California Real Estate Broker Exam — All Questions

Under Civil Code section 660, which test does California use to decide whether an item has become a fixture and therefore part of the real property?

• a.Whether the item was installed by a contractor licensed by the Contractors State License Board
• b.Whether the item costs more than the personal property already located inside the same structure
• c.Whether the item was listed by the seller on the inventory schedule attached to the purchase agreement
• d.Whether the item is attached by roots, imbedded, resting permanently, or fastened by nails or bolts✓

Civil Code section 660 states that a thing is deemed affixed to land when it is attached by roots, imbedded in the land, permanently resting on it, or permanently attached to what is permanent by means of cement, plaster, nails, bolts or screws. The statute is about the manner of annexation, not about price: an expensive chandelier hanging on a hook is still personal property. A purchase-agreement inventory allocates items between the parties by contract, which can override the default result but is not the statutory test. Who installed the item, and whether that person held a contractor license, has no bearing on whether the item became part of the realty.

A restaurant tenant bolts commercial ovens and a walk-in cooler to the leased premises to run the business. Under California law these items are:

• a.Real property, because they were bolted to the building and cannot be severed by the tenant
• b.Trade fixtures, which stay personal property and may be removed by the tenant before the lease ends✓
• c.Real property, because the landlord holds the underlying fee title to the improved premises
• d.Common area equipment, because they serve the business rather than the tenant personally

Trade fixtures are items a tenant annexes to leased premises to carry on a trade or business, and California treats them as the tenant's personal property. Civil Code section 1019 states the removal right together with its condition: a tenant “may remove from the demised premises, any time during the continuance of his term, anything affixed thereto for purposes of trade, manufacture, ornament, or domestic use, if the removal can be effected without injury to the premises, unless the thing has, by the manner in which it is affixed, become an integral part of the premises.” The right therefore turns on being able to remove the item without injuring the premises, not on repairing damage afterwards, and the manner of attachment still governs: an item annexed so thoroughly that it has become an integral part of the building stays with the building. The landlord's fee ownership of the premises does not sweep in equipment the tenant installed for its trade. And “common area” describes space shared by occupants of a development, which is unrelated to who owns installed equipment.

Under California law, growing crops that a farm tenant plants and cultivates for an annual harvest are classified as:

• a.Appurtenances, passing automatically to the buyer with any transfer of the underlying land
• b.Emblements, treated as the tenant's personal property and harvestable after the tenancy ends✓
• c.Improvements, valued in the cost approach along with the buildings on the parcel
• d.Encumbrances, because they burden the owner's right to use the surface of the land

Emblements are annual crops produced by the tenant's own labor. California treats them as the tenant's personal property, so an agricultural tenant whose tenancy ends before harvest keeps the right to re-enter and take the crop. Civil Code section 660 expressly carves emblements and industrial growing crops out of the fixture rule for purposes of sale. An appurtenance is a right that runs with the land, such as an easement, and does not describe a crop. Improvements are the man-made structures on the parcel. An encumbrance is a claim held by someone other than the owner, which a crop is not.

Immobility, indestructibility and non-homogeneity are usually described as which characteristics of land?

• a.The four elements of value used to define market value in appraisal practice
• b.The economic characteristics of land, distinguished from its physical characteristics
• c.The physical characteristics of land, not its economic characteristics✓
• d.The four unities required before a valid joint tenancy can be created

Immobility, indestructibility and non-homogeneity (also called uniqueness) are the three physical characteristics of land. The economic characteristics are a separate set — scarcity, improvements, permanence of investment and area preference, sometimes called situs. The four elements of value are utility, scarcity, demand and transferability, which describe what makes a thing valuable rather than what land physically is. The four unities of time, title, interest and possession are the requirements for a joint tenancy, which is a form of co-ownership.

An appraiser explains that a hillside lot's value is driven mainly by its view, its access and its school district. This reflects which economic characteristic of land?

• a.Indestructibility, meaning the land itself endures even when its improvements do not
• b.Area preference, often called situs, meaning the value people place on a particular location✓
• c.Non-homogeneity, meaning no two parcels of land are exactly alike in every respect
• d.Permanence of investment, meaning improvements to land are long-lived and fixed in place

Area preference, or situs, is the economic characteristic that captures people's preference for one location over another, and it is the reason two physically similar lots can be worth very different amounts. Indestructibility is a physical characteristic describing the durability of the land itself. Non-homogeneity is the physical characteristic that every parcel is unique, which explains why comparables must be adjusted but is not what makes a view valuable. Permanence of investment refers to the long life of improvements such as streets and sewers, which is a different economic characteristic.

Which of the following is a money encumbrance rather than a non-money encumbrance on California real property?

• a.A recorded abstract of judgment creating a judgment lien against the owner's real property✓
• b.An appurtenant easement giving a neighboring parcel a recorded right of way across the land
• c.A recorded declaration of covenants, conditions and restrictions limiting building height
• d.An encroachment where a neighbor's garage extends two feet over the common boundary

A money encumbrance, or lien, secures the payment of money and can be foreclosed to satisfy the debt; a recorded abstract of judgment creates exactly that kind of lien against the debtor's real property in the county. An easement is a non-money encumbrance: it gives someone a right to use the land but secures no debt. Recorded covenants, conditions and restrictions limit how the land may be used and likewise secure no payment. An encroachment is an unauthorized physical intrusion, which clouds title and may support an action to remove it, but again involves no debt.

A person claiming title by adverse possession in California must show hostile, open and notorious possession and, under Code of Civil Procedure section 325, must also show that the claimant:

• a.Timely paid all state, county and municipal taxes levied on the land for the five-year period✓
• b.Recorded a written notice of the adverse claim with the county recorder before entering the land
• c.Obtained the record owner's written permission to occupy the land at the start of the period
• d.Occupied the land continuously for twenty years while making no use of the surrounding parcels

Code of Civil Procedure section 325 makes payment of taxes an express element: adverse possession is not established unless the land has been occupied and claimed continuously for five years and the claimant or the claimant's predecessors timely paid all state, county or municipal taxes levied on it during those five years, proven by certified records of the county tax collector. Recording a notice of claim is not part of the statute. Permission destroys the claim rather than supporting it, because possession must be hostile to the owner's title. And the California period is five years, not twenty.

A property owner grants a utility company the recorded right to run transmission lines across the parcel. The utility owns no adjoining land. This interest is best described as:

• a.A license, which is personal, revocable at will and creates no interest in the land itself
• b.An easement appurtenant, which benefits an adjoining dominant tenement and runs with it
• c.An easement in gross, which benefits a person or entity rather than a neighboring parcel✓
• d.A profit a prendre, which allows the holder to remove soil, timber or minerals from the land

An easement in gross benefits a person or an entity rather than a parcel of land, and commercial easements in gross such as utility easements are recognized and transferable in California. An easement appurtenant requires a dominant tenement that receives the benefit and a servient tenement that bears the burden; here the utility owns no adjoining parcel, so there is no dominant tenement. A license is mere permission, personal to the holder and revocable, which is not what a recorded grant to a utility creates. A profit gives the right to take something from the land, which transmission lines do not involve.

Which statement about California's automatic homestead exemption under Code of Civil Procedure section 704.730 should a broker give a client?

• a.It protects a statutory floor of equity that the statute adjusts annually for inflation✓
• b.It protects the full equity in the residence without limit as long as the owner occupies it
• c.It applies only if the owner records a declared homestead before any judgment lien attaches
• d.It bars the holder of a purchase money deed of trust from foreclosing on the residence

Section 704.730 sets the automatic homestead exemption as a statutory amount within a floor and a ceiling and directs that the figures be adjusted annually for inflation, so a broker should quote the current published amount rather than a remembered one. The exemption is a capped dollar amount, not unlimited protection of all equity. It is called automatic precisely because it applies without recording anything; a declared homestead is a separate, optional device with its own advantages. And the homestead exemption protects equity against certain judgment creditors, not against a consensual lien such as a deed of trust the owner signed.

Civil Code section 683 provides that a joint tenancy in California is created only when the instrument does what?

• a.Recites that the co-owners are related to one another by blood, marriage or adoption
• b.Expressly declares the interest to be a joint tenancy in the will or transfer creating it✓
• c.States that the co-owners took title at different times and in unequal percentage shares
• d.Is acknowledged before a notary and recorded within thirty days of the date of transfer

Civil Code section 683 defines a joint interest as one owned by two or more persons in equal shares by a title created by a single will or transfer when it is expressly declared in that will or transfer to be a joint tenancy. Without the express declaration the co-owners take as tenants in common. Family relationship is irrelevant to the form of co-ownership. Unequal shares and different acquisition times defeat the unities of interest and time that a joint tenancy requires. Notarization and recording protect priority and give constructive notice, but neither creates the joint tenancy.

Two unmarried siblings hold title as tenants in common. One sibling dies leaving a valid will. That sibling's undivided interest:

• a.Is converted into community property held by the surviving cotenant and the estate
• b.Passes automatically to the surviving cotenant by operation of the right of survivorship
• c.Escheats to the State of California because a tenancy in common cannot be devised
• d.Passes under the will to the named beneficiary, because there is no right of survivorship✓

A tenancy in common carries no right of survivorship. Each cotenant owns an undivided fractional interest that is freely transferable during life and passes at death by will, or by intestate succession if there is no will. The right of survivorship belongs to joint tenancy and to community property with right of survivorship, neither of which is present here. Escheat happens only when a decedent leaves no will and no heirs at all. Community property is a form of ownership between spouses, and it cannot arise between siblings or between a survivor and a decedent's estate.

Under Civil Code section 682.1, community property with right of survivorship differs from an ordinary community property vesting because it:

• a.Exempts the property from the reassessment rules that apply on a change in ownership
• b.Converts each spouse's half into separate property that the other spouse cannot reach
• c.Allows either spouse to convey the entire property alone without the other spouse joining
• d.Passes to the surviving spouse without administration when expressly declared✓

Civil Code section 682.1 provides that community property of spouses, when expressly declared in the transfer document to be community property with right of survivorship, passes to the survivor on the death of one spouse without administration, in the same way as property held in joint tenancy. The vesting keeps the community character of the asset rather than converting it into separate property. It does not enlarge one spouse's power to convey, since a transfer of community real property still requires both spouses to join. And it is a title vesting, not a property tax provision.

In a California condominium, the owner of a unit typically holds:

• a.A leasehold in the unit granted by the association for the life of the improvements
• b.Shares of stock in a corporation together with a proprietary lease of the unit for a stated term
• c.An undivided interest in the whole project with the exclusive right to occupy an assigned unit
• d.Fee title to the airspace of the unit plus an undivided interest in the common area✓

A California condominium is an estate in real property consisting of a separate interest in a defined space — normally the airspace of the unit — coupled with an undivided interest in the common area held in common with the other owners. Stock plus a proprietary lease describes a stock cooperative, a different form of common interest development in which the corporation owns the building. An undivided interest in the whole with an exclusive right of occupancy describes an undivided interest subdivision or certain time-share arrangements. A leasehold from the association describes neither, since the association manages the common area rather than owning the units.

In the United States government rectangular survey system used for parts of California, one section contains:

• a.43,560 acres, one square mile, and there are 24 sections in a township
• b.160 acres, one quarter of a square mile, and there are 16 sections in a township
• c.640 acres, one square mile, and there are 36 sections in a township✓
• d.320 acres, one half of a square mile, and there are 12 sections in a township

A section under the rectangular survey is one mile square and contains 640 acres, and a township six miles on a side contains 36 numbered sections. A quarter section is 160 acres, which is a common subdivision of a section but not a section itself. The figure 43,560 is the number of square feet in one acre, not a count of acres. And 320 acres is a half section. Candidates should also remember that much of coastal and southern California is described by metes and bounds or by reference to recorded tract maps because of Spanish and Mexican land grants.

A California purchase agreement describes the property as 'Lot 14, Block 3, Tract 22417, as per map recorded in Book 512, Pages 8 to 11, of Maps, in the office of the County Recorder.' This is:

• a.A rectangular survey description keyed to a principal meridian and a numbered base line
• b.A metes and bounds description that fixes the boundary by courses, distances and monuments
• c.A lot, block and tract description that incorporates a recorded subdivision map by reference✓
• d.An informal street address description that is insufficient to convey title in California

This is the lot, block and tract method, also called the recorded map or recorded plat method, which identifies the parcel by reference to a subdivision map recorded with the county. It is the most common description in California's developed areas. Metes and bounds fixes a boundary by starting at a point of beginning and running courses and distances, which this description does not do. A rectangular survey description would name a township, range, section and principal meridian. And this description is far more precise than a street address, which is why it is legally sufficient.

The four government rights in land are commonly summarized as police power, eminent domain, taxation and escheat. Escheat operates when:

• a.A local agency downzones a parcel in a way that reduces its economic value
• b.An owner dies leaving neither a valid will nor any heirs, so title passes to the state✓
• c.A public agency takes private property for public use upon payment of just compensation
• d.An owner fails to pay property taxes and the county tax collector sells the parcel

Escheat is the state's reversionary right to property left by an owner who dies intestate without heirs, so that land does not become ownerless. Downzoning is an exercise of the police power, which regulates the use of land for public health, safety and welfare and generally requires no payment. Taking property for public use on payment of just compensation is eminent domain, a different power entirely. A tax sale is an exercise of the taxing power enforced through the tax lien, and the parcel is sold to a purchaser rather than passing to the state as an escheat.

A city rezones an owner's parcel to a less intensive use, reducing its market value. The owner has received no payment. This is most likely:

• a.A valid exercise of the police power, which normally requires no compensation to the owner✓
• b.An inverse condemnation, entitling the owner to just compensation as a matter of course
• c.An escheat of the development rights, which vest in the city on adoption of the ordinance
• d.A special assessment, which the owner may contest through the county assessment appeals board

Zoning is the classic exercise of the police power. Because the police power regulates rather than takes, a reduction in value caused by a valid land use regulation ordinarily gives the owner no right to compensation, so long as an economically viable use remains. Inverse condemnation is available only where regulation goes so far that it amounts to a taking, which a routine downzoning normally is not. Escheat concerns intestate succession without heirs and has nothing to do with development rights. A special assessment is a charge levied to fund a local improvement, not a rezoning.

Under California's Proposition 13 as implemented in the Revenue and Taxation Code, the assessed value of real property is generally:

• a.The replacement cost of the improvements only, since land is exempt from annual assessment
• b.The current market value determined by the county assessor in a fresh appraisal every year
• c.The original purchase price of the property with no adjustment permitted for any reason
• d.The base year value, raised at most 2 percent a year and reset on a change of ownership✓

Proposition 13 assesses California real property at its base year value with annual inflationary increases capped at 2 percent, and the base year value is reset to full cash value when there is a change in ownership or new construction. That is why a long-held property and a newly purchased neighboring property can carry very different tax bills. An annual market revaluation is exactly what Proposition 13 replaced. The purchase price does become the new base year value, but it is then adjusted each year, so it is not frozen. And land is assessed along with improvements.

Government Code section 65860 requires that a California city or county zoning ordinance be:

• a.Identical to the zoning of every adjoining jurisdiction
• b.Approved by the Department of Real Estate before adoption
• c.Renewed by the voters at least once every ten years
• d.Consistent with the jurisdiction's adopted general plan✓

Government Code section 65860 imposes the consistency requirement: county and city zoning ordinances must be consistent with the general plan of the jurisdiction. The general plan is the constitution for local land use, and an inconsistent zoning ordinance is vulnerable to challenge. The Department of Real Estate regulates licensees and subdivision sales; it has no approval role over local zoning. There is no statewide requirement that zoning be periodically ratified by voters. And neighboring jurisdictions routinely zone differently, which is why boundary-line land uses can differ sharply.

A landowner wants to build a structure closer to the side property line than the setback allows, because the lot is unusually narrow. The appropriate application is for:

• a.A conditional use permit, which allows a listed use in a zone subject to stated conditions
• b.A variance, which permits a deviation from a development standard✓
• c.A zone change, which amends the ordinance to place the parcel in a different zoning district
• d.A general plan amendment, which changes the long-range land use designation of the parcel

A variance authorizes a departure from a development standard such as a setback, height or lot coverage limit, and it is granted where strict application would deprive the owner of privileges enjoyed by others because of a hardship peculiar to the property. A conditional use permit authorizes a particular use that the ordinance lists as conditionally permitted, which is about use rather than dimensions. A zone change moves the parcel into a different district and is a legislative act. A general plan amendment changes the underlying policy designation, which is a far larger step than a setback adjustment.

A California subdivider must obtain a public report from the Real Estate Commissioner before offering subdivision interests for sale. That requirement comes from:

• a.The Subdivided Lands Law in the Business and Professions Code, a consumer protection statute administered by the DRE✓
• b.The Subdivision Map Act in the Government Code, a local mapping statute administered by cities and counties
• c.The California Environmental Quality Act, which governs environmental review of discretionary projects
• d.The Davis-Stirling Common Interest Development Act, which governs the operation of homeowner associations

The Subdivided Lands Law, beginning at Business and Professions Code section 11000, is the DRE-administered consumer protection statute that requires the Commissioner's public report before subdivision interests may be offered or sold. The Subdivision Map Act, beginning at Government Code section 66410, is the separate local statute that governs tentative and final maps and physical subdivision design; the two schemes are routinely confused. The California Environmental Quality Act governs environmental review. Davis-Stirling governs how a common interest development is run after it exists, not how it is approved and sold.

A lawful commercial building becomes prohibited when the city rezones the area to residential use. The owner keeps operating the existing business. This is:

• a.A legal nonconforming use, which the ordinance may allow to continue subject to limits on expansion✓
• b.A variance, because the owner is excused from the new standard by reason of a unique hardship
• c.Spot zoning, because a single parcel now carries a classification different from its neighbors
• d.An illegal use that the city must abate immediately without any amortization period

A use that was lawful when established and becomes prohibited by a later ordinance is a legal nonconforming use, often described as grandfathered. Ordinances typically let it continue but restrict enlargement, rebuilding after destruction, and resumption after abandonment, and many provide an amortization period. A variance is something the owner applies for and the agency grants; it is not the automatic status of a pre-existing use. Spot zoning describes singling out one parcel for different treatment when the ordinance is adopted. And because the use was lawful when begun, it is not simply illegal.

The Alquist-Priolo Earthquake Fault Zoning Act affects a California real estate transaction chiefly because it:

• a.Prohibits the sale of any property located within one mile of a mapped active fault trace
• b.Requires every residential seller to retrofit the foundation before title can be transferred
• c.Creates mapped earthquake fault zones that must be disclosed to a buyer of property inside them✓
• d.Requires the buyer to obtain earthquake insurance as a condition of recording the deed

The Alquist-Priolo Act directs the State Geologist to delineate earthquake fault zones along known active faults, and a property inside such a zone must be disclosed; the earthquake fault zone is one of the six hazards on the Natural Hazard Disclosure Statement in Civil Code section 1103.2. The Act regulates construction across fault traces through local permitting; it imposes no blanket retrofit duty on sellers. It does not prohibit sales inside or near a zone. And earthquake insurance is optional in California, never a recording condition.

Under Civil Code section 1101.4, the seller of a single-family residence in California must disclose in writing to the buyer:

• a.The results of a mold inspection performed by a licensed industrial hygienist within the past year
• b.The statutory requirement to replace noncompliant plumbing fixtures and whether the property has any✓
• c.The estimated annual water consumption of the property for each of the preceding five years
• d.The name of the water agency serving the property and the current per-acre-foot wholesale rate

Civil Code section 1101.4 required noncompliant plumbing fixtures in single-family residential real property to be replaced with water-conserving fixtures on or before 1 January 2017, and subdivision (c) requires a seller or transferor to disclose that requirement in writing to the buyer along with whether the property includes any noncompliant fixtures. The section says nothing about mold testing, which California addresses through general material-fact disclosure rather than a mandated inspection. It requires no consumption history. And it does not call for information about the water supplier's wholesale rates.

For which properties does the federal lead-based paint disclosure rule require the seller to give the buyer the EPA pamphlet and a ten-day opportunity to test?

• a.All residential property in California regardless of the year it was constructed
• b.Target housing built before 1978, subject to the exemptions in the federal rule✓
• c.Any property located inside a mapped state responsibility wildland fire area
• d.Commercial and industrial buildings of any age that contain occupied offices

The federal Residential Lead-Based Paint Hazard Reduction Act applies to target housing, which is housing constructed before 1978, and requires the seller to disclose known lead-based paint and hazards, give the buyer the EPA lead hazard pamphlet, and allow a ten-day opportunity to conduct an inspection unless the parties agree otherwise. Post-1977 construction is outside the rule because residential lead paint was banned. Wildland fire areas are a California natural hazard disclosure category with no connection to lead. And the rule covers housing, not commercial or industrial buildings.

A recorded declaration of covenants, conditions and restrictions in a California subdivision contains a clause limiting occupancy by race. A broker asked about it should explain that the clause is:

• a.Void and unenforceable, and removable from the record under the Government Code✓
• b.Enforceable against later buyers because it was recorded before the current fair housing statutes
• c.Enforceable only by the homeowners association and only against the original purchasers
• d.Valid as a private agreement, since fair housing law reaches only sellers, lenders and licensees

Restrictive covenants that limit the use, occupancy or transfer of housing on a protected basis such as race are void and unenforceable in California, and the Government Code provides a restrictive covenant modification process so an owner or association can have the offending language struck from the recorded document. Recording date does not save such a clause; the point of the modification statute is that these clauses survive in old records. The association cannot enforce what the law voids. And fair housing law reaches private restrictions, not only the conduct of sellers, lenders and licensees.

In a California common interest development, if a recorded CC&R provision conflicts with a use permitted by the city's zoning ordinance, the practical result is that:

• a.The zoning ordinance controls, because a public regulation always overrides a private agreement
• b.The more restrictive of the two controls, so the owner must satisfy both the ordinance and the CC&Rs✓
• c.The CC&Rs control, because the association's governing documents are recorded against the parcel
• d.Neither controls, because the conflict makes both the ordinance and the CC&R provision void

Public land use controls and private restrictions operate independently, and an owner must comply with both. Where they differ, the more restrictive one effectively governs, because satisfying the looser rule still leaves the owner in breach of the stricter one. Zoning does not repeal private covenants, so a city permitting a use does not license a violation of the CC&Rs. Nor do the CC&Rs override the ordinance, since a private declaration cannot authorize what the public agency forbids. And a conflict between them does not invalidate either instrument.

A California parcel borders a flowing stream. The owner's right to make reasonable use of the water because the land adjoins the watercourse is:

• a.An appropriative right, obtained by permit from the State Water Resources Control Board
• b.A riparian right, which attaches to the land and is not lost through non-use✓
• c.A littoral right, which attaches to land bordering a lake, sea or other still body of water
• d.A correlative right, which governs the shared use of percolating groundwater by overlying owners

A riparian right belongs to land that borders a flowing watercourse. It attaches to the land itself, entitles the owner to reasonable use of the water, and is not lost merely because the owner does not exercise it. An appropriative right is created by permit or license from the State Water Resources Control Board for use that may be far from the stream, and it can be lost by non-use. A littoral right belongs to land bordering a lake or the sea rather than a stream. Correlative rights describe how overlying owners share a common groundwater basin.

Soil is gradually deposited on a riverfront parcel by the action of the current, enlarging the owner's land over several years. This process and its result are called:

• a.Erosion, and the owner must record an amended legal description before any transfer
• b.Avulsion, and the added land reverts to the state as sovereign submerged land
• c.Reliction, and the added land must be dedicated to the county as public open space
• d.Accretion, and the added land, called alluvion, belongs to the riparian owner✓

Accretion is the gradual addition of soil to riparian land by the action of water, and the deposited material is called alluvion; California treats the new land as belonging to the riparian owner. Avulsion is the sudden tearing away or deposit of land by a violent change in a watercourse, and it does not change boundaries in the same way. Reliction is the gradual withdrawal of water that exposes previously submerged land, which is a different process. Erosion is the gradual wearing away of land, the opposite of what happened here.

Under the Williamson Act, a California landowner who enters a contract with a county to keep land in agricultural use receives:

• a.Assessment based on the land's agricultural income value rather than its unrestricted market value✓
• b.A complete exemption from all state and local property taxes for the life of the contract
• c.A guaranteed public report from the Real Estate Commissioner authorizing sale of parcels
• d.A right to convert the land to residential use at any time on thirty days' written notice

The Williamson Act, formally the California Land Conservation Act, lets a landowner contract with a city or county to restrict land to agricultural or related open space use in exchange for assessment based on the actual agricultural income the land produces rather than its full unrestricted market value. It is a reduced assessment, not a full exemption from property tax. It has nothing to do with the Subdivided Lands Law public report. And the contract renews automatically each year unless a notice of nonrenewal starts a phase-out, so the owner cannot convert the land on short notice.