Modern Real Estate Practice in Texas, 16th Edition
Chapter 22 Answer Key
1. b
2. b
3. d
4. c
5. c
6. d
7. d
8. c
9. a
10. a
11. c
12. b
Workers’ compensation policies cover medical or hospital payments for
injuries sustained by building employees in the course of their employment.
Corrective maintenance corrects problems after they have occurred.
Although a high percentage of occupancy may appear to indicate an effective
rental program, it also could mean that rental rates are too low. Any time the
occupancy level exceeds 95 percent, serious consideration should be given to
raising the rents, but only after a survey of the competitive space available in the
neighborhood.
Public liability insurance covers the risk an owner assumes when the public
enters the building. Claims are used to pay medical expenses should a person be
injured in the building as a result of the landlord’s negligence.
In selecting residential tenants, the property manager must comply with all
federal and local fair housing laws.
The property manager must be able to respond to a variety of environmental
problems. Tenant concerns—as well as federal, state, and local regulations—
determine the extent of the manager’s environmental responsibilities.
The management agreement should be in writing and should cover the
following points: 1) Description of the property; 2) Time period the agreement
will cover; 3) Definition of management’s responsibilities; 4) Statement of
owner’s goals; 5) Extent of manager’s authority; 6) Reporting; 7) Management
fee; 8) Allocation of costs. A list of previous owners is not relevant to the
property manager’s duties and responsibilities to the current owner.
Most hazard policies insure against the actual loss of property but do not cover
loss of revenue from income property. Interruption insurance covers the loss
of income that occurs if the property cannot be occupied.
Apartment rental rates are stated in monthly amounts on a unit basis.
Commercial and office space rentals are usually stated according to annual or
monthly rate per square foot of space occupied by the tenant.
In establishing rental rates, initial concerns are whether the income from
rentable space covers the fixed charges and operating expenses and provide a
fair return on the investment. In the short term, rental rates are primarily a result
of supply and demand and are determined after a detailed survey of the
competitive space available in the neighborhood.
Surety bonds cover an owner against financial losses resulting from an
employee’s criminal acts or negligence while carrying out his or her duties.
The perils of any risk are evaluated in terms of options—ACTOR. That is, in
considering the possibility of loss, the property manager must decide whether it
is better to Avoid it, Control it, Transfer it, by taking out an insurance policy, Or
Retain it. To avoid rate increases or cancellation of a policy, an owner will
frequently pay for small casualty losses out of pocket. The IRS will allow these
losses as a deduction as long as they do not exceed the deductible portion of the
insurance policy. Some owners, therefore, consider policies with a higher
deductible, which also results in a lower insurance premium.
©2014 Kaplan, Inc.
Modern Real Estate Practice in Texas, 16th Edition
13. d
14. a
15. b
16. c
In all activities, a property manager must be aware that his or her responsibility
is to realize the highest return on the property that is consistent with the
owner’s instructions.
Under the provisions of the Fair Credit Reporting Act, if a property owner
rejects an application based on the applicant’s credit report, the applicant must
be given the name of the credit reporting agency and must be told that he or she
has a right to get a copy of the credit report. The landlord, however, cannot give
the applicant a copy of the report. The applicant must also be told that the credit
agency did not make the decision to reject the applicant. If a property owner
rejects an applicant based on information other than a credit report, the owner
must either disclose the reason or tell the applicant that he or she has the right to
submit a request for disclosure of the reason for rejection.
A general agency relationship exists between the owner and the property
manager because the manager may bind the owner to any contracts (leases,
contractors, etc.) within the scope of the manager’s authority laid out in the
management agreement. If only a special agent, the broker would not be able
bind or obligate the owner to such contracts.
The purpose of a cash reserve fund is to cover variable expenses such as
repairs, decorating, and supplies. The amount to set aside in any year is usually
estimated from similar expenses from the previous year.
©2014 Kaplan, Inc.