Legal Aspects of Real Estate, 3rd Edition Study Guide

From: first tuesday, PO Box 20069, Riverside, CA. 92516 1.800.794.0494 General Information Thank you for enrolling in our home study course. Your personal satisfaction with this course will be greatest if you complete the course soon. However, the course is good for one year from the date of your enrollment. If you do not complete your course within one year, you must re-enroll in the course. A re-enrollment fee will apply. This study guide is voluntary and for your personal benefit. Answers are included so you can determine your reading comprehension. Final Examination On completion of your studying, fax or mail us the enclosed Request to Take Final Exam form. The Department of Real Estate (DRE) requires the final examination to be administered by a Test Administrator. You may select a Test Administrator of your choice. The Test Administrator can be anyone except a relative or co-worker. DRE Disclaimer This course is approved by the California Department of Real Estate (DRE) for continuing education courses. However, DRE approval does not constitute endorsement of the views or opinions expressed by the course sponsor or book authors. Refund Policy We will accept refunds on courses if returned within 15 days of your invoice date. Return postage will not be refunded. Please return all course materials to: first tuesday Attn: Returns PO Box 20069 Riverside, CA. 92516

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Legal Aspects of Real Estate, 3 Edition

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Legal Aspects of Real Estate, 3rd Edition

Course Description The course is designed to give the student a working understanding of real property estates, title conditions, rights and disputes of adjacent owners, conveyancing, vesting, involuntary liens, partnership formation, the creation of securities risks in real estate investments, and the role of the courts in the enforcement of related rights, as well as the elements, defenses and enforceability of real estate contracts. Course Outline Three hours are designated for each quiz for a total of 45 hours for the entire course. Completion of the course requires passing an open book final exam consisting of 100 questions. Assignment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Chapters 1 to 5 6 to 9 10 to 13 14 to 17 18 to 19 20 to 23 24 to 29 28 to 30 31 to 34 35 to 37 38 to 40 41 to 44 45 to 47 48 to 50 51 to 53 Pages 3 to 31 35 to 67 69 to 99 101 to 125 119 to 135 137 to 160 161 to 203 205 to 228 229 to 260 263 to 294 297 to 316 317 to 342 345 to 372 375 to 387 389 to 409 Quiz 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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Legal Aspects of Real Estate, 3rd Edition Instructions: Quizzes are open book. All answers are either True or False. Answer key is located on the last page. Quiz 1 Pages 3-31 _____ 1. Under the Spanish civil law, legal disputes were settled on a case-by-case basis before a judge. _____ 2. A state may provide less constitutional protection than the federal government, but cannot provide more. _____ 3. Eminent domain is the right of the government to take private property for public use. _____ 4. Covenants, conditions and restrictions (CC&Rs) which limit subdivision sales to nonminorities violate constitutional equal protection laws. _____ 5. Venue determines which court has the power to decide a case. _____ 6. The federal and California court systems consist of three tiers: trial courts, appellate courts and one Supreme Court. _____ 7. Unreasonable interference with the transfer of real property is a legal rule called conditions restraining alienation. _____ 8. Federal law supersedes state law covering the same legal issue. _____ 9. F. Supp. in a case citation indicates a decision of a federal appellate court. _____ 10. In a published opinion of a case, the publishers commentary on the case facts and law should be considered a primary source of information on the case. Quiz 2 Pages 35-67 _____ 1. Real estate is characterized as movable. _____ 2. In California, oil and gas are incapable of being owned until they are actually possessed. _____ 3. Trade fixtures are to be removed by a tenant on termination of the tenancy, unless agreed to the contrary with the landlord. _____ 4. An estate at will may not be terminated at the discretion of the fee owner. _____ 5. In a periodic tenancy, the landlord and tenant agree to successive rental periods of the same length, such as in a month-to-month tenancy. _____ 6. Unless agreed to the contrary in the lease agreement, permanently affixed tenant improvements remain with the property on the surrender of the property. _____ 7. A mechanics lien for unpaid labor and materials for a tenant improvement may attach to the landlords interest in the property if the landlord fails to post a Notice of Nonresponsibility. _____ 8. When a fixed-term or periodic tenancy is terminated, the tenant who remains in possession becomes a tenant-at-will. _____ 9. A tenant under a fixed-term lease must be given notice before the landlord can commence an unlawful detainer action. _____ 10. An unlawful detainer action is required to evict a transient occupant.

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Quiz 3 Pages 69-99 _____ 1. An instrument conveying a possessory interest in real estate which allows the tenant to exclusively occupy the premises in exchange for rent is called a license. _____ 2. When a licensee makes substantial expenditures relying on the property owners grant of a license for a use which appears to require a long duration, the license may be considered irrevocable. _____ 3. A landowners appurtenant right to withdraw water from the adjacent river or lake for beneficial use is called a prescriptive right. _____ 4. Owners of land and water providers (appropriators) who hold water rights own water. _____ 5. The first step in appropriating water is to apply for a permit from the State Water Resources Control Board. _____ 6. Navigable waterways, tidelands, shore zones, and nonnavigable tributaries are subject to state regulation and control for purposes of the public trust. _____ 7. The management powers the state possesses to regulate and control the use of properties owned or subject to the public trust do not include destroying the navigability of certain waters for the benefit of others. _____ 8. Uncertainty as to a boundarys exact location must exist to establish a boundary line under the agreed-to boundary doctrine. _____ 9. Natural markers used by owners to set a boundary line include trees, rock piles and creek beds. _____ 10. Lot line adjustments do not require planning commission approval. Quiz 4 Pages 101-118 _____ 1. Boundary improvements, other than trees, located on the property line between adjacent properties are called party walls. _____ 2. Adjacent property owners have a mutual obligation to maintain the fences between them, except for owners who allow their land to lie unfenced. _____ 3. An encroachment occurs when an improvement on real estate extends onto property belonging to another person without his consent. _____ 4. An encroachment does not qualify as a nuisance. _____ 5. Once an encroachment has been determined, the remedies available to the owner do not include obtaining an injunction ordering the removal of the encroaching structure. _____ 6. A neighbor may not resort to self-help to cut branches off an encroaching tree. _____ 7. A nuisance is any condition which prevents a neighbors free use or enjoyment of his property or is injurious to his health. _____ 8. The city cannot control the planting, removal and maintenance of trees located in a public right of way between a property owners land and the curb of the street. _____ 9. A city may impose a penalty for the illegal removal of its trees. _____ 10. When a city decides to plant, maintain or remove city trees growing along city streets, the city may tax parcels of land affected by the improvements.

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Quiz 5 Pages 119-135 _____ 1. A trespass is an interference with anothers title or ownership interest. _____ 2. Privileged entries include entering the property possessed by another in case of emergency, to abate a nuisance or to serve legal papers. _____ 3. Leaving toxic waste on anothers property is never considered a trespass. _____ 4. A trespasser who enters and occupies anothers property without the rightful occupants consent is guilty of a misdemeanor. _____ 5. A property owner is liable for injuries to others caused by unsafe conditions on his property, unless the injured person is a trespasser. _____ 6. A person creating a nuisance must have a possessory interest in property to be held liable for the nuisance. _____ 7. The illegal sale of a controlled substance is considered a nuisance per se. _____ 8. An activity done or maintained under express authority of a statute may still be considered a nuisance. _____ 9. Stopping a public nuisance is the responsibility of state or local government authorities. _____ 10. A continuing nuisance exists when the nuisance cannot be abated at a reasonable cost and by reasonable means. Quiz 6 Pages 137-160 _____ 1. The property which benefits from an easement is referred to as the servient tenement. _____ 2. An easement in gross belongs to an individual and is his personal right. _____ 3. Trees and shrubs cannot be placed or maintained to cast a shadow on an existing solar collector. _____ 4. An unrecorded easement is enforceable when the owner of the burdened property sells to a buyer who has no knowledge of the easement. _____ 5. If a property is landlocked, the owner of the property may be able to acquire an easement by necessity. _____ 6. A prescriptive easement bars the owner of the property burdened by the easement from all use of his land. _____ 7. When the use of an easement places an excessive burden on the property subject to the easement, the easement may be lost by forfeiture. _____ 8. Mere nonuse of an easement is sufficient conduct to demonstrate intent to terminate an easement by abandonment. _____ 9. An affirmative covenant is a restriction that requires the property to be used only for a specific purpose. _____ 10. A deed restriction prohibiting the sale of subdivision lots to persons of a certain race or religion is enforceable. Quiz 7 Pages 161-203 _____ 1. Owners of appurtenant easements and easements in gross have a duty to maintain the easement they hold on other property. _____ 2. To be valid, a deed does not need to identify the grantor and the grantee.

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_____ _____ _____ _____ _____ _____ _____ _____

3. An oral agreement for the transfer of real estate ownership will be enforced either under the doctrines of specific performance or estoppel. 4. Before establishing title by adverse possession, an occupant must show he has paid all taxes assessed against the property during his occupancy. 5. The grantor of property need not be capable of conveying an interest in real estate at the time the deed is signed for the deed to be enforceable as an actual conveyance of the real estate. 6. To transfer real estate by a deed, the deed must be signed by the grantor named in the deed. 7. For delivery of a deed to occur, the grantor must intend to convey title, and the grantee must accept the deed as an immediate conveyance. 8. A deed is ineffective until the grantee or his agent unconditionally accepts the deed. 9. Grant deed covenants must be separately bargained for and agreed to as a provision to be included in a grant deed conveyance. 10. A quitclaim deed operates to release to the grantee all interest the grantor may have in the property and does not carry with it the implied covenants contained in a grant deed.

Quiz 8 Pages 205-228 _____ 1. A preliminary title report can be relied on as a representation of the condition of title. _____ 2. An abstract of title is also defined as a preliminary title report. _____ 3. The physical condition of property is an encumbrance subject to coverage under a policy of title insurance. _____ 4. CLTA standard policies and ALTA policies do not cover losses incurred due to the effects of government regulations concerning the use, occupancy or enjoyment of the property. _____ 5. The ALTA owners policy contains preprinted exceptions, also called standard or regional exceptions. _____ 6. Endorsements are provisions added to title insurance to cover losses due to CC&R violations, mechanics liens, and the effects of inflation. _____ 7. The insured must provide the title company with a proof-of-loss statement within 15 days after incurring a loss or damage. _____ 8. An adverse possessor must occupy the property for at least five years and pay all taxes due on the property for each year in order to acquire title by adverse possession. _____ 9. Adverse possession by color of title is based on the possession of property without any belief by the adverse possessor that he is the true owner. _____ 10. Exclusive use of the property is not required to perfect an adverse possession claim under a claim of right.

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Quiz 9 Pages 229-260 _____ 1. A quitclaim deed can be used to transmute community property into the separate property of the other spouse. _____ 2. Either spouse may sell, lease for more than one year or encumber community property without the consent of the other. _____ 3. A revocable living trust is a type of vesting separate from the owner similar to an LLC, partnership or corporation. _____ 4. A written Declaration of Trust is required to establish a living trust. _____ 5. A business trust can be created in the state of California since it is the same as a trust business. _____ 6. A tenancy in common is taxed as a partnership when co-owners carry on a trade, business, or financial operation where services are rendered through centralized property management and the income, profits and losses are divided. _____ 7. When real estate is sold, leased or financed to five or more people taking title as tenants in common with undivided interests, a subdivision is created. _____ 8. The right of survivorship aspect of a joint tenancy extinguishes a joint tenants interest in the real estate upon his death and leaves the remaining joint tenants with the entire ownership interest. _____ 9. A written agreement to sever a joint tenancy, signed by all of the joint tenants, must be notarized and recorded. _____ 10. A surviving spouse is entitled to a fully stepped-up cost basis in the community real estate only if the community property is vested in a revocable inter vivos trust. Quiz 10 Pages 263-294 _____ 1. No limit is imposed on the number of members who may join a limited liability company (LLC). _____ 2. Only one person is required to form an LLC and commence operations by filing the LLC-1 with the Secretary of State. _____ 3. The limited liability protection for the members of an LLC is the same as for shareholders in a corporation. _____ 4. The LLC scheme prohibits the merger of a limited partnership into an LLC. _____ 5. The assignability of an LLC members interest can be controlled by the LLCs operating agreement. _____ 6. When the manager of an LLC is substituted or removed, the LLC does not have to notify the Secretary of State of the change by filing the LLC-2. _____ 7. Reassessment will not be triggered when an LLC member with a minority interest in an LLC acquires a majority interest. _____ 8. The mere formation of an LLC to purchase and operate an existing incomeproducing real estate project involves a securities risk. _____ 9. A group investment with an expectation of profits interwoven with the efforts of others to produce income and ultimately return the investment is a corporate security.

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10. An investors action to recover his funds must be commenced within two years after the date of the securities violation or one year after the investors discovery of the violation, whichever occurs later.

Quiz 11 Pages 297-316 _____ 1. A buyer advancing funds toward the purchase price is entitled to a purchasers lien even though the sellers non-performance was caused by the buyers breach. _____ 2. The priority of a purchasers lien goes back to the date of possession by the buyer under the purchase agreement. _____ 3. A forfeiture of the buyers deposit is not allowed even if the buyers breach is deliberate. _____ 4. A vendors lien is not available as a remedy should an escrow officers miscalculation result in the receipt of insufficient closing funds due from the buyer. _____ 5. A seller is entitled to a vendors lien when a buyer defaults on payments due under a land sales contract. _____ 6. A sellers assignment of his unsecured carryback note is a waiver of the vendors lien right. _____ 7. A mechanics lien is still valid, even if the subcontractor fails to serve the 20day preliminary notice to the appropriate parties. _____ 8. A subcontractor who has actual knowledge, but not constructive knowledge, of the lenders identity is relieved from the obligation to serve the lender with a 20-day preliminary notice. _____ 9. A general contractor who has not been paid must record a mechanics lien within 60 days of the date a notice of cessation is recorded. _____ 10. An action to foreclose on a mechanics lien must be filed within 30 days after the mechanics lien is recorded. Quiz 12 Pages 317-342 _____ 1. A judgment creditor creates a valid lien on real estate owned by the judgment debtor on recordation of an abstract of judgment. _____ 2. The release of a recorded instrument does not have to be notarized to be recorded. _____ 3. It is improper to record a lis pendens in actions for breach of a real estate contract where only money damages are sought. _____ 4. When real estate is improved, not purchased, with fraudulently acquired money, a constructive trust is not created. _____ 5. A lis pendens must be recorded before the lawsuit involving title or possession to real estate is filed. _____ 6. An individuals ownership interest in a partnership may be attached by use of a charging order to satisfy a judgment against the individual. _____ 7. Limited partners may remove the general partner when a creditor obtains a charging orders assignment of the general partners interest.

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_____ _____ _____

8. An automatic homestead exemption remains junior to a voluntary lien placed on the real estate, such as a trust deed. 9. An owner cannot declare a homestead exemption if the owners personal residence is vested in a revocable living trust. 10. A homeowner who voluntarily sells his residence while title is clouded by a creditors lien leaves the sales proceeds unprotected under a recorded declaration of homestead.

Quiz 13 Pages 345-372 _____ 1. To constitute slander of title, written or oral statements must cause money losses to the owner. _____ 2. A publication made under absolute privilege bars a slander of title action even if the publication was made with actual malice. _____ 3. To be considered absolutely privileged, a lis pendens must identify the court action involving title to real estate. _____ 4. A husband and wife who vest title to real estate as community property may sue to partition the real estate. _____ 5. A life estate cannot be subject to a partition suit. _____ 6. Owelty is the money paid to even a distribution when real estate cannot be divided equally in a partition action. _____ 7. The proceeds of a sale of the real estate are distributed to the co-owners first. _____ 8. A quiet title action may not be joined with other causes of action related to the property. _____ 9. A buyer who forfeits all rights to the property due to a breach gets credit for installments of principal and interest paid to the seller on a land sales contract. _____ 10. An occupant who can establish a claim of title to property by adverse possession can quiet title to the property in his name and become the owner of record. Quiz 14 Pages 375-387 _____ 1. If interest rates rise before specific performance is awarded to the buyer, the buyer is allowed to enjoy this benefit without a credit to the seller. _____ 2. The loan-term formula indemnifies the buyer for future losses while considering the likelihood the buyer will refinance before the loan term expires. _____ 3. The cancellation of a purchase agreement is a real estate activity which gives rise to a declaratory relief action. _____ 4. Before a party to a contract is entitled to seek declaratory relief, the party must breach his obligations under the contract. _____ 5. An owner involved in a tax dispute with a government agency has no recourse to declaratory relief once the taxes are levied. _____ 6. A declaratory judgment will only be granted if an actual controversy exists and future litigation is likely to result if not resolved.

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7. A buyer who rent skims from five-or-more parcels exposes himself to multiple acts of rent skimming penalties. 8. A tenants recovery from a buyer who engages in rent skimming does not include the security deposit, moving expenses and attorney fees. 9. A buyer is subject to an additional one-year imprisonment, $10,000 fine, or both for each additional act of rent skimming in excess of the five initial properties. 10. The federal rent skimming statute does not apply to the investor of only one property subject to a FHA/VA loan.

Quiz 15 Pages 389-409 _____ 1. Equitable indemnity arises when a buyer sues a seller and the seller claims the broker caused the loss. _____ 2. Judicial determination of a good-faith settlement by a broker with an opposing party prevents any indemnity claims the brokers client may have against the broker. _____ 3. A separate dispute between a broker and seller in which the seller alone suffers a loss due to the brokers actions will not survive a court-approved good faith settlement between the broker and buyer. _____ 4. An attorney fees provision written for the benefit of only one party to the contract entitles only the named party to collect any attorney fees. _____ 5. In a court action, the party who receives the greater money damages is considered the prevailing party. _____ 6. Attorney fees are not recoverable when an agreement which contains an attorney fees provision is declared unenforceable. _____ 7. Attorney fees are not recoverable on condemnation actions. _____ 8. Attorney fees are recoverable on class action suits which set strong public policy. _____ 9. Fee agreements for attorney services must be in writing when it is known the fees will exceed $1,000. _____ 10. An attorney must provide an itemized billing within 10 days following a brokers request for the billing statement.

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The following are the answers to the quizzes for Legal Aspects of Real Estate, 3rd Edition and the page numbers where they are located. Quiz 1. F 2. F 3. T 4. T 5. F 6. T 7. T 8. T 9. F 10. F Quiz 1. F 2. T 3. T 4. F 5. T 6. F 7. T 8. F 9. T 10. F 1 3 10 11 15 18 22 24 24 31 31 6 137 138 139 141 146 148 152 153 156 158 Quiz 2 1. F 35 2. T 37 3. T 41 4. F 44 5. T 46 6. T 49 7. T 56 8. F 62 9. F 65 10. F 66 Quiz 7 1. T 161 2. F 168 3. T 169 4. T 171 5. F 172 6. T 179 7. T 181 8. T 185 9. F 192 10. T 202 Quiz 12 1. T 317 2. F 318 3. T 323 4. T 324 5. F 325 6. T 328 7. T 329 8. T 333 9. F 334 10. F 340 Quiz 3 1. F 70 2. T 74 3. F 75 4. F 77 5. T 80 6. T 85 7. F 88 8. T 95 9. T 98 10. F 99 Quiz 8 1. F 205 2. F 206 3. F 208 4. T 213 5. F 213 6. T 218 7. F 219 8. T 224 9. F 225 10. F 227 Quiz 13 1. T 345 2. T 348 3. T 349 4. F 354 5. F 356 6. T 358 7. F 359 8. F 364 9. F 367 10. T 370 Quiz 4 1. T 101 2. T 102 3. T 106 4. F 106 5. F 107 6. F 111 7. T 113 8. F 115 9. T 116 10. T 116 Quiz 9 1. T 231 2. F 232 3. F 236 4. T 237 5. F 241 6. T 243 7. T 247 8. T 250 9. F 253 10. F 259 Quiz 14 1. F 375 2. F 376 3. T 378 4. F 379 5. T 380 6. T 381 7. T 383 8. F 384 9. T 386 10. T 387 Quiz 5 1. F 119 2. T 119 3. F 120 4. T 122 5. F 123 6. F 127 7. T 128 8. F 129 9. T 131 10. F 133 Quiz 10 1. T 264 2. T 264 3. T 266 4. F 272 5. T 279 6. F 281 7. F 284 8. F 287 9. T 289 10. F 294 Quiz 15 1. T 389 2. T 390 3. F 390 4. F 393 5. T 397 6. F 399 7. F 401 8. T 403 9. T 407 10. T 408

Answer References

Quiz 11 1. F 298 2. T 298 3. T 300 4. F 304 5. F 306 6. T 307 7. F 310 8. F 312 9. T 313 10. F 314

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