Michigan Real Estate Broker Exam — All Questions

A Michigan seller conveys an unplatted parcel in a township, abutting a road never accepted as public. Section 261 of the Land Division Act requires the seller to:

• a.Petition the county road commission to accept the road
• b.Give written notice on a separate attached instrument✓
• c.Record a maintenance agreement before the closing date
• d.Obtain a variance from the township planning commission

MCL 560.261 forbids selling any lot in a recorded plat or any parcel of unplatted land in an unincorporated area abutting a street or road that has not been accepted as public "unless the seller first informs the purchaser in writing on a separate instrument to be attached to the instrument conveying any interest" that the road is private and is not required to be maintained by the board of county road commissioners; a contract entered into in violation of the section is voidable at the purchaser's option. The duty is disclosure with voidability as its sanction, not a duty to get the road accepted, to record a maintenance agreement or to obtain a zoning variance. The act is 1967 PA 288, MCL 560.101 and following, still carrying the popular names Plat Act and Subdivision Control; 1996 PA 591, the public act PSI's outline names for this topic, is the amendment that retitled it the land division act, effective March 31, 1997. Michigan's separate Land Sales Act, 1972 PA 286, was repealed in full by 2010 PA 49, so older material naming it is out of date.

A Michigan licensee tells homeowners the racial makeup of their block is changing and values will fall, hoping to win listings. MCL 37.2506 makes this:

• a.Lawful when the statement is factually accurate
• b.Unlawful under the Elliott-Larsen Civil Rights Act✓
• c.Unlawful only where the licensee is compensated
• d.Lawful if made to fewer than five households

MCL 37.2506 forbids representing, for the purpose of inducing a real estate transaction from which the person may benefit financially, that a change has occurred or will or may occur in the composition of the owners or occupants of a block, neighborhood or area with respect to religion, race, color, national origin, age, sex, sexual orientation, gender identity or expression, familial status or marital status — or representing that such a change will or may lower property values, increase criminal or antisocial behavior, or bring a decline in the quality of schools. The prohibition attaches to making the representation, so the accuracy of the claim, the number of households approached and whether a commission was actually earned are all beside the point. MCL 37.2502 covers the rest of the ground, barring refusal to deal, discriminatory terms, refusal to transmit a bona fide offer, misrepresenting availability, discriminatory advertising and taking a listing on discriminatory instructions, and MCL 339.2515(1) requires every Michigan listing agreement to state that discrimination is prohibited.

Under the Michigan Persons with Disabilities Civil Rights Act, a broker may not refuse to deal with a renter on the basis of a disability that is:

• a.Disclosed only after a lease application is submitted
• b.Not registered with a state disability assistance program
• c.Unrelated to the ability to acquire or maintain property✓
• d.Documented by a licensed physician's written report

MCL 37.1502(1) reaches an owner, any other person engaging in a real estate transaction, and a real estate broker or salesperson, and it protects the buyer or renter, a person residing or intending to reside in the dwelling, and anyone associated with them, against discrimination on the basis of a disability "that is unrelated to the individual's ability to acquire, rent, or maintain property or use by an individual of adaptive devices or aids." That relatedness test is the structure of the whole section; nothing in it turns on when the disability was mentioned, on enrollment in any state program, or on medical documentation. Subsection (1)(f) also bars discriminatory advertising and application forms, and subsection (2) bars denying a person access to a multiple listing service or a brokers' organization. On the disclosure side the counterpart is MCL 339.2518(a): no action lies against a licensee for failing to disclose that a former occupant has or is suspected of having a disability.

A Michigan broker manages rentals. Under 1972 PA 348 the security deposit may not exceed 1 1/2 months' rent, and an itemized list of damages must be mailed to the departed tenant within:

• a.14 days after the tenant vacates the unit
• b.45 days after the lease term formally ends
• c.30 days after the termination of occupancy✓
• d.7 days after the tenant's forwarding address

MCL 554.602 caps the security deposit at 1 1/2 months' rent, and MCL 554.609 requires the landlord to mail the tenant an itemized list of damages, together with a check or money order for the balance, within 30 days after the termination of occupancy. The other intervals in the act are real but attach to different steps, which is what makes them useful distractors: MCL 554.603 gives the landlord 14 days from the tenant taking possession to deliver the written notice of the landlord's name and address, the depository and the tenant's own duty to supply a forwarding address within 4 days of moving; MCL 554.609 requires the tenant to respond to the notice of damages within 7 days or forfeit the amount claimed; and MCL 554.613(1) gives the landlord 45 days after termination of occupancy to commence an action for a money judgment. Failing to comply fully with MCL 554.613 waives all claimed damages and makes the landlord liable to the tenant for double the amount retained.

The Michigan Truth in Renting Act makes which lease clause void?

• a.A clause requiring 30 days' notice to vacate
• b.A clause requiring rent on the first of the month
• c.A clause forbidding pets anywhere in the rental unit
• d.A clause providing for a confession of judgment✓

MCL 554.633(1)(d) forbids a rental agreement to include a provision for a confession of judgment by a party, and MCL 554.633(3) makes any provision that violates the section void. The rest of the prohibited list has the same character: waiving or altering remedies for a breach of the covenants of fitness and habitability, waiving rights under the security deposit act, discriminating in violation of the Elliott-Larsen Civil Rights Act or the Persons with Disabilities Civil Rights Act, exculpating the lessor from its own failure to perform, waiving a jury trial, shifting legal costs beyond what statute permits, taking a security interest in the tenant's personal property, accelerating rent without noting the duty to mitigate, waiving eviction procedure, releasing a duty to mitigate damages, requiring a power of attorney, and letting the lessor alter the agreement without the tenant's written consent. Ordinary commercial terms — due dates, pet rules and notice periods — are untouched. MCL 554.634 separately requires the agreement to state the address for notices and to carry the statutory notice in type no smaller than 12 point.

Michigan's criminal usury statute, MCL 438.41, is violated where a lender not authorized by law to do so knowingly charges simple interest at a rate exceeding:

• a.25% per annum✓
• b.7% per annum
• c.11% per annum
• d.36% per annum

MCL 438.41 makes it criminal usury to knowingly charge, take or receive money or other property as interest on the loan or forbearance of money at a rate exceeding 25% at simple interest per annum, or the equivalent rate for a longer or shorter period, and it punishes the offense by imprisonment of up to 5 years or a fine of not more than $10,000.00, or both. The 7% figure is real but belongs to a different statute and a different question: MCL 438.31 sets the legal rate of interest at 5% and lets the parties stipulate in writing for any rate not exceeding 7% per annum — while excluding from that act any obligation whose rate is regulated by another law of this state or of the United States, which is why ordinary regulated mortgage lending is not confined to 7%. Neither 11% nor 36% appears in either act.

A Michigan home sells for $200,000 in a county of fewer than 2,000,000 people. The state real estate transfer tax alone, at $3.75 per $500 of value, is:

• a.$1,100
• b.$1,720
• c.$860
• d.$1,500✓

MCL 207.525(1) levies the state real estate transfer tax at $3.75 for each $500.00 or fraction of $500.00 of the total value of the property transferred, so $200,000 divided by $500 gives 400 units and 400 multiplied by $3.75 is $1,500. The county transfer tax under MCL 207.504 is a separate and much smaller levy — 55 cents for each $500.00 in a county with a population under 2,000,000, and not more than 75 cents where the county board of commissioners so authorizes in a county of 2,000,000 or more — which adds $220 here and produces the $1,720 combined figure that the third choice reflects. The written instrument must state the total value on its face unless an affidavit declaring it is attached. MCL 207.526 exempts a long list of transfers, among them instruments given as security, leases, conveyances to a child, stepchild or grandchild, conveyances creating or ending a tenancy by the entireties, corrective deeds, land contracts before legal title passes, and instruments given in foreclosure or in lieu of it.

A Michigan buyer signs a purchase agreement for a residential condominium unit and receives the developer's section 84a documents. She may withdraw without cause or penalty within:

• a.3 business days after receiving the documents
• b.15 calendar days after signing the agreement
• c.30 calendar days after the master deed records
• d.9 business days after receiving the documents✓

MCL 559.184(2) gives the purchaser 9 business days from receipt of the documents required by MCL 559.184a to withdraw from a signed purchase agreement without cause and without penalty, provided the withdrawal comes before conveyance of the unit; the count includes the day the documents are received if that day is a business day, and MCL 559.184(4)(b) requires the purchase agreement to recite the right. The 3-business-day figure appears in the same section but measures something else — MCL 559.184(4)(a) requires escrowed funds to be returned to the purchaser within 3 business days after a withdrawal. The right of withdrawal may be waived only in exceptional cases, in writing, by a purchaser who has received all the listed documents and knowingly and voluntarily gives it up under MCL 559.184(5), and the section does not apply to a business condominium unit. Amending the purchase agreement or the condominium documents affords no additional time to withdraw under MCL 559.184a(2).

A Michigan co-owner wants to lease her condominium unit. Before presenting a lease to a prospective tenant she must notify the association of co-owners in writing at least:

• a.5 days before, with the tenant's credit report
• b.20 days before, with the association's approval
• c.10 days before, with a copy of the exact lease✓
• d.30 days before, with a copy of the master deed

MCL 559.212(2) requires a co-owner, including the developer, who wishes to rent or lease a unit to disclose that fact in writing to the association of co-owners at least 10 days before presenting a lease or otherwise agreeing to grant possession, and at the same time to supply the association with a copy of the exact lease for review for compliance with the condominium documents; a copy of the executed lease must follow, and where no lease is used the co-owner must supply the occupants' names and address, the rent and its due dates, and the term. Subsection (3) requires tenants to comply with the condominium documents and requires every lease to say so. If the association concludes a tenant has not complied, subsection (4) has it notify the co-owner by certified mail and allow 15 days to investigate and cure before it may sue for eviction and damages. Where the co-owner is in arrears on assessments, subsection (5) lets the association direct the tenant to pay rent to it instead.

The Michigan State Housing Development Authority, created by 1966 PA 346, matters to a broker chiefly because it:

• a.Finances housing for low and moderate income buyers✓
• b.Issues the broker and salesperson licenses in Michigan
• c.Holds the escrow accounts of Michigan brokerage firms
• d.Adopts the zoning ordinances of Michigan municipalities

The State Housing Development Authority Act of 1966, MCL 125.1401 and following, opens by finding a seriously inadequate supply of and a pressing need for safe and sanitary dwelling accommodations within the financial means of low income or moderate income families and persons, and it declares it a valid public purpose to finance the acquisition, rehabilitation and construction of that housing and to make financing for the purchase of existing housing available at affordable interest rates. That is where a broker meets MSHDA in practice, in the down-payment assistance and mortgage products a qualifying buyer may use. Licensing and discipline belong to LARA under the Occupational Code; a client's escrow money stays in the broker's own non-interest-bearing demand trust account under R 339.22134(3); and zoning is a function of local government, not of a state housing authority.

Two competing Michigan brokerages agree over lunch to quote the same commission rate. Under the Michigan Antitrust Reform Act, 1984 PA 274, that agreement is:

• a.Lawful where each brokerage may still discount it
• b.Unlawful as a conspiracy in restraint of trade✓
• c.Lawful because commission rates are negotiable
• d.Unlawful only if a consumer proves actual harm

MCL 445.772 provides that a contract, combination or conspiracy between 2 or more persons in restraint of, or to monopolize, trade or commerce in a relevant market is unlawful, and MCL 445.773 separately reaches the establishment, maintenance, use or attempted establishment of a monopoly for the purpose of excluding or limiting competition or controlling, fixing or maintaining prices. An agreement among competitors about what to charge is the paradigm case, and the offense is complete on the agreement itself — a retained freedom to discount does not undo it, and no showing of actual consumer harm is required to make it unlawful. Commission rates are indeed negotiable between a broker and a client, which is exactly what an agreement among brokerages takes away from the client. A licensee who does this is also exposed to discipline under MCL 339.604 for violating a rule of conduct of the occupation.

A Michigan house sits within one mile of a working farm. Under MCL 286.473c the seller's one-mile farm notice is:

• a.Mandatory, and must be recorded with the deed at closing
• b.Mandatory, and must be signed by the neighboring farmer
• c.Voluntary, and bars any later nuisance suit by the buyer
• d.Voluntary, while the disclosure statement asks about farms✓

MCL 286.473c(1) says a seller of real property located within 1 mile of the property boundary of a farm or farm operation "may voluntarily make available to the buyer" the statement that generally accepted agricultural and management practices may generate usual and ordinary noise, dust, odors and other associated conditions, and that those practices are protected by the Michigan Right to Farm Act. It is an option, which is a genuine trap: PSI's outline heads this topic "Michigan Right to Farm Act (Seller's Disclosure Required)" and study material often reads that heading as making the one-mile notice compulsory. What is compulsory is the Seller's Disclosure Statement itself, whose "Other Items" list asks the seller whether there is a farm or farm operation in the vicinity, MCL 565.957. Giving the notice extinguishes no claims; what protects the farm is MCL 286.473, and MCL 286.473b lets a farm that prevails in a nuisance action recover its actual costs and reasonable attorney fees. Note that MCL 286.473c(2) still cross-refers to the Land Sales Act at MCL 565.808, an act repealed in full by 2010 PA 49.

A Michigan homeowner sells her own house on land contract and finances it herself. Under Regulation Z as amended by Dodd-Frank, a natural person escapes the definition of loan originator if, among other conditions, she finances the sale of:

• a.Any number of properties she has owned for 5 years
• b.Up to five properties in any single calendar year
• c.Only properties she built herself for resale at retail
• d.Only one property she owns in any 12-month period✓

12 CFR 1026.36(a)(5) excludes a natural person, estate or trust that provides seller financing for the sale of only one property in any 12-month period, owned by that person and serving as security for the financing, that has not built or acted as contractor for a residence on the property in the ordinary course of business, and whose financing carries no negative amortization and a fixed rate or a rate first adjustable after five or more years with reasonable caps. 12 CFR 1026.36(a)(4) is the wider exclusion, reaching three or fewer properties in any 12-month period, and it imposes two conditions the one-property exclusion does not: the financing must be fully amortizing, and the seller must determine in good faith that the consumer has a reasonable ability to repay. Neither exclusion is stated as a five-property or five-year test, and neither is available to a person who built the residence in the ordinary course of business. Michigan land contracts remain creatures of state law, but a seller-financed residential deal must now clear this federal screen too.