Oklahoma Real Estate Broker Exam — All Questions

A managing broker collects rents and security deposits for several owners. How must these funds be handled?

• a.Deposited into the brokerage's general operating account for convenience and tracked on a separate ledger for each owner
• b.Held in a trust (property-management) account separate from the broker's own funds✓
• c.Kept as cash in the office safe until month end
• d.Applied first to the broker's management fee, then remitted

Rents and security deposits are trust funds belonging to others and must be held in a trust or property-management account separate from the broker's operating and personal funds. Placing them in the broker's operating account is commingling, and using them for the broker's benefit is conversion, both serious violations. The broker keeps a ledger for each owner, reconciles the account regularly, and remits per the management agreement rather than skimming fees first. Proper trust handling is a defining broker competency.

A retail store's lease sets rent as a base amount plus a percentage of the tenant's gross sales. This is a:

• a.Percentage lease✓
• b.Gross lease, where the tenant pays all operating expenses
• c.Net lease, in which the landlord pays the property taxes
• d.Ground lease

A percentage lease ties part of the rent to the tenant's sales, common in retail and shopping centers because the landlord shares in the store's success. In a gross lease the landlord pays the operating expenses out of a flat rent; in a net lease the tenant pays some expenses (taxes, insurance, maintenance) on top of base rent. A ground lease leases the land itself, often long term, so the tenant can build. Matching lease type to property type is a core property-management skill.

A tenant remains in the unit after the lease term ends, without the landlord's permission. What kind of tenancy is this?

• a.Estate for years, which renews automatically
• b.Periodic tenancy
• c.Tenancy at sufferance✓
• d.Tenancy at will, terminable only by the tenant

A tenant who stays after the lease ends without the landlord's consent holds a tenancy at sufferance, the lowest leasehold interest; the former tenant is essentially a holdover the landlord may remove through lawful process. An estate for years has a fixed term; a periodic tenancy renews automatically period to period; and a tenancy at will continues only while both parties agree. A manager must know these distinctions to pursue the correct, lawful remedy rather than a wrongful self-help eviction.

A management agreement pays the firm 7% of rents actually collected. Scheduled rent for the month is $60,000, vacant units account for $2,400, and one tenant owing $1,200 never paid. What is the fee?

• a.$4,200
• b.$4,116
• c.$4,032
• d.$3,948✓

Collected rent is what the fee attaches to, so start there: $60,000 scheduled less $2,400 vacancy less $1,200 uncollected equals $56,400 actually collected. Then 0.07 x $56,400 = $3,948. Check: 7% of $56,000 would be $3,920, so a figure just under $4,000 is reasonable. The $4,200 answer bills 7% of the full scheduled rent, $4,032 forgets the delinquency, and $4,116 forgets the vacancy. Tying the fee to collected rent, rather than to scheduled rent, a flat monthly fee, or a per-unit fee, is what aligns the manager's pay with keeping units filled and rent actually coming in.

An owner's management agreement caps unbudgeted repairs at $2,500 without written approval. The on-site manager signs a $40,000 roof replacement contract without asking the owner. What best describes this?

• a.The owner is bound because a manager has unlimited spending authority
• b.The manager exceeded the authority the management agreement granted✓
• c.The contract is void because only an owner may sign for repairs
• d.The manager acted properly because roof work is ordinary upkeep

A property manager's authority is broad but not unlimited: it is defined by the management agreement, and a spending cap is exactly the kind of limit that binds the manager. Signing a $40,000 contract without approval exceeds that authority and exposes the manager and the supervising broker to the owner for the loss. The contract is not void, since a contractor who reasonably believed the manager had authority may still be able to enforce it against the owner, leaving the owner to look to the manager. A roof replacement is a capital item, not routine upkeep, and nothing about the manager's role grants unlimited spending power.

A manager could raise rents 12% at renewal but expects several long-term, reliable tenants to move out. Which reasoning best reflects a property manager's objectives?

• a.Never raise rent, because tenant goodwill outweighs the owner's income
• b.Always charge the maximum rent the market will bear at renewal
• c.Weigh the added income against turnover cost and the owner's long-term return✓
• d.Let the on-site staff decide, since they know the tenants best

A manager serves three objectives at once: producing the owner's desired return, preserving and enhancing the value of the investment, and keeping tenants satisfied enough to stay. Those goals pull against each other here. A 12% increase looks like more income until you subtract the make-ready cost, marketing, and weeks of lost rent from each unit that turns over; effective rent, which is what the owner actually collects after concessions and vacancy, can fall even as the asking rent rises. Charging the maximum without regard to turnover ignores the owner's return, refusing to ever raise rent ignores it too, and delegating the decision to on-site staff abandons the manager's own duty.

A manager is preparing next year's budget for a 40-unit building whose roof will need full replacement in roughly six years. Where does that cost belong?

• a.In the operating budget, spread evenly across monthly repairs
• b.In a capital reserve budget funded over the roof's remaining life✓
• c.Nowhere, since replacements are paid from rent when they occur
• d.In this year's variable operating expenses as a lump sum

Long-lived components such as roofs, boilers, elevators, and paving are funded through a capital reserve budget, which sets aside money each year so the replacement can be paid for when it comes due. The operating budget covers the recurring income and expenses of running the property this year: utilities, routine repairs, insurance, payroll, and the management fee. Burying a future roof in monthly repairs or in one year's variable expenses distorts both the budget and net operating income. Waiting to pay out of cash flow is how deferred maintenance starts. A reserve study, which estimates each component's remaining life and replacement cost, is the tool that sets the annual funding amount.

A firm's written rental policy automatically rejects any applicant who has any criminal record of any kind. Why does this policy create fair housing exposure?

• a.Criminal history is itself a protected class under federal law
• b.Federal law forbids any consideration of an applicant's record
• c.Applicants may lawfully be screened only on their credit score
• d.A blanket ban can have a disparate impact on protected classes✓

Criminal history is not a protected class, and housing providers may consider it. The problem is discriminatory effect: a policy that is neutral on its face can still violate the Fair Housing Act if it disproportionately excludes members of protected classes and does not serve a substantial, legitimate interest that could be met by a less discriminatory approach. A blanket lifetime ban, especially one counting arrests that never led to conviction, is the classic example. The defensible practice is an individualized assessment of the nature, severity, and recency of the conduct. Federal law does allow exclusion based on conviction for the manufacture or distribution of controlled substances, and screening is not limited to credit scores.

A tenant with a disability in a privately owned building that receives no federal housing assistance asks the manager to waive the no-pets rule for her assistance animal and to have grab bars installed in the bathroom. Which statement is correct?

• a.Both are modifications the landlord must install and pay for itself
• b.Both may be refused because the no-pets rule applies to all tenants equally
• c.The animal is a reasonable accommodation and the grab bars a reasonable modification✓
• d.The animal requires a pet deposit and the grab bars require landlord funding

A reasonable accommodation is a change in rules, policies, or services, such as waiving a no-pets rule; a reasonable modification is a physical change to the premises, such as grab bars. In private, unassisted housing the landlord bears the administrative cost of the accommodation, while the tenant generally pays for the modification and may be required to restore the unit where that is reasonable; where the provider receives federal financial assistance, Section 504 shifts the cost of structural modifications to the provider. An assistance animal is not a pet, so no pet deposit, pet rent, or pet fee may be charged, though the tenant remains responsible for actual damage the animal causes. Refusing both because the rule is applied uniformly is precisely the reasoning fair housing law rejects.

An owner considering the federal Housing Choice Voucher program asks the managing broker how it works. Which statement about that program is accurate?

• a.The federal government dictates the rent the owner must accept
• b.A housing agency pays part of the rent and the unit must pass inspection✓
• c.Federal law requires every private landlord to accept voucher holders
• d.The voucher goes to the tenant, who then owes the owner nothing

Under the Housing Choice Voucher program, a local public housing agency administering federal funds pays a housing assistance payment directly to the owner under a contract, and the tenant pays the balance out of pocket; the unit must pass a housing quality inspection and the rent must be reasonable compared with similar unassisted units. The agency reviews rent reasonableness rather than dictating a price the owner must take, and in the ordinary case the tenant pays a share out of pocket, generally about 30% of adjusted monthly income, though a family with almost no income can owe close to nothing. Federal fair housing law does not make source of income a protected class, so participation is voluntary as a matter of federal law, although some state and local laws do require owners to consider voucher holders.

A single-tenant industrial building is leased so the tenant pays a base rent plus the real estate taxes, the building insurance, and all maintenance on the property. This is a:

• a.A modified gross lease
• b.A gross lease
• c.A triple net lease✓
• d.An index escalation lease

Net leases are named for how many expense categories shift to the tenant: single net adds the taxes, double net adds taxes and insurance, and triple net adds taxes, insurance, and maintenance on top of base rent, which is the arrangement described. In a gross lease the landlord pays the operating expenses out of one flat rent. A modified gross lease splits them, commonly with the tenant paying increases above a base year or an expense stop. An index lease adjusts the rent by a published measure such as a consumer price index, while a graduated lease steps the rent up on a schedule fixed in advance.

A shopping center tenant receives a year-end statement billing its proportionate share of parking lot upkeep, exterior lighting, landscaping, and snow removal. This charge is:

• a.A tenant improvement allowance
• b.Percentage rent on the gross sales
• c.A common area maintenance (CAM) charge✓
• d.A ground rent escalation charge

Common area maintenance charges pass through the cost of operating the areas all tenants share, usually allocated by each tenant's share of leasable square footage, billed in monthly estimates and trued up in a year-end reconciliation. A tenant improvement allowance is the opposite direction of money: a landlord contribution toward building out the tenant's own space, negotiated when the lease is signed. Percentage rent is calculated on the tenant's sales, not on center expenses. Ground rent is what a tenant pays for leased land under a ground lease. A manager must be able to show what went into the pool and defend the allocation method when a tenant audits the bill.

A tenant holding a long-term lease at below-market rent subleases the space to another business at a higher rent, keeping the spread and reserving the final month of the term. The tenant now holds:

• a.A ground lease of the land
• b.A sandwich lease position✓
• c.A novation of the lease
• d.An assignment of the lease

When a tenant subleases and keeps an interest, that tenant's position sits between the original landlord above and the subtenant below, which is why it is called a sandwich lease. The sublessor keeps paying the landlord under the original lease and collects from the subtenant, profiting on the spread and staying fully liable upward. It is not an assignment, because the tenant did not transfer the entire remaining term and instead reserved the last month. Nothing here is a novation, which would require the landlord to release the original tenant and substitute a new one. A ground lease is a lease of the land itself, usually long term.

A commercial tenant assigns the entire remaining lease term to a new company and the landlord consents in writing, but signs no release. Who is liable when the new company stops paying rent?

• a.Only the assignee, since an assignment ends the tenant's duties
• b.The assignee, with the original tenant still secondarily liable✓
• c.Only the landlord's insurer, under the lease liability clause
• d.Neither one, because the landlord's consent discharged the lease

An assignment transfers the tenant's entire remaining interest, so the assignee becomes primarily liable to the landlord for the rent. The original tenant, however, made contractual promises in the lease and stays secondarily liable on them unless the landlord grants an express release or the parties execute a novation. Consenting to an assignment is not the same as releasing the assignor, which is the trap in this question. In a sublease the arrangement differs again: the subtenant owes the sublessor, and the original tenant remains fully liable to the landlord. No liability insurer pays a tenant's unpaid rent. Brokers negotiating assignments should get any release in writing.

An investor sells an apartment building in the middle of the tenants' one-year written leases. What happens to those leases when the deed is delivered at closing?

• a.They continue; the buyer takes title subject to them✓
• b.They terminate automatically once the deed is delivered
• c.They convert to month-to-month tenancies at the buyer's option
• d.They end unless every tenant signs a new lease at closing

A lease creates an interest in the property, so a sale does not end it. The buyer takes title subject to the existing leases, steps into the landlord's position, and must honor the terms, which is why buyers review the rent roll and collect estoppel certificates before closing and why the parties must follow the state's rule for transferring the tenants' security deposits to the new owner. Delivery of the deed changes the landlord, not the tenancy, and a buyer cannot unilaterally convert leases to month-to-month or force tenants to re-sign. The lease itself remains valid so long as it had competent parties, an adequate description of the premises, a term, rent, and a lawful purpose.

A manager ignores repeated written reports that the building's only heating system has failed. After weeks without heat in winter, the tenant moves out and stops paying rent. The tenant is claiming:

• a.Actual eviction, which always requires a court order
• b.Breach of quiet enjoyment, which requires staying in possession
• c.Constructive eviction, which can end the rent obligation✓
• d.Abandonment, which forfeits the tenant's security deposit

Constructive eviction arises when the landlord's act or failure to act makes the premises unusable for their intended purpose. The tenant must generally give notice, allow a reasonable chance to cure, and then actually vacate within a reasonable time; having done so, the tenant may treat the lease as ended and stop paying, and may pursue damages. Actual eviction is a physical ouster or removal through the lawful court process, which is not what happened. The covenant of quiet enjoyment is the promise that was breached, but a tenant who stays in possession has not established constructive eviction. Abandonment means leaving without legal cause, and this tenant had cause.

A retail tenant argues that the implied warranty of habitability obligates the landlord to replace the store's outdated ventilation system. How should the manager evaluate that argument?

• a.The warranty applies equally to every kind of leased property
• b.The warranty is mainly residential, so the lease governs here✓
• c.The warranty makes a commercial landlord responsible for all repairs
• d.The warranty requires the tenant to withhold rent before repairs

The implied warranty of habitability requires a residential landlord to deliver and maintain a dwelling fit to live in, covering essentials such as heat, running water, working plumbing, and structural safety, and in most states it cannot be waived. Courts generally do not imply it in commercial leases, where the parties are presumed capable of negotiating; a commercial tenant's rights come from the express repair, services, and maintenance clauses it bargained for. So the warranty does not reach every leased property, does not make a commercial landlord answer for every repair, and does not set up rent withholding as a prerequisite, since withholding and abatement remedies are creatures of state law.

A residential tenant is two months behind in rent. The on-site manager changes the locks and has the electricity shut off to push the tenant out. This action is:

• a.Proper, since the tenant breached the lease agreement first
• b.Proper if the lease authorizes a lockout for nonpayment
• c.Unlawful self-help rather than lawful court process✓
• d.Improper only if the tenant later pays the full balance

Changing locks, cutting utilities, removing doors, or setting a tenant's belongings on the curb are self-help evictions, and they are unlawful, exposing the owner, the manager, and the supervising broker to damages and license discipline. The lawful path is a proper notice, then a summary possession or unlawful detainer action, a judgment for possession, and a writ executed by a law enforcement officer; the notice forms and time periods are set by each state. A lease clause cannot authorize what the law forbids, the tenant's own breach creates no right of self-help, and the tenant paying later does not make the lockout retroactively lawful.

An owner short on cash instructs the managing broker to wire all of the tenants' security deposits to the owner's personal bank account. How should the broker respond?

• a.Refuse; deposits are trust funds held for the tenants✓
• b.Comply, since the owner owns the building and its money
• c.Comply if the owner signs a written indemnity agreement
• d.Send only the amount of each deposit above one month's rent

Security deposits are money belonging to others, held in trust; they are neither the owner's working capital nor the broker's. Releasing them on the owner's demand would be conversion of trust funds, and an indemnity agreement cannot authorize it, because the broker's duty runs to the parties beneficially entitled to the money and to the state's trust-fund rules, not to the owner's promise to make the broker whole. Sending part of each deposit is the same violation in smaller pieces. How much may be collected, whether interest accrues, where the funds sit, and when deductions and refunds must occur are all set by state law, which the broker follows rather than the client's instruction.

Roof flashing, exterior painting, and parking lot patching at an apartment complex have been postponed for several years to increase reported cash flow. An appraiser will treat this as:

• a.Deferred maintenance, a form of physical deterioration✓
• b.Routine maintenance funded in the annual operating budget
• c.Preventive maintenance that lowers future operating cost
• d.Corrective maintenance already covered by the capital reserves

Work that is needed and postponed is deferred maintenance, which appraisers treat as physical deterioration and deduct from value, frequently by more than the bare cost to cure because buyers discount for what else may have been neglected. Preventive maintenance is scheduled servicing and inspection intended to stop failures before they happen. Routine maintenance is the recurring day-to-day upkeep, such as cleaning, landscaping, and minor repairs, budgeted every year. Corrective maintenance is the actual repair performed after something breaks, and nothing here has been repaired or funded. Starving maintenance to raise short-term net operating income erodes both the owner's investment and the property's competitive position.

Rather than repair or insure an aging diving board at a managed apartment property, the manager has it removed entirely so the exposure no longer exists. This response to risk is:

• a.Risk control
• b.Risk transfer
• c.Risk avoidance✓
• d.Risk retention

Avoidance eliminates the activity or feature that creates the exposure, which is exactly what removing the board accomplishes. Control, sometimes called reduction, keeps the activity but lowers the frequency or severity of loss through measures such as fencing the pool, posting depth markers, improving lighting, and enforcing hours. Transfer shifts the financial consequence to another party, chiefly through insurance or an indemnity clause in a lease or vendor contract. Retention is the deliberate decision to absorb a loss, through deductibles, self-insurance, or a funded reserve. A competent manager uses all four, and the exam tests whether you can name which one a described action represents.

A covered fire leaves an owner's office building untenantable for eight months. Rent stops coming in while the mortgage and taxes continue. Which coverage responds to the lost rental income?

• a.General liability coverage
• b.Fire legal liability coverage
• c.Business interruption coverage✓
• d.Workers compensation coverage

Business interruption coverage, often written as rent loss for investment property, replaces the income the building would have produced while it cannot be occupied after a covered peril, which is why lenders and experienced owners insist on it. Property or hazard insurance pays to repair the physical damage but not for the stream of rent that stopped. General liability responds to bodily injury and property damage claims brought by others on the premises. Workers compensation covers job injuries to on-site employees. Fire legal liability covers a tenant's liability for fire damage to the space it rents. Managers also require tenants to carry renters insurance, since the owner's policy covers neither tenants' belongings nor tenants' liability.

A firm manages a multi-tenant office building whose lobby, corridors, and restrooms are open to the public. Which statement best describes the ADA obligations for those existing areas?

• a.The building is exempt because it predates the ADA entirely
• b.Compliance is triggered only when the city issues a permit
• c.Barriers must be removed where removal is readily achievable✓
• d.A lease clause assigning ADA duties to tenants ends liability

Title III of the Americans with Disabilities Act covers public accommodations and commercial facilities, and in existing buildings it requires removal of architectural barriers where that is readily achievable, meaning able to be carried out without much difficulty or expense; alterations and new construction must meet the accessibility standards outright. Being built before the ADA is not an exemption, and no permit application triggers or postpones the duty. Landlords and tenants may allocate the work between themselves by lease, but that private allocation does not extinguish either one's liability to the public. A prudent manager keeps a written barrier-removal plan and documents what has been completed each year.

A brokerage manages 60 buildings for different owners, with on-site managers collecting the rent. Which practice best satisfies the broker's supervision and trust-fund duties?

• a.Letting each on-site manager hold receipts in a personal account
• b.Reconciling the trust account and keeping a ledger per owner✓
• c.Combining the owners' funds with the firm's operating account
• d.Relying on each owner's accountant to audit the deposits yearly

The broker must reconcile the property-management trust account on the schedule state law requires, comparing the bank balance to the book balance and to the total of the individual owner ledgers, and must maintain a separate ledger showing every receipt and disbursement for each owner. Unlicensed on-site staff who handle money must be trained, supervised, and often bonded, with every dollar routed into the firm's trust account rather than into personal or building accounts. Merging owner funds into the operating account is commingling. An owner's own accountant does not discharge the broker's recordkeeping and supervision duty, and failure to supervise is a common independent ground for broker discipline.