Kentucky Real Estate Broker Exam — All Questions

A Kentucky principal broker agrees to manage a fourplex for an owner. What must be in place before he begins?

• a.A current written property management agreement naming the bank and number of the escrow account✓
• b.A separate property manager certificate issued by the commission for each managed property
• c.A written agreement, but only where the broker will be collecting tenant security deposits
• d.An oral understanding, provided the owner confirms it in writing within thirty days of the start date

201 KAR 11:121 Section 10(1) is unconditional: 'A principal broker, or an affiliated licensee, shall not engage in property management without a current written property management agreement.' Section 10(2) then lists fourteen minimum contents, including the registered company name and address, the client's name and address, the address and number of units, the effective dates and whether the client agrees to automatic annual renewal, the method of early termination, the compensation, the minimum security deposit per unit, 'The name and address of the bank where the principal broker's escrow or management account is held, and, consistent with KRS 383.580(1), the account number' — information which must also appear in the lease — the KRS 383.580 security-deposit procedures, which must also appear in the lease, the conditions for paying expenses, the accounting date, a copy of the lease form attached, the client's certification of receipt, and both signatures with dates. Nothing turns on whether deposits are collected, and Kentucky issues no property manager credential: property management is real estate brokerage under KRS 324.010(1) and is defined at 324.010(9).

Kentucky sets deadlines around property management money. Which pairing is correct?

• a.Money into the escrow or management account within ten business days; final accounting within 30 days of the end
• b.Money into the escrow or management account within three business days; final accounting only if the client asks
• c.Money into the escrow or management account within three business days; final accounting within 60 days of termination✓
• d.Money into the escrow or management account by the end of the month; final accounting within 90 days of termination

Both figures come from 201 KAR 11:121 Section 10. Subsection (4): 'Money received shall be deposited into an escrow or management account of the principal broker within three (3) business days of receipt.' Subsection (10): 'Within sixty (60) days of the termination of a management agreement, a principal broker shall send the client a final accounting that contains any transaction that occurred after the last monthly accounting.' It is owed automatically, not on request. Between those two sit the running duties: subsection (9) requires a monthly accounting to the client, by unit, on the date the parties set; subsection (3) requires an owner ledger for each client and a unit ledger for each unit, plus a ledger by tenant on the client's written request; and subsections (5) to (8) require money received to be entered on the ledgers, a receipt to be given for it, expenses to be documented by invoice or receipt by unit, and security deposit adjustments to be made under KRS 383.580 and entered on both ledgers. KRS 324.111(7) adds that property management accounts be kept separate from all other accounts, or property management funds specifically identified in the escrow records.

A Kentucky property management agreement must carry the security-deposit procedures of KRS 383.580. Where a local government has adopted that Act, what does it require of the landlord?

• a.Deposits held in any account the landlord chooses, provided they are refunded within thirty days
• b.Deposits held in an interest-bearing account, with the interest paid to the tenant at move-out
• c.Deposits held by the managing broker alone, who may release them to either party on request
• d.Deposits held in an account used only for that purpose, with the tenant told the account number✓

KRS 383.580(1) requires all landlords of residential property taking security deposits to deposit them 'in an account used only for that purpose' at a regulated bank or lending institution, and provides that 'Prospective tenants shall be informed of the location of the separate account and the account number.' The sanction is severe and often tested: under 383.580(4) no landlord is entitled to retain any portion of a deposit if it was not held in a separate account and if the initial and final damage listings required by subsections (2) and (3) were not provided — a signed list of existing damage with estimated repair costs before the tenant tenders the deposit, and a matching list at the end of occupancy. Kentucky pays no statutory interest to tenants, and there is no thirty-day universal refund rule; 383.580(6) and (7) let the landlord take the deposit out after thirty days where the tenant left owing the last month's rent and made no demand, or after sixty days where a refund notice went unanswered. Note the scope: KRS 383.580 sits inside the Uniform Residential Landlord and Tenant Act, which KRS 383.500 lets cities, counties and urban-county governments adopt in their entirety and without amendment — so it binds landlords only where adopted. The licensee's duty is statewide regardless, because 201 KAR 11:121 Section 10(2)(h) and (i) require the management agreement and the lease to carry these procedures and the account number.