the seller (or lessor and lessee) in the same
transaction.
Compensation to Unlicensed Persons
It is illegal to pay compensation to any unlicensed individual who provides real
estate services.
Compensation can be paid or shared with anyone who is a principal in the
transaction. A licensee may offer inducements, including rebates and gifts, to the
public to attract business.
Sponsoring Broker; Employment Agreement
A licensee can only have one sponsor and cannot perform acts requiring a
license for any other broker.
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A sponsoring broker must have a written employment or an independent
contractor agreement with each sponsored licensee. This agreement must
include the duties and rights of each party, including those related to supervision,
compensation and termination. A sponsoring broker must also have a written
agreement with a sponsored licensee’s personal assistants.
If a sponsored licensee opens a corporation to accept compensation and owns
100 percent of the stock in it, the sponsoring broker may pay the licensee’s
compensation directly to the corporation. A corporation formed for this purpose is
not required to be licensed.
Expiration of Brokerage Agreement
A brokerage agreement is the relationship created between a sponsoring broker
and any member of the public who is receiving real estate services through the
sponsoring broker or the broker’s sponsored licensees. To be valid, written
brokerage agreements must either have one specific, automatic ending date or
must give the client the chance to cancel the agreement annually with 30 days’
written notice. A brokerage agreement terminates automatically when the license
of the sponsoring broker is suspended or revoked.
Disclosure of Licensed Status
A licensee must give written disclosure of his or her licensed status to all parties
involved in a transaction where the licensee has or may acquire an ownership or
leasehold interest.
Advertising
Advertising must be honest and truthful. All advertising by sponsored licensees
must be overseen by their sponsor or managing broker. Licensees must indicate
that they are licensed in all advertising.
Blind advertising is illegal and includes any real estate advertisement that does
not include the sponsoring broker's business name. A sponsored licensee must
use the sponsor’s name in all advertising that is part of the brokerage business.
Any advertising that includes the licensee’s name must also include the
sponsoring broker’s business name.
If the property being advertised is owned in any way by a licensee, the licensee
must obey several additional rules:
Consumers responding to advertising must be informed that a licensee
has an interest in the property.
When a yard sign or other advertisement states that a broker is
advertising, no further disclosure of the ownership interest is required.
In property data sheets, the term “broker owned” or “agent owned” is
sufficient disclosure.
A licensee who is sponsored or inoperative can advertise “By Owner” if
the licensee has sole ownership of the property and is not using the
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services of his or her sponsor or of another broker. (Be aware that a
sponsored licensee who is selling his or her own property doesn’t need to
list the property with his or her sponsoring broker. The licensee can sell
the property “By Owner” or list the property with a different broker.) In this
context, “sole ownership” can mean the following kinds of ownership:
o Ownership of 100 percent of the property.
o Ownership by joint tenancy.
o Ownership by tenancy by the entirety.
o Ownership of 100 percent of a land trust owning the property.
The terms “broker-owned” or “agent-owned” must be used in “by owner”
advertising.
Sponsored or inoperative licensees must disclose their license status
when advertising to purchase or lease real estate.
A sponsored or inoperative licensee must not use the company’s or
sponsoring broker’s name in connection with the sale, lease, purchase or
in advertising in a way that might confuse the public. Use of the
sponsoring broker’s name or company name in a personal transaction
could lead a consumer to believe that the company or sponsor is providing
the service or is a principal in the transaction.
Internet and Related Advertising
All advertising by sponsored licensees must be overseen by their sponsor or
managing broker. All advertising, including listings in the phone directory, must
include the sponsoring broker’s business name.
Licensees who advertise over the internet must follow additional rules:
Internet advertising must disclose any intention to sell or share consumer
information that is obtained from the public online.
The use of a deceptive or misleading Web address is prohibited.
Authorization must be obtained before “framing” content from another
brokerage’s or multiple listing service’s website. (Framing occurs when
linked content from one site is displayed to look like it is part of your own
site.)
Licensees cannot use deceptive tactics to increase their Web traffic.
Company Policy
Other than sole proprietors, each real estate company must maintain a policy
manual addressing at least the following issues:
Agency.
Discrimination.
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Confidentiality.
Advertising.
Training.
Supervision.
Disclosure.
Risk management.
Escrow.
ARTICLE 15 – AGENCY RELATIONSHIPS
Legislative Intent
Article 15, also referred to as the “Agency Relationships Article,” sets specific
rules and standards of practice that are intended to protect the public in dealings
with real estate licensees. It makes it clear that the courts are to judge the
actions of licensees by this statute and not by the rules of common law.
The provisions of Article 15 apply only to licensees dealing with the public and
not to brokers in their relationships with other licensees.
Relationships Between Licensees and Consumers
Licensees and consumers can rely on the provisions of Article 15 to resolve
problems or recover damages resulting from a brokerage relationship.
A licensee is presumed to be representing any consumer with whom he or she
interacts, with only two exceptions:
When the sponsoring broker and consumer enter into a written agreement
for some other arrangement.
When licensees limit their actions to ministerial acts.
Duties of Licensees Representing Clients
A licensee representing a client is expected to do the following:
Honor any agreement between the licensee and the client.
Try to get the client’s price and terms.
Present all offers in a timely manner.
Disclose all material facts to the client, except information that is either
confidential or concerns an aspect of physical condition that does not
affect value.
Account for all money and property in which the client has an interest.
Obey specific directions from the client.
Act only in the client’s best interest.
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Use care and skill.
Keep all of the client’s confidential information confidential. (Confidential
information is information that could harm the client’s negotiating
position. It can be disclosed if the client gives permission, if the disclosure
is required by law or if the information becomes public from another
source, such as a newspaper. However, material information regarding
the physical condition of the property is never considered confidential.)
Obey all laws.
The next four items clarify important aspects of agency relationships. The law
states:
It is permissible and appropriate to show all available and suitable
properties to all prospects.
A licensee preparing offers on the same property at the same time for two
or more competing clients must give each client notice of this fact.
If the client asks to be referred to a different agent, the original agent must
comply.
When representing a buyer, it is permissible to accept compensation
based on the purchase price.
A licensee is not responsible for damages when unknowingly providing false
information to a client if the information was provided by a customer. However, if
licensees commit fraud or neglect their responsibilities, this section of the law will
not protect them.
Duty to Disclose Information
Licensees are to disclose physical defects in the property to all parties and are
not responsible for any ill effect these disclosures may have on the transaction.
The requirement to disclose information doesn’t apply to information about
stigmatized property” that doesn’t relate to physical condition. Stigmatized
property is property that might be undesirable because it was the site of a
presumably negative event. Examples include a property where a suicide,
murder or alleged ghost sighting occurred.
The law also exempts licensees from liability for failing to disclose that a previous
occupant of a property was infected with HIV or had any other medical condition.
Depending on the circumstances, making disclosures about someone’s health
status could violate fair housing laws. If the health information is about a client, it
might also be considered confidential information under the license law.
Licensee’s Relationship With Customers
Although licensees are expected to treat customers honestly, a licensee’s
obligations to a customer are not the same as to a client.
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A seller’s agent must disclose latent defects to prospective buyers. A licensee is
not liable for unknowingly providing false information to a customer if the
information was provided by a client.
A licensee may assist customers by performing ministerial acts. Performance of
these acts does not constitute a brokerage agreement with the customer.
Duties After Termination of Brokerage Agreement
At the termination of a brokerage agreement, the licensee must account for any
moneys or property of the client and continue to keep all confidential information
confidential. All other duties of the agent end with termination of the agreement.
Agency Relationship Disclosure
When entering into a brokerage agreement, the licensee must disclose several
pieces of information to a consumer:
The type of relationship being created.
The name of the client’s designated agents.
The sponsoring broker’s policy for compensating other parties.
These disclosures may be made part of a larger agreement.
Licensees not wanting to take on the responsibilities of an agent must warn the
consumer in writing before the consumer discloses any confidential information.
Compensation Does Not Determine Agency
Compensation does not create an agency relationship.
Dual Agency
Dual agency requires “informed consent” of both the buyer and the seller (or
lessor and lessee). To legally achieve informed consent, the licensee must have
the parties enter into a Dual Agency Consent Agreement. This form describes
the difference between full representation and dual agency. It also includes a list
of what the agent can and cannot do for the client in a dual agency relationship.
A copy of the form appears on the next page:
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DUAL AGENCY CONSENT AGREEMENT
The undersigned ___________________________________________, (insert name(s)), (Licensee) may
undertake a dual representation (represent both the seller or landlord and the buyer or tenant) for the sale or
lease of property. The undersigned acknowledge they were informed of the possibility of this type of
presentation. Before signing this document please read the following:
Representing more than one party to a transaction presents a conflict of interest since both clients
may rely upon the Licensee's advice and the client's respective interests may be adverse to each
other. Licensee will undertake this representation only with the written consent of ALL clients in the
transaction.
Any agreement between the clients as to a final contract price and other terms is a result of
negotiations between the clients acting in their own best interests and on their own behalf. You
acknowledge that the Licensee has explained the implications of dual representation, including the
risks involved, and understand that you have been advised to seek independent advice from your
advisors or attorneys before signing any documents in this transaction.
WHAT A LICENSEE CAN DO FOR CLIENTS WHEN ACTING AS A DUAL AGENT
1.
Treat all clients honestly.
2.
Provide information about the property to the buyer or tenant.
3.
Disclose all latent material defects in the property that are known to Licensee.
4.
Disclose financial qualification of the buyer or tenant to the seller or landlord.
5.
Explain real estate terms.
6.
Help the buyer or tenant to arrange for property inspections.
7.
Explain closing costs and procedures.
8.
Help the buyer compare financing alternatives.
9.
Provide information about comparable properties that have sold, so both clients make
educated decisions on what price to accept or offer.
WHAT A LICENSEE CANNOT DISCLOSE TO CLIENTS WHEN ACTING AS A DUAL AGENT
1.
Confidential information that Licensee may know about a clients, without that client permission.
2.
The price or terms the seller or landlord will take other than the listing price without permission
of the seller or landlord.
3.
The price or terms the buyer or tenant is willing to pay without permission of the buyer or
tenant.
4.
A recommended or suggested price or terms the buyer or tenant should offer.
5.
A recommended or suggested price or terms the seller or landlord should counter with or
accept.
If either client is uncomfortable with this disclosure and dual representation, please let the Licensee know.
You are not required to sign this document unless you want to allow Licensee to proceed as a Dual Agent in
this transaction. By signing below, you acknowledge that you have read and understand this form and
voluntarily consent to Licensee acting as a Dual Agent (that is, to represent BOTH the seller or landlord and
the buyer or tenant) should that become necessary.
Dated this _________ day of _________________________________20____________
LICENSEE
__________________________
signature
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__________________________
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In addition to having the parties to the dual agency sign the consent agreement
as part of any contract to purchase, the licensee must have the clients sign or
initial a confirmation of their agreement to a dual agency relationship. Together,
this agreement and confirmation protect the licensee from the type of adverse
claims that would be possible under the common law approach to dual agency.
If a client does not want to enter into a dual agency agreement, the licensee can
continue to represent the other party in the transaction. The licensee can refer
the client who does not wish to be involved in a dual agency relationship to
another licensee and can collect a referral fee if it is properly disclosed.
Designated Agency
A sponsoring broker is able to avoid being considered a dual agent by appointing
separate licensees to represent the buyer and seller (or lessor and lessee) in a
transaction. The appointed agent is called a “designated agent” and represents
the individual whom he or she is assigned to work with.
Sponsoring brokers are required to protect the confidential information of their
designated agents’ clients. Since the sponsoring broker is obligated to protect the
confidential information, a designated agent is allowed to discuss a client’s
confidential information with the sponsoring broker.
No Subagency
Subagency between broker members of a multiple listing service is prohibited.
Each licensee is expected to represent the consumers with whom he or she is
working.
Vicarious Liability
The consumer is only held accountable for an agent’s acts or omissions when
the agent is following the consumer’s specific directions.
Actions For Damages
Actions for damages under Article 15 must be brought within two years of either
the injury or the injured party gaining knowledge of the act or omission. Under no
circumstance can any action be brought more than five years after the injury.
Actions can only be for actual damages or injunction.
Exclusive Brokerage Agreements
An exclusive brokerage agreement is a written agreement between a
sponsoring broker and a client who will receive exclusive representation. All
exclusive brokerage agreements must state that certain minimum services will be
provided. These services include the following tasks, which cannot be waived by
the client:
Accepting offers and counteroffers.
Delivering offers and counteroffers.
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Assisting the client with communicating and negotiating the presentation
of notices, offers and counteroffers.
Answering the client’s questions regarding these matters.
ARTICLE 20 – DISCIPLINARY PROVISIONS
Index of Decisions
The department must maintain an index of its formal decisions regarding
disciplinary actions.
Unlicensed Practice
When an individual is performing acts requiring a license without obtaining the
required license, the department has the authority to investigate and can collect a
civil penalty of up to $25,000 per offense. Civil penalties must be paid within 60
days.
Violations
Noncompliance with the act or its supporting rules is subject to discipline allowed
under the act.
Grounds For Discipline
The department can punish violators in many ways:
It can refuse to issue or renew a license.
It can place a licensee on probation.
It can suspend or revoke a license.
It can reprimand the licensee.
It can impose a civil fine up to $25,000.
Disciplinary measures can be taken against licensees for any of the following
actions:
Failing to pay state taxes.
Falsely obtaining a license.
Being found guilty of dishonesty, fraud, larceny, embezzlement, operating
a confidence game, or a felony under the act or any similar law in another
jurisdiction.
Being found mentally incompetent.
Operating a real estate office in an improper location in a retail
establishment.
Being disciplined in another jurisdiction for an act or omission that would
also be a violation of the act.
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Operating without a license or with an inoperative or a non-renewed
license.
Cheating on a real estate exam.
Helping others cheat on a real estate exam.
Misrepresentation or untruthful advertising.
Ongoing misrepresentation directly, through other individuals, or in
advertising.
Influencing, persuading or inducing someone to act based on false
promises.
Ongoing misrepresentation and wrongdoing.
Falsely using an insignia of membership in an organization or other false
advertising.
Acting as an undisclosed dual agent.
Acting for a broker other than the licensee’s sponsoring broker.
Failing to account for the assets of others.
Improper handling of earnest money.
Failure to make escrow records available to the department.
Failure to make copies of documents available to parties in the
transaction.
Failure of a sponsoring broker to submit proper licensing documents to the
department.
Acting unethically or unprofessionally.
Commingling assets of others with personal assets.
Sponsoring a licensee for a single transaction or evading the law to pay a
fee to a non-licensee.
Allowing a non-licensee to use the licensee’s broker license to run a real
estate business without the actual participation of the broker.
Any dishonest dealing.
Advertising or placing signs on a property without the owner’s written
consent.
Failing to provide information to the department within 30 days of request.
Placing advertising without disclosing that the advertiser is a licensee.
Engaging in discrimination.
Violating the Illinois Human Rights Act.
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Inducing someone to break a contract and enter into a different
transaction.
Negotiating directly with the client of another broker.
Acting as both attorney and broker in the same transaction.
Falsely advertising free services.
Violating the Land Sales Registration Act or the Time-Share Act.
Violating a disciplinary order of the department.
Improperly paying compensation in violation of the act.
Forcing a party to a transaction to compensate the licensee as a
prerequisite to release of earnest money.
Disregarding or violating provisions of the act, or inducing others to violate
any part of the act.
Not providing minimum services.
Defaulting on an educational loan.
Failing to pay child support.
Improperly offering a “guaranteed sales plan.” A “guaranteed sales plan” is
an arrangement between a licensee and an owner in which the licensee
lists the seller’s property and promises to purchase the property if it is not
sold within a specified time. The licensee is prohibited from purchasing the
property until the listing agreement has terminated. A licensee offering a
guaranteed sale has at least three main duties:
o Provide complete details to the seller.
o Show proof of having the resources to complete the purchase as
set forth in the agreement.
o Market the property in the same manner as the licensee’s other
listings.
The department has methods of stopping the licensed activities of people who
may be putting the public at risk. It may request the mental or physical
examination of a licensee or applicant who is believed to be unfit to hold a
license. A license may be suspended, or the department may refuse to issue or
renew a license for failure to pay taxes or file a tax return.
Injunctions
An injunction is a court order that forces someone to stop doing a specific act.
The department has the right to get an injunction against any licensee who is
violating the law or against any unlicensed person who is performing acts
requiring a license.
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Violations
An individual found guilty of falsely acting as a licensee is charged with as Class
A misdemeanor. If the person is found guilty of a second offense, it is a Class 4
felony.
Returned Checks
A returned check fee of $50 is payable to the department for a bad check in
addition to the amount owed and other fees and penalties that might apply.
Illegal Discrimination
Upon recommendation of the disciplinary board, the department must suspend or
revoke the license of a licensee who has been found guilty of illegal
discrimination.
Illinois Administrative Procedure Act
The Illinois Administrative Procedure Act is incorporated into the act almost in its
entirety. The Illinois Administrative Procedure Act sets standards for hearings
and certain other procedures.
Investigations and Hearings
The department is to conduct an investigation and/or hearing in instances of
suspected wrongdoing. Individuals who will be the subject of a hearing must be
given 30 days’ written notice of the charges against them.
Record of Proceedings
The department must keep records of hearings and all related documents.
Subpoena Power
The department is given power to subpoena and take depositions and oaths.
Rehearings
The department can conduct a rehearing. Recordkeeping for a rehearing is also
prescribed by law.
Temporary Suspension
If the Commissioner finds that emergency action must be taken to protect the
public, the Commissioner may temporarily suspend a license. A hearing must
then be scheduled within 30 days of the suspension. If the accused is granted a
continuance, the suspension remains in effect.
Appointment of a Hearing Officer
The Secretary appoints hearing officers to conduct hearings.
Order of Certified Copy
When a disciplinary order is signed and sealed by the Secretary of the IDFPR, it
is considered proof that the order is proper and valid.
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Surrender of License
If a licensee does not surrender a revoked or suspended license, the department
has the right to seize it.
Restoration of a Suspended or Revoked License
The department has the authority to restore a suspended or revoked license.
Secretary’s Right to a Rehearing
If the Secretary believes a disciplinary finding is incorrect, he or she can order a
new hearing.
Requests for Documents
The department can charge a fee for answering a request for documents by or
for the court.
Administrative Review
Decisions of the department can be subject to a judicial review.
Fines and Penalties For Real Estate Recovery Fund
The proceeds of all fines and penalties collected under the act are placed in the
real estate recovery fund.
Recovery From Real Estate Recovery Fund
The department is to maintain a recovery fund to reimburse the public when a
licensee’s actions result in the loss of actual money rather than market value. An
individual who has lost money due to the acts of a licensee can recover up to
$25,000 plus attorneys’ fees. Attorneys’ fees will be reimbursed in an amount not
to exceed 15 percent of the recovery. Courts will not award any interest.
No licensee may recover from the fund unless the court finds that the licensee
was a victim of intentional misconduct.
The maximum liability against the fund for any single act of a licensee or a
licensee’s unlicensed employee is $100,000. The award will be spread equitably
among the aggrieved parties.
An aggrieved party wishing to recover a loss from the recovery fund must first
receive a judgment from a court. The suit for judgment must be started within two
years from the time of loss or the time the aggrieved party became aware or
should have become aware of the loss. An aggrieved party who files suit against
the recovery fund must name all licensees and other parties that are in any way
responsible for the loss.
Upon a court order for payment from the fund, the licensee’s license is
terminated. The department may not restore the terminated license of any
licensee whose license is terminated in this way until full repayment is made to
the fund, including interest. A discharge in bankruptcy will not help the licensee
get the license back.
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If the money in the fund is insufficient to pay any judgments, the department will
satisfy unpaid claims, with interest, as funds become available.
Power of the Department to Defend
The department has the right to take appropriate action on behalf of any licensee
being sued for judgment.
Subrogation of the Department
Once the department has made payment from the fund, it takes over the rights of
the aggrieved party.
An aggrieved party who does not comply with the act when attempting recovery
loses the right to recover from the fund.
Disciplinary Actions and Recovery
Repayment to the fund by a licensee will not affect any other disciplinary
proceedings against the licensee.
Time Limit on Action
The department must begin its action against an individual within five years of the
violation.
No Private Right of Action
Except as specifically stated in the act, no individual has a private right of action
for damages or right to enforce any part of the act.
ARTICLE 25 – ADMINISTRATION OF LICENSES
Real Estate Administration and Disciplinary Board
A nine-member Real Estate Administration and Disciplinary Board is to be
appointed by the governor. All members need to have been residents and
citizens of Illinois for at least six years prior to appointment. Six members need to
have been salespeople or broker licensees for at least 10 years prior to
appointment. (The term “salesperson” relates to a type of real estate license that
was discontinued by Illinois in 2012.) Three members need to represent
consumer interests and must not be licensed under the act, not be married to a
licensee, and not own an interest in a real estate brokerage business.
Board duties include making recommendations to the Secretary and the
department on questions concerning standards of professional conduct and
discipline and examination of license candidates. The department may not
exercise certain disciplinary functions without a written report from the board.
More details about the board are listed below:
The term of each appointment is four years.
The terms are staggered.
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Appointments to fill vacancies serve for the balance of the term of the
member being replaced.
No one is to serve more than 12 years in a lifetime.
The geographic makeup of the board should be similar to the geographic
makeup of the licensee population.
The governor must consider the recommendations of trade organizations
when choosing members of the board.
The governor may terminate an appointment for good cause.
Members are to be reimbursed for expenses incurred while fulfilling their
duties.
Rules
After conferring with the disciplinary board, the department is required to issue
rules to implement the act.
Reliance on Advisory Letters
If a licensee questions whether a specific action is legal or appropriate based
upon the law, he or she may request an advisory letter from the department
stating the department’s position on the matter. Once it is received, the licensee
may rely on the department’s position and will not be punished while following
the department’s advice.
Real Estate Coordinator
A coordinator oversees the IDFPR’s real estate division and reports to the
department’s secretary. The coordinator’s responsibilities include:
Serving as the non-voting chairperson of the Real Estate Administration
and Disciplinary Board.
Acting as a liaison between the department, real estate licensees and real
estate groups.
Distributing education and other materials to real estate licensees.
Appointing committees.
Supervising all of the department’s real estate activities.
Peer Review Advisers
The department can hire individual licensees to assist in investigations of alleged
violations of the law. These licensees are referred to as “peer-review advisers.”
Real Estate Research and Education Fund
The Real Estate Research and Education Fund is created and administered by
the department to provide funds that may be used for research or education at
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state institutions of higher education or other organizations. The funds are
intended to help advance education in the real estate industry.
An annual transfer of $125,000 is made to the fund from the Real Estate License
Administration Fund. Each year, $15,000 of the $125,000 is to be used to fund a
scholarship program for persons of minority racial origin for real estate education.
The scholarship program is to be administered by the department or its
designated group or individual. Money in the education fund is to be invested,
and the resulting income is to be added to the fund.
Real Estate License Administration Fund
The State Treasury is to maintain a Real Estate License Administration Fund. All
money received by the department is to be deposited into this fund. The money
is used to pay expenses of the department for administration of the act. The
money also covers the department expenses for the administration of any other
act that provides revenue to this fund.
Funding For Real Estate Recovery Fund
If at any time the balance of the recovery fund is less than $750,000, the state
treasurer transfers enough money from the Real Estate License Administration
Fund to bring the balance to $800,000. The money in the fund may be invested,
and any income from investment is deposited in the Real Estate License
Administration Fund.
Real Estate Audit Fund
The Real Estate Audit Fund is a special fund used to conduct audits of escrow
accounts.
Exclusive State Powers
The state reserves the right to govern real estate licensing and prohibits any
municipal or county government from passing its own license laws or interfering
with the enforcement of the act.
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CHAPTER 5 EXAM
LICENSE LAW AND AGENCY
1. Real estate licensees must:
a. carry their real estate license in their wallet at all times.
b. give their real estate license to their sponsoring broker, who will post it in
a public place in the sponsor’s office.
c. post their real estate license on the wall in their home.
d. mail their real estate license to the regulating agency, where it will be
hung in the Director’s office.
2. Individuals must hold an active Illinois real estate license if they wish to
negotiate the lease of:
a.
b.
c.
d.
their own home in Chicago.
property belonging to a relative’s estate for which they are executor.
a home belonging to a client who will pay them a commission.
an apartment building they have inherited.
3. A real estate license can be revoked for:
a.
b.
c.
d.
the loss of a pocket card.
intentionally misleading someone into signing a contract.
submitting an absurd offer to the seller of a property.
closing a deal after midnight.
4. Illinois residential leasing agent licenses expire on:
a.
b.
c.
d.
April 30 of odd-numbered years.
July 31 of even-numbered years.
April 30 of even-numbered years.
July 31 of odd-numbered years.
5. Blind advertising means advertising placed by:
a.
b.
c.
d.
an owner without stating he or she is not a licensee.
an owner who is not using a real estate agent.
a licensee without obtaining the owner’s permission.
a licensee without stating a sponsor’s business name.
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6. A licensee has just collected a commission from the owner of a home she
has sold. She would be in violation of license law unless:
a.
b.
c.
d.
she holds a residential leasing agent license.
she holds a valid real estate broker’s license.
she is a close relative of the owner paying the commission.
she is both a real estate licensee and an attorney.
7. It is illegal for an owner to pay a referral fee to a tenant for the referral of
another tenant if the:
a.
b.
c.
d.
tenant only refers the prospect and nothing more.
compensation is less than one month's rent in a six-month period.
tenant places four or more referrals in a 12-month period.
tenant lives in a building with over 100 units.
8. Leasing agent licensees requiring continuing education must complete _____
for each renewal period.
a.
b.
c.
d.
15 hours
25 hours
6 hours
12 hours
9. If a broker pays a fee or commission directly to a leasing agent employed by
another broker:
a. the broker should not pay more than the legally permitted maximum.
b. the broker paying the commission is in violation of the Real Estate
License Act.
c. the fee must be limited to no more than $4,000.
d. the leasing agent must share the fee with a client.
10. Who of the following would not be exempt from licensure in the sale of
property?
a.
b.
c.
d.
An executor in the performance of his duty.
An owner selling her own home.
A father selling his son’s home for a nominal fee.
An attorney in fact.
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11. To show apartments for the owner of the building, the unlicensed manager
must:
a.
b.
c.
d.
live in the state capital.
live in a city where he has lived three out of the last five years.
be the resident manager, living in the building.
serve only minorities.
12. When an unlicensed person is found guilty for the first time of acting as a
licensee, he or she will be found guilty of a:
a.
b.
c.
d.
class A felony.
class C misdemeanor.
class A misdemeanor.
class D felony.
13. Which of the following is true regarding rental finding services?
a. A person registering as a rental finding service is not required to obtain a
real estate license.
b. A contract must be entered into with the prospect before accepting a fee
for services.
c. The entire contract provided to a consumer by a rental finding service
must be in the same size and style type.
d. Once licensed, a rental finding service can advertise a rental unit without
the written authority of the owner.
14. A real estate broker steals $1 million in earnest money and cannot be found.
The total amount of money to be recovered from the Recovery Fund will be
limited to the following amount:
a.
b.
c.
d.
$10,000.
$100,000.
$500,000.
$50,000.
15. The purpose of the Real Estate License Act is to:
a.
b.
c.
d.
set all fines to the national standard.
create a source of revenue for the state.
set standards for licensees.
limit the number of real estate licensees.
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16. From the date of incident, how long does an aggrieved person have to start
action for compensation from the Real Estate Recovery Fund?
a.
b.
c.
d.
2 years.
1 year.
6 months.
5 years.
17. An Illinois managing broker must enter into written agreements of
employment with the licensees he or she sponsors. These agreements must
include:
a.
b.
c.
d.
how vacation will be earned.
hours to be worked.
exact amount of compensation.
method of termination.
18. A leasing agent is allowed to engage in leasing transactions that involve:
a.
b.
c.
d.
residential property.
commercial property.
industrial property.
all kinds of property.
19. Real estate licensees must:
a.
b.
c.
d.
memorize the code of ethics.
never sell or buy property for themselves.
carry their pocket card with them.
have a college degree.
20. Dual agency requires:
a.
b.
c.
d.
oral consent from all parties.
written consent from all parties.
filing of special forms with the IDFPR.
sharing of commissions with all parties.
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APPENDIX: SCENARIOS AND GUIDANCE FOR PRACTICE
In this section, we have compiled several hypothetical scenarios. Each scenario
involves a story that relates to an aspect of real estate law or good business
practices. You can think of the scenarios as examples of how the topics
mentioned in your book might apply in real-life situations. However, you should
consider speaking with your managing broker or your attorney if you have
specific practical or legal questions about what you can or cannot do.
SCENARIO 1: STIGMATIZED PROPERTY
The owner of an apartment building informed a leasing agent that a tenant was
murdered in Apartment #4. The agent tells the owner that this information does
not impact the physical condition of the property and does not need to be
disclosed. A few weeks later, the agent, who is authorized to act as a dual agent
by both parties, shows Apartment #4 to a potential tenant. The agent does not
disclose that the property was the site of a murder. After moving in, the tenant
learns about the murder from a neighbor and believes she has been deceived by
the agent. The tenant decides to report the agent to the IDFPR.
What Is the Central Issue in the Case?
Stigmatized property.
What Does the Law Say About the Central Issue?
Real estate licensees in Illinois are not required to research issues or
occurrences at a location that do not have a direct physical or financial effect on
the property.
No cause of action shall arise against a licensee for the failure to disclose:
That an occupant of the property was afflicted with
Immunodeficiency Virus (HIV) or any other medical condition.
Human
That the property was the site of an act or occurrence that had no effect
on the physical condition of the property or its environment or the
structures located thereon.
Fact situations on property that is not the subject of the transaction.
Physical conditions located on property that is not the subject of the
transaction that do not have a substantial adverse effect on the value of
the real estate that is the subject of the transaction.
How Does the Law Apply to the Facts of the Case?
The agent has not violated any laws since the occurrence of a murder in the
property does not have any effect on the physical condition of the property and,
therefore, does not need to be disclosed.
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What, If Anything, Could Have Been Done to Prevent the Problem?
There is little or nothing that the agent could have done. The agent is under no
obligation to disclose information that does not have a direct physical or financial
effect on the property.
SCENARIO 2: FAIR HOUSING
A leasing agent meets with an owner of a 4-unit building. The owner is a
prominent member of Chicago’s Polish-American community and has lived in
one of the units for 20 years. She mentions how proud she is of her heritage and
that she wants to work with a licensee who can market the rental of her property
in Polish as well as English. She says she is willing to rent to anyone but would
make special concessions to a lessee who is a Polish-American.
What Is the Central Issue in the Case?
Housing discrimination.
What Does the Law Say About the Central Issue?
Discrimination is prohibited if it is based on any of the following factors:
Race.
Color.
Religion.
Sex.
National origin.
Ancestry.
Age.
Order of protection status.
Marital status.
Physical or mental disability.
Military status.
Sexual orientation.
Unfavorable discharge from military service.
Familial status.
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The following actions may be considered discriminatory:
Refusing to engage in a real estate transaction.
Altering the terms, conditions or privileges of a real estate transaction.
Refusing to receive or fail to transmit an offer.
Refusing to negotiate with a person.
Making it seem as though real property is not available.
Offering, soliciting, accepting, using or retaining a listing with the
knowledge that discrimination is intended.
Publishing anything that puts discriminatory limits on a real estate
transaction or indicates an intent to discriminate.
There are exceptions that might make housing discrimination permissible:
Prohibitions of age-related discrimination are generally limited to cases
involving people who are 40 and above.
Housing discrimination in the private sale of a single-family home is not
prohibited if ALL of the following conditions are met:
o The owner does not own more than three single-family homes.
o The home is sold without the help of a real estate licensee.
o No discriminatory advertising is used.
o The owner either was the most recent occupant of the home OR
has not already used this “private owner” exemption during the
previous 24 months.
Discrimination is not prohibited in the rental of apartments (other than in
advertising) if the building has no more than four units and the owner lives
in one of the units.
Discrimination is not prohibited in the renting of rooms in a private home if
the owner or a relative lives there.
Illegal discrimination is not occurring when the renting of rooms is
restricted to members of a particular sex.
Discrimination is not prohibited when housing controlled by a religious
organization gives special treatment to people of that religion (unless
membership in the religion is restricted by race, color or national origin).
How Does the Law Apply to the Facts of the Case?
Refusing to engage in a real estate transaction or altering the terms, conditions
or privileges of a real estate transaction may be illegal activities if they
discriminate against a protected class of people. National origin is a protected
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class under Illinois anti-discrimination law. Therefore, the owner is engaging in
discrimination.
If the owner were to use the help of a licensee, the discrimination would be
illegal.
If the agent believes that the owner intends to discriminate, he cannot list the unit
for rent.
What, If Anything, Could Have Been Done to Prevent the Problem?
The agent could inform the owner about fair housing laws.
If the owner does not change her mind, the agent should not represent her or be
involved in the transaction in any way.
SCENARIO 3: REFERRAL FEES
After the signing of each lease, a leasing agent presents his clients with a gift
certificate and “Thank You” card. In the card, he adds a note stating that he will
offer additional gift certificates to anyone who gets him a referral.
What Is the Central Issue in the Case?
Referral fees and affinity relationships.
What Does the Law Say About the Central Issue?
No licensee may pay a fee to an unlicensed person who is not a principal to the
transaction.
How Does the Law Apply to the Facts of the Case?
The agent is able to give his principals in a transaction a gift certificate after the
signing of a lease.
The agent is not allowed to continue to give gift certificates to former clients for
future referrals unless the former clients are licensed.
What, If Anything, Could Have Been Done to Prevent the Problem?
The agent could have continued to offer gift certificates to the principals in his
transactions at the signing of the lease but offered no gifts after that.
The agent could have sent a “Thank You” card to his former clients for any future
referral he receives but not included anything of value in return.
The agent’s former clients could have become entitled to receive referral fees by
obtaining real estate licenses.
SCENARIO 4: RENTAL FINDING SERVICES
A new employee has been hired by a local college to assist students in the rental
of apartment units owned by the college. Whenever rental units owned by the
college are unavailable, she refers the students to local apartment building
owners and receives a small fee from those owners. Since she is employed by
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the college to work in rentals, she believes she does not need a real estate
license.
What Is the Central Issue in the Case?
Operating a rental finding service.
What Does the Law Say About the Central Issue?
A rental finding service is any business that finds, attempts to find, or offers to
find, for any person who pays or is obligated to pay a fee or other valuable
consideration, a unit of rental real estate or a lessee to occupy a unit of rental
real estate not owned or leased by the business.
Any person, corporation, limited liability company, partnership, or limited
partnership that operates a rental finding service must be licensed.
The requirement for holding a license does not apply to any regular employee
assisting the owner in the management, sale, or lease of the owner’s property.
How Does the Law Apply to the Facts of the Case?
Since she is employed by the college, the employee does not need a license
when working in the rental of units owned by the college.
The employee must be licensed if she receives referral fees from other building
owners.
What, If Anything, Could Have Been Done to Prevent the Problem?
The employee could have limited her rental finding services to buildings owned
by her employer.
The employee could have obtained a real estate license.
SCENARIO 5: DISABLED TENANTS
A property manager manages a large apartment complex that does not allow
tenants to keep any pets. An applicant saw an advertisement for one of the
manager’s apartments, which mentioned the building’s no-pets policy. The
applicant called the manager and explained that she was interested in an
apartment but would need to keep a guide dog because of her vision problems.
The manager said he sympathized with the applicant but said pets do too much
damage to property. The applicant thought the manager was being unreasonable
and filed a complaint against the manager and the building’s owner.
What Is the Central Issue in the Case?
Discrimination on the basis of disability.
What Does the Law Say About the Central Issue?
The Fair Housing Amendments Act of 1988 extended the Fair Housing Act to
protect the physically and mentally disabled. It is unlawful to discriminate in the
sale or rental of a dwelling, or to otherwise make a dwelling unavailable to any
buyer or renter based on the disability of:
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The buyer or renter.
A person residing or intending to reside in the dwelling after it is sold,
rented or made available.
Any person associated with the buyer or renter.
The disabilities covered under the Fair Housing Act include hearing, mobility and
visual impairments, chronic alcoholism, chronic mental illness, AIDS and AIDSrelated disease and mental retardation.
If modifications are necessary to provide a disabled person with full enjoyment of
an existing premises, the landlord must let the disabled person make reasonable
modifications to the premises at the individual’s expense. A landlord may require
that the disabled person restore the premises to its original condition before the
person vacates the property.
The landlord cannot refuse to make reasonable accommodations that are
necessary for the disabled person to use the housing.
How Does the Law Apply to the Facts of the Case?
Because of her vision problems, the applicant is protected by the Fair Housing
Act. Landlords cannot discriminate against her because of her disability.
Allowing a guide dog would have been a reasonable accommodation under the
circumstances. Since the manager refused to make a reasonable
accommodation, he was in violation of the Fair Housing Act.
What, If Anything, Could Have Been Done to Prevent the Problem?
The manager could have explained the situation to the building’s owner and
allowed the applicant to keep a guide dog in her apartment.
SCENARIO 6: LEASING AGENTS AND SPONSORING BROKERS
A leasing agent has made sure to renew her license on time every two years.
Her sponsoring broker has decided to stop practicing real estate. The agent has
received her license from the sponsor, indicating the termination of the
sponsorship. However, the agent has continued to engage in leasing activities.
Since she has a lot of experience, she believes she no longer needs a managing
broker telling her what to do. She decides to work by herself.
What Is the Central Issue in the Case?
Leasing agent licensing.
What Does the Law Say About the Central Issue?
Licensed leasing agents must be sponsored by a sponsoring broker.
Except for a person working under a 120-day leasing agent permit, no leasing
agent applicant may engage in the activities of a licensed leasing agent until a
valid sponsor card has been issued to the applicant.
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A sponsoring broker may issue a sponsor card to an individual only under either
of the following circumstances:
Upon being presented with a leasing agent examination score report
stating that the broker may issue a sponsor card.
Upon being presented with an original leasing agent license that is
endorsed by the broker by whom the leasing agent was previously
employed.
Within 24 hours of issuing a sponsor card, the sponsoring broker must submit the
following items to the IDFPR (for an initial leasing agent license):
A copy of the sponsor card and transcript
A leasing agent examination score report stating that the broker may issue
a sponsor card.
A completed leasing agent license application.
The license application fee.
Within 24 hours of issuing a sponsor card, the sponsoring broker must submit the
following items to the IDFPR (for people already holding a leasing agent license):
A copy of the sponsor card.
The properly endorsed leasing agent license and pocket card of the
sponsored licensee.
No leasing agent may accept compensation for leasing agent activities except
from the agent’s sponsoring broker.
When a licensee terminates his or her employment or association with a
sponsoring broker or the employment is terminated by the sponsoring broker, the
licensee must obtain from the sponsoring broker his or her license endorsed by
the sponsoring broker indicating the termination. The sponsoring broker must
surrender to the IDFPR a copy of the license of the licensee within two days of
the termination or must notify the department in writing of the termination and
explain why a copy of the license is not surrendered. Failure of the sponsoring
broker to surrender the license will subject the sponsoring broker to discipline.
Once the license has been endorsed, the leasing agent is prohibited from
practicing until he or she receives another sponsor card.
The license of any licensee whose association with a sponsoring broker is
terminated will automatically become inoperative immediately upon the
termination unless the licensee accepts employment or becomes associated with
a new sponsoring broker.
When a licensee accepts employment or association with a new sponsoring
broker, the new sponsoring broker must send to the department a duplicate
sponsor card, along with the licensee's endorsed license or an affidavit of the
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licensee of why the endorsed license is not surrendered, and pay the appropriate
fees.
How Does the Law Apply to the Facts of the Case?
The agent cannot engage in leasing activities without being sponsored.
The sponsoring broker returned the agent’s license and stopped sponsoring her.
The sponsor’s actions made it illegal for the agent to work as a leasing agent
until she receives a new sponsor card.
What, If Anything, Could Have Been Done to Prevent the Problem?
The agent could have temporarily stopped her leasing activities and asked
another broker to sponsor her.
The agent could have obtained a managing broker’s license and sponsored
herself.
SCENARIO 7: COMMERCIAL PROPERTIES
A leasing agent’s friends own a retail shopping center and ask her to perform
leasing activities for them. She agrees to show the space for rent.
What Is the Central Issue in the Case?
Leasing agent activities.
What Does the Law Say About the Central Issue?
"Leasing Agent" means a person who is employed by a real estate broker to
engage in licensed activities limited to leasing residential real estate who has
obtained a license.
A leasing agent license enables the licensee to engage only in residential leasing
activities. Such activities include without limitation:
Leasing or renting residential real property.
Attempting, offering, or negotiating to lease or rent residential real
property.
Supervising the collection, offer, attempt, or agreement to collect rent for
the use of residential real property.
A licensed real estate broker does not need a leasing agent license in order to
perform leasing activities.
Licensed leasing agents must be sponsored and employed by a sponsoring
broker.
A licensed leasing agent cannot engage in any licensed activities other than
those relating to the leasing of residential property.
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How Does the Law Apply to the Facts of the Case?
A licensed leasing agent cannot engage in any licensed activities other than
those relating the leasing of residential property. Since she is only licensed as a
leasing agent, the agent cannot engage in the leasing of commercial property.
What, If Anything, Could Have Been Done to Prevent the Problem?
The agent could have referred her friends to a licensed broker.
The agent could have obtained a broker license instead of a leasing agent
license.
The agent could have limited her duties to residential leasing.
SCENARIO 8: INOPERATIVE LICENSES
A leasing agent worked at a brokerage firm for many years. As he was leaving
the office for a 6 p.m. showing, he got into a serious argument with his
sponsoring broker. The sponsor decided to stop sponsoring the leasing agent.
The sponsor removed the agent’s license from the wall, signed it, dated it, made
a copy and gave the agent the original. Later that night, the agent went to the
previously scheduled appointment to show an apartment to a client. The former
sponsor found out that the agent showed the property and reported the agent to
the IDFPR.
What Is the Central Issue in the Case?
Working with an inoperative license.
What Does the Law Say About the Central Issue?
"Inoperative" means a status of licensure where the licensee holds a current
license but is prohibited from engaging in licensed activities because the licensee
is unsponsored or the license of the sponsoring broker with whom the licensee is
associated or by whom he or she is employed is currently expired, revoked,
suspended, or otherwise rendered invalid.
When a licensee terminates his or her employment or association with a
sponsoring broker or the employment is terminated by the sponsoring broker, the
licensee must obtain from the sponsoring broker his or her license endorsed by
the sponsoring broker indicating the termination. The sponsoring broker must
surrender to the department a copy of the license of the licensee within two days
of the termination or must notify the department in writing of the termination and
explain why a copy of the license is not surrendered. Failure of the sponsoring
broker to surrender the license will subject the sponsoring broker to discipline.
The license of any licensee whose association with a sponsoring broker is
terminated will automatically become inoperative immediately upon the
termination unless the licensee accepts employment or becomes associated with
a new sponsoring broker.
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The department may refuse to issue or renew a license, may place on probation,
suspend, or revoke any license, reprimand, or take any other disciplinary or
non-disciplinary action against a licensee in handling his or her own property,
whether held by deed, option, or otherwise, for any one or any combination of the
following causes:
Engaging in the practice of real estate brokerage without a license or after
the licensee's license was expired or while the license was inoperative.
How Does the Law Apply to the Facts of the Case?
A licensee whose license is terminated holds an inoperative license until he or
she becomes sponsored again. Since the sponsor terminated the agent’s license
and no one else became the agent’s sponsor, the agent was an inoperative
licensee during the appointment.
The IDFPR will discipline a licensee who practices real estate on an inoperative
license. The agent’s license was inoperative, and the agent may be disciplined
by the IDFPR.
What, If Anything, Could Have Been Done to Prevent the Problem?
The agent could have cancelled the appointment until another sponsor could be
found.
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Glossary
Acceptance By
Ratification
The acceptance of lease terms that occurs when a tenant
takes possession of the property but does not sign a lease.
This form of acceptance is recognizable by the courts.
Accord and Satisfaction
When all parties have agreed to a change in one or more of
the terms of a contract.
Actual Eviction
Court action initiated by the lessor to have a tenant removed
from the premises.
Administrative Law
Judge (ALJ)
A judge who hears complaints and considers evidence
regarding violations of the Fair Housing Act.
Agency
The legal relationship created when one person represents
another.
Air Rights
Rights to use the space above the surface of land upward into
the sky.
Airspace
The space above the surface extending into infinity.
Americans With
Disabilities Act of 1990
A comprehensive civil rights law for the protection of persons
with physical and mental disabilities. This law mandates equal
access to jobs, public accommodations, government services,
public transportation and telecommunications.
Assignment
The act of one party to a contract allowing someone else to
assume all of his/her rights under the contract.
Bilateral Contract
A contract in which two parties exchange promises.
Blockbusting
Inducing an owner to sell or rent a dwelling by making
representations regarding entry of persons of a protected
class, also referred to as “panic peddling.”
Breach of Contract
The action or lack of action of one party to a contract which
violates the terms of the agreement.
Brokerage Agreement
The relationship created between a sponsoring broker and any
member of the public who is receiving real estate services
through the sponsoring broker or the broker’s sponsored
licensees.
Chattel
Personal property, or objects which are not permanently
affixed to land.
Civil Rights Act of 1866
Guaranteed property rights to all citizens regardless of race.
This act specifically provides that all citizens shall have the
same right to inherit, purchase, sell or lease real and personal
property.
Client
A person who is being represented by a licensee.
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Commingling
Depositing personal funds in a special escrow account
established to hold funds belonging to others.
Compensation
Anything of value that is given in exchange for real estate
services.
Compensatory Damages Money paid with the intent to return the injured party of a
defaulted contract to the financial condition they were in before
the breach occurred.
Competent Parties
Parties to a contract who are of legal age, sane and sober.
Conciliation Agreement
An agreement proposed by HUD in order to settle a Fair
Housing complaint.
Concurrent Ownership
Ownership of property by two or more individuals or entities.
Condemnation Action
The court action used to exercise the power of eminent
domain, allowing the government to purchase property against
the wishes of the owner.
Confidential Information Information that could harm the client’s negotiating position.
Consideration
The promise offered in exchange for an action, something of
value or another promise.
Constructive Eviction
A defense used by the lessee to avoid paying rent and vacate
the property when the lessor allows the premises to become
uninhabitable for an unreasonable amount of time in violation
of the lease agreement.
Consumer
A person or entity seeking or receiving real estate brokerage
services.
Contract
A legally binding promise or set of promises, generally setting
the terms of a business arrangement like an apartment lease.
Customer
A consumer who is not being represented by a licensee but for
whom the licensee is performing ministerial acts.
Designated Agency
Representation of either the purchaser/lessee or the
seller/lessor, as assigned by the licensee’s sponsoring broker.
Destruction Clause
A lease clause that describes what rights and responsibilities
the lessor and lessee have if the premises is partially or
completely destroyed.
Discharged Contract
A contract in which all of the terms of have been fulfilled, also
called an “executed contract.”
Dual Agency
The practice of representing both the buyer/lessee and the
seller/lessor in a real estate transaction.
Duress
The use of force to induce another to act against his/her will.
Eminent Domain
Government police power that allows the taking of private
property for public purpose.
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Exclusive Brokerage
Agreement
A written agreement between a sponsoring broker and a client
who will receive exclusive representation.
Executed Contract
A contract in which all of the terms have been fulfilled.
Executory Contract
A contract in which all of the terms have not been fulfilled.
Express Contract
Specific oral or written agreements of two or more parties.
Fair Housing Act
Title VIII of the Civil Rights Act of 1968. This act bans
discrimination on the basis of race, color, sex, religion, national
origin, disability and familial status.
Fair Housing
Amendments
Act of 1988
Enacted to expand coverage of the Fair Housing Act and to
enhance its enforcement. The two major additions to the act
include the protection of families with children (referred to as
“familial status”) and handicapped persons in real estate
activities. This act also modified HUD complaint procedure,
removed the cap for punitive damages and increased the
available damages and civil penalties.
Fixture
Personal property that becomes real property when it is
permanently affixed to the land. It is included in the lease or
sale of land unless otherwise specified. Tests to determine
fixture include the method of attachment, the customization to
the underlying real property, the intent of individual attachment
of the object and the specific agreement of the parties to the
sale or lease.
Fraud
When one party intentionally misrepresents or conceals facts
relevant to the contract. When fraud is committed, the contract
is enforceable or voidable by only the injured party.
Holdover Tenancy
A lease that is created when a lessor accepts rent from a
tenant whose lease has terminated.
IDFPR
The Illinois
Regulation.
Implied Contract
A contract that is formed by the actions of the parties and is
not written.
Improvement Clause
A lease clause that states which rights the lessor will have to
enter the premises to make improvements. It will also state
what the tenant is allowed to do with regard to improvements
to the property.
Improvements
Man-made objects directly attached to the land.
Injunction
A court order that forces someone to stop doing a specific act.
Involuntary Termination
The cancellation of a lease against the tenant’s wishes through
actual eviction, constructive eviction, eminent domain,
mortgage foreclosure or bankruptcy proceedings.
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Joint Tenancy
A form of co-ownership in which ownership interests of a
deceased owner become the property of the surviving owners.
Land
The surface, subsurface and airspace, along with that which is
permanently attached.
Lease
A bilateral contract in which the lessor (landlord) promises to
provide exclusive possession of the property in return for the
lessee’s (tenant’s) promise to pay rent.
Leasehold Estate or
Interest
The rights a tenant acquires in the lessor’s property, also
known as a “tenancy.”
Legal Purpose
An act or use that is allowed by law.
Lessee
The person receiving the lease, also known as the “tenant.”
Lessor
The owner or landlord providing the lease.
Menace
The threat to use force to induce another to act against his/her
will.
Misrepresentation
The omission or distortion of facts.
Monetary Damages
Money awarded to the injured party of a breached contract by
the court system.
Novation
All parties to the contract agree to a substitution of one of the
parties to the contract by creating a new agreement.
Offer and Acceptance
The parties’ agreement to the terms of a contract. A “meeting
of the minds.”
Offeree
A person receiving the offer.
Offeror
A person making an offer.
Option
A contract to hold an offer open for a specified period of time.
Ownership in Severalty
Individual ownership of property by one person or entity with
no co-owners.
Panic Peddling
Inducing an owner to sell or rent a dwelling by making
representations regarding entry of persons of a protected
class. Also referred to as “blockbusting.”
Parol Evidence Rule
The legal rule that prohibits courts from allowing oral evidence
to change the terms of a written contract.
Periodic Tenancy
A lease that has no specific ending date, will automatically
renew itself, and goes from period to period, as in month-tomonth.
Personal Assistant
A licensed or unlicensed person who has been hired to assist
a licensee.
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Personal Property
Property not permanently affixed to the land, also called
“chattel” or “personalty.”
Place of Public
Accommodation
A privately owned business or facility that affects commerce
and falls within at least one of several specified categories
from the Americans With Disabilities Act.
Protected Class
A group of individuals protected under the Fair Housing Act.
Provisions of Law
Statements required by local, state and federal laws. Fair
housing and human rights provisions would be part of these
laws.
Punitive Damages
Money awarded by the court to an injured party of a breached
contract to punish the party who caused the breach.
Purchase Option
A lease clause that gives the lessee the right to purchase the
property under certain conditions.
Real Estate
Land and all leaseholds and other interest in land.
Real Property
Land and improvements that are permanently attached to the
land.
Realty
See Land.
Renewal Option
A lease clause that gives the lessee the right to extend the
lease term under certain conditions.
Rent
Money paid for use of leased property.
Repair and Maintenance
A lease clause that clearly states which repairs or maintenance
tasks are the responsibility of the lessor and of the lessee.
Rescind
An agreement between parties that a contract is to be
cancelled and treated as if it never existed.
Security Deposit
Money deposited for or by the tenant with the lessor to be
forfeited if the lessee defaults or damages the property.
Specific Performance
Legal remedy for breach of contract that forces the party who
defaulted on the contract to perform as originally agreed.
Statute of Frauds
Law requiring that all real estate contracts be in writing in order
to be enforceable by the courts. In Illinois, leases of one year
or less are an exception to this law and can be enforced
through the courts even if oral.
Statute of Limitations
A law limiting to the amount of time a party can wait before
bringing action against another party who has committed fraud
or violated the terms of a contract.
Steering
The action of an agent/licensee to direct a prospective toward
or away from specific neighborhoods and units within a
housing complex or building.
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Stigmatized Property
Property that might be undesirable because it was the site of a
presumably negative event that did not impact physical
condition.
Subagency
The practice of an agent allowing other agents to assist in
performing some or all of the tasks of the agency.
Sublet
The transfer of a portion of the lease term, most often the
premises, with reversion to the lessee. A right acquired by the
lessee unless otherwise denied.
Subsurface
The space beneath the surface extending to the center of the
earth.
Subsurface Rights
The rights to use the space beneath the surface of land to the
center of the earth, including mineral rights, oil rights, gas
rights and water rights.
Surrender and
Acceptance
Mutual agreement between parties to terminate a lease or
other contract.
Tenancy
The rights a tenant acquires in the lessor’s property, also
known as a “leasehold estate or interest.”
Tenancy At Sufferance
A lease that is created by law when a tenant continues to
occupy property after his/her rights have expired, wrongfully
possessing the owner’s property.
Tenancy At Will
A lease with no definite duration which can be terminated by
either party at any time.
Tenancy For Years
A lease that has a specific ending date. Its timeframe can be
hours, days, weeks, months or years.
Tenancy in Common
A form of co-ownership in which ownership interests of a
deceased owner can be passed along to the owner’s chosen
heirs.
Tenant
The person receiving the lease, also known as the “lessee.”
Termination Clause
A lease clause stating the method and procedure for ending
the lease.
Testers
People who pose as prospective tenants or purchasers and
work in pairs to test how two tenants with equal buying power
of a protected class will be treated by the same licensee in a
real estate transaction.
Trade Fixtures
An item of personal property that is attached to real property
for a business purpose, such as a sink in a barber shop.
Undue Influence
The use of a position of trust, authority and confidence to
cause a party to enter into a contract that he/she would not
otherwise choose to do.
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Unenforceable Clause
A lease clause that makes each clause separate. If one clause
is deemed incorrect or unenforceable, it will not invalidate or
affect any other part of the lease.
Unenforceable Contract
A contract that has all of the necessary elements for a binding
contract but lacks the provisions necessary to have the court
enforce its terms.
Unilateral Contract
A contract in which one party makes a promise to induce the
action of a second party. For example, a reward is offered to
the person who finds a lost dog.
Valid Contract
A contract that fulfills all the requirements of the law. It is
binding and enforceable on and by both parties.
Void Contract
A contract that lacks legally required provisions and is not
binding on either party. An example would be a contract for an
illegal purpose.
Voidable Contract
A contract that has the elements of a valid contract but only
one party has the right to enforce or withdraw from the
agreement.
Voluntary Termination
The cancellation of a lease or other contract at the end of its
term or through surrender and acceptance any time during its
term.
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