Unit 17. Broker Pre-License Topics. Policy. Lesson 3. Leases. Lesson 3 - Page 1 (800) InstituteOnline.com. Real Estate Institute 2021

Full text

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© Real Estate Institute | InstituteOnline.com 1

Broker Pre-License Topics

Lesson 3

Units: 17, 18, 21, & 22

Property Management, Fair Housing & Environmental Issues

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Broker Pre-License Topics

• Copyright ©2021 by Real Estate Institute

• All rights reserved. No part of this presentation may be recorded, reproduced, stored in any retrieval system or transcribed in any form or by any means (electronic, mechanical, photocopy, recording or otherwise) without the prior written permission of the Real Estate Institute.

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• This presentation is available exclusively for students enrolled in a course with Real Estate Institute.

Policy

3

Leases

Unit 17

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Broker Pre-License Topics

• Identify – the four types of leasehold estates

• Describe – the requirements and general conditions of a valid lease and how a lease may be discharged

• Explain – the rights of landlords and tenants in an eviction proceeding

• Distinguish – between the various types of leases

Learning Objectives

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Broker Pre-License Topics

Leases

A lease is a contract between an owner of real estate (lessor) and a tenant (lessee) to transfer the lessor’s rights to exclusive possession and use of the property to the tenant for a specified period of time.

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Broker Pre-License Topics

• A landlord retains a reversionary right to possession after the lease term expires.

The lessor’s interest is called a leased fee estate plus

reversionary right.

Leases

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Broker Pre-License Topics

• In Illinois, The Statute of Frauds requires leases of over one year to be in writing to be enforceable.

• Verbal leases for one year or less that can be performed within a year of their making are enforceable.

Leases

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Broker Pre-License Topics

Estate For Years

Estate From Period-to-Period Estate At Will

Estate At Sufferance

Leasehold Estates

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Broker Pre-License Topics

In ILLINOIS . . . The notices required by statute are:

• Tenancy from year to year: at least 60 days’

written notice within the four-month period prior to the last 60 days of the lease period

• Tenancy from month to month: 30 days’ written notice

• Tenancy from week to week: seven days’ written notice

• Farm tenancies from year to year: four months’

written notice, with termination only at the end of the period

Leasehold Estates

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Broker Pre-License Topics

Estate For Years - A leasehold estate that

continues for a definite period of time and automatically

terminates at the end of that period is called an estate for years.

No notice is required to terminate the estate for years.

Leasehold Estates

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Broker Pre-License Topics

Estate From Period-to-Period

Automatically renew unless notice of termination is given by one of the parties.

Leasehold Estates

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Broker Pre-License Topics

Estate At Will –

A tenancy of indefinite duration, an estate at will continues until it is terminated by either party giving proper notice.

Leasehold Estates

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Broker Pre-License Topics

Estate At Sufferance – A tenancy that arises when a tenant who lawfully possessed real property continues in possession of the premises without the landlord’s consent after the rights expire.

Leasehold Estates

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Broker Pre-License Topics

Requirements of a Valid Lease

• Capacity To Contract

• Legal Objective

• Offer and Acceptance

• Consideration

Lease Agreement

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Broker Pre-License Topics

Possession -

The covenant of quiet enjoyment is a presumed

promise by the lessor.

Use of Premises - A

lessor may restrict a lessee’s use of the

premises through provisions included in the

lease.

Improvements

- Any alterations become fixtures,

which are the landlord’s property.

Lease Agreements

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Term of Lease - The period for

which the lease

will run.

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Broker Pre-License Topics

In Illinois,

• Compensation for damages

• 5 or more units

• statement listing damages within 30 days

• return security deposit within 45 days

• Interest on deposits

• 25 or more units

• if deposits held at least 6 months

• pay interest every 12 months

Security Deposits

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Broker Pre-License Topics

Accessibility -

It is illegal to discriminate

against prospective tenants on the basis of physical

disability.

Tenants with disabilities must

be permitted to make reasonable modifications to a property at their

own expense.

Lease Agreements

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Broker Pre-License Topics

The Americans with Disabilities Act (ADA)

also applies to

commercial, nonresidential property

in which public goods or services are

provided.

Lease Agreements

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Broker Pre-License Topics

Maintenance

• In ILLINOIS . . . A landlord must deliver and maintain any residential leasehold free from defects that would render the use of the dwelling unsafe or unsanitary and unfit for human occupancy (implied warranty of habitability).

Destruction of Premises

• In leases involving agricultural land, when improvements are damaged or destroyed, the tenant is obligated to pay rent to the end of the term.

Lease Agreements

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Broker Pre-License Topics

Assignment

- When a tenant transfers all leasehold interests to

another person.

Subletting - When a

tenant transfers less than all the leasehold interests by leasing them to a new tenant.

Lease Agreements

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Broker Pre-License Topics

Recording a Lease

• Possession of leased premises is constructive notice of the lessee’s interest. Anyone who inspects the property receives actual notice.

Owners of commercial property often record leases.

Options

• A lease may contain an option that grants the lessee the privilege of renewing the lease.

Lease Agreements

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Broker Pre-License Topics

Gross Lease - Tenant

pays a fixed rental, and

landlord pays all operating expenses.

Net Lease - Tenant

pays all or some of the operating expenses in addition to the rent. A common variation is a

triple net lease.

Percentage Lease -

Rent is based on a base fixed rental fee plus a percentage of the gross income. Common type of retail business

lease.

Types of Leases

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Broker Pre-License Topics

Variable Leases

Graduated Lease -

Provides for specified

rent increases at set dates.

Index Lease - Allows rent to be adjusted periodically based on changes in the consumer

price index or some other indicator.

Types of Leases

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Broker Pre-License Topics

Ground Lease - Involves separate ownership of the

land and buildings.

Historically, this type of lease was used in the gas station

business.

Oil and Gas Lease -

When an oil company leases land to explore

for oil and gas.

Lease Purchase - Part of the rent is applied toward the purchase price until the tenant can

obtain financing or purchase the property.

Sale-and-Leaseback -

Owners of a property sell the property and then lease it back

again.

Types of Leases

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Broker Pre-License Topics

• A lease is terminated when the contract terminates;

either when the parties have fully performed their obligations or agree to cancel the lease.

• The lease does not terminate if the parties die or if the property is sold.

• A tenancy may be terminated by operation of law:

bankruptcy or condemnation.

Discharge of Leases

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Broker Pre-License Topics

5-day notice:

 If the tenant fails to pay the rent, the landlord may terminate the lease automatically and sue for possession. If the tenant pays the past-due rent, the lease continues in full force.

10-day notice:

 If the tenant’s breach is other than nonpayment of rent, the landlord may terminate the tenancy by serving the tenant with 10 days’ written notice.

Landlord’s Remedies in Illinois

Actual Eviction (called forcible entry & detainer)

Breach of Leases

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Broker Pre-License Topics

Tenants’ Remedies -

• If a landlord breaches any clause of a lease agreement, the tenant has the right to sue for damages.

Constructive Eviction -

• If the premises become unusable for the purpose stated in the lease, the tenant may have the right to abandon them.

Breach of Leases

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Broker Pre-License Topics

• In Illinois, a landlord must file a Forcible Entry And

Detainer Action

• The suit should be filed in the circuit court of the county in which the property is located.

• If the court rules in favor of the landlord, the tenant must then leave the premises.

Evictions

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Broker Pre-License Topics

• All persons must have access to housing of their choice without any differentiation in the terms and conditions because of their race, color, religion, familial status, disability, or gender.

• In rental, apply same tenant criteria to everyone.

• Illinois Human Rights Act More in Unit 21 – Fair Housing

Civil Rights Laws

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Broker Pre-License Topics

Lead-Based Paint

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The Federal Lead-

Based Paint Hazard

Reduction Act requires

that landlords disclose

any possible lead-based

paint or related hazards.

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Broker Pre-License Topics

Residential Leasing

Agents

Referral Fees –

The IL Real Estate License Act allows landlords to pay a referral fee to tenants of no more than $5,000- or two- month’s rent, whichever is

less, in any 12-month period.

Rental- Finding Services

Regulation of the Rental Industry

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Broker Pre-License Topics

Quick-Fire Review

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Broker Pre-License Topics

• Would you be able to describe the different Leasehold Estates to a Landlord or Tenant?

Quick-Fire Review

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Broker Pre-License Topics

• Would you be able to describe the different types of leases available to a Landlord or Tenant?

Quick-Fire Review

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Broker Pre-License Topics

Quick-Fire Review

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Broker Pre-License Topics

• Generally, an oral lease for five years is illegal.

Quick-Fire Review

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Broker Pre-License Topics

• Generally, an oral lease for five years is illegal.

• FALSE!

Quick-Fire Review

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Broker Pre-License Topics

• A lease would be terminated by the sale of the leased premises.

Quick-Fire Review

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Broker Pre-License Topics

• A lease would be terminated by the sale of the leased premises.

• FALSE!

Quick-Fire Review

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Broker Pre-License Topics

• Under a tenancy for years, the term of the lease must be for at least one year.

Quick-Fire Review

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Broker Pre-License Topics

• Under a tenancy for years, the term of the lease must be for at least one year.

• FALSE!

Quick-Fire Review

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Broker Pre-License Topics

 Actual eviction

 Assignment

 Cash Rent

 Constructive Eviction

 Estate At Sufferance

 Estate At Will

 Estate For Years

 Estate From Period To Period

 Gross Lease

 Ground Lease

 Holdover Tenancy

 Implied Warranty of Habitability

Key Terms Review

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Broker Pre-License Topics

 Lease

 Leasehold Estate

 Lease Purchase

 Month-To-Month Tenancy

 Net Lease

 Nondisturbance Clause

 Percentage Lease

 Rental-Finding Service

 Reversionary Right

 Right of First Refusal

 Security Deposit

 Sharecropping

 Sublease

Key Terms Review (cont’d)

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Broker Pre-License Topics

• Identify – the four types of leasehold estates

• Describe – the requirements and general conditions of a valid lease and how a lease may be discharged

• Explain – the rights of landlords and tenants in an eviction proceeding

• Distinguish – between the various types of leases

Learning Objectives - Review

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Property Management

Unit 18

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Broker Pre-License Topics

• Identify – the basic elements of a management agreement;

• Describe – a property manager’s functions; and

• Explain – risk management and the role of environmental regulations and the Americans with Disabilities Act in the property manager’s job.

Learning Objectives

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Broker Pre-License Topics

Property Management

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Property management involves the leasing, managing, marketing, and maintenance of real estate.

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Broker Pre-License Topics

In ILLINOIS…

• Property management requires a real estate license, and an individual real estate licensee must perform property management services under the supervision of his or her sponsoring broker.

• The Real Estate License Act of 2000 exempts resident managers from licensure requirements when their primary residence is on the premises being managed.

• Illinois permits individuals whose real estate practice is limited to leasing or renting residential property, collecting rent, negotiating leases, and similar activities to obtain a special Residential leasing agent license instead of the broader-scope broker license.

The Property Manager

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Broker Pre-License Topics

Principal Responsibilities

1. Achieve the objectives of the property owners.

2. Generate income for the owners.

3. Preserve and/or increase the value of the investment property.

The Property Manager

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Broker Pre-License Topics

• Community association management

• Housing for the elderly

• Manufactured homes

• Resort housing

• Concierge services

• Asset management

• Corporate property managers

• Residential leasing agents

New Opportunities

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Broker Pre-License Topics

Management Agreement

Creates a general agency relationship between the owner and the property manager.

The Property Manager

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Broker Pre-License Topics

• Budgeting Expenses

• Capital expenditures

• Renting the Property

• Setting rental rates

• Selecting Tenants

• Collecting rents

• Maintaining Good Relations with Tenants

Property Management Responsibilities

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Broker Pre-License Topics

Maintaining the Property

• Preventive maintenance

• Repair or corrective maintenance

• Routine maintenance

• Construction

Management Functions

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Broker Pre-License Topics

Handling Environmental Concerns

• A variety of environmental issues, from waste disposal to air quality, must be addressed by the property manager.

• Property manages should be aware of building related illness (BRI) and sick building syndrome (SBS).

Management Functions

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Broker Pre-License Topics

The Americans with Disabilities Act

• Title I of the ADA provides for the employment of qualified job applicants regardless of their disability.

• Title III of the ADA prohibits discrimination in commercial properties.

• The ADA recommends reasonably achievable accommodations to provide access to the facilities and services.

Management Functions

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Broker Pre-License Topics

Risk Management

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One of the most critical areas of responsibility for a property manager is risk management. The property manager must decide whether it is better to avoid, control, transfer, or retain a risk.

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Broker Pre-License Topics

• Security of Tenants

• Types of Insurance

• Claims

• Depreciated or actual cash value

• Current replacement cost

Risk Management

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Broker Pre-License Topics

The Management Profession

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Most metropolitan areas have local associations of building and property owners and managers that are affiliates of regional and national associations.

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Broker Pre-License Topics

Quick-Fire Review

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Broker Pre-License Topics

• How would you evaluate a property manager?

Quick-Fire Review

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Broker Pre-License Topics

• How would you go about setting rental rates?

Quick-Fire Review

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Broker Pre-License Topics

Quick-Fire Review

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Broker Pre-License Topics

• A management agreement is to a property manager like a listing agreement is to a broker.

Quick-Fire Review

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Broker Pre-License Topics

• A management agreement is to a property manager like a listing agreement is to a broker.

• TRUE!

Quick-Fire Review

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Broker Pre-License Topics

• In determining rental amounts, a property manager considers the economic principle of supply and demand.

Quick-Fire Review

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Broker Pre-License Topics

• In determining rental amounts, a property manager considers the economic principle of supply and demand.

• TRUE!

Quick-Fire Review

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Broker Pre-License Topics

 American With Disabilities Act (ADA)

 Management Agreement

 Management Plan

 Multiperil Policy

 Property Manger

 Risk Management

 Surety Bonds

 Tenant Improvements

 Workers’ Compensation Acts

Key Terms Review

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Broker Pre-License Topics

• Identify – the basic elements of a management agreement;

• Describe – a property manager’s functions; and

• Explain – risk management and the role of environmental regulations and the Americans with Disabilities Act in the property manager’s job.

Learning Objectives - Review

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Fair Housing

Unit 21

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Broker Pre-License Topics

• Identify – the classes of people who are protected against discrimination in housing by various laws

• Describe – how the Fair Housing Act is enforced

• Explain – how fair housing laws address a variety of discriminatory practices and regulate real estate advertising

Learning Objectives

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Broker Pre-License Topics

Fair Housing

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The purpose of civil rights laws is to create a marketplace in which all persons of similar financial means have a similar range of housing choices.

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Broker Pre-License Topics

The Civil Rights Act of 1866 prohibited discrimination in housing based on:

• Race

• Color

Fair Housing

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Broker Pre-License Topics

The Federal Fair Housing Act prohibits discrimination based on:

• Race

• Color

• Religion

• Sex

• National origin

• Disability

• Familial status

Fair Housing

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Broker Pre-License Topics

In Illinois, Protected Classes Are:

• Age

• Marital Status

• Unfavorable Military Discharge

• Military Status

• Ancestry

• Sexual Orientation

• Order of Protection

Illinois Human Rights Act

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Broker Pre-License Topics

Housing discrimination in the private sale of a single- family home is not prohibited if ALL of the following conditions are met:

• The owner does not own more than three single- family homes.

• The owner or a relative was the last person to live in the home.

• The home is sold without the help of a real estate licensee.

• No discriminatory advertising is used.

Fair Housing Exemptions

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Broker Pre-License Topics

• Religious Organizations

• 55 or Better - 62 or Over –

 Housing intended for persons age 62 or older or housing occupied by at least one person 55 years of age or older per unit (where 80 percent of the units are occupied by individuals 55 or older) is exempt from the familial status protection.

Fair Housing Exemptions

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Broker Pre-License Topics

The ADA requires reasonable accommodations in employment and access to goods, services, and public buildings.

American With Disabilities Act (ADA)

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Broker Pre-License Topics

• The Fair Housing Act is administered by the Office of Fair Housing and Equal Opportunity (FHEO) under the direction of HUD.

• A complaint may be filed with HUD within 1 year of alleged act.

• The parties may elect civil action in federal court at any time within 2 years of the discriminatory act.

Enforcement Of The Fair Housing Act

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Broker Pre-License Topics

Fair Housing Violations

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Blockbusting a.k.a. Panic Selling Encouraging people to immediately list and sell their homes by claiming that the entry of a protected class of people into the neighborhood will have some sort

of negative impact on property values.

Steering a.k.a. Channeling Guiding home seekers to or away from particular

neighborhoods.

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Broker Pre-License Topics

Fair Housing - Advertising Rules

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HUD distributes an

Equal Housing Opportunity poster to be

prominently displayed in the sponsoring broker’s office.

HUD requires that its fair housing posters be displayed in any place of business where real estate is offered for sale or rent.

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Broker Pre-License Topics

Fair Housing Violation

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Refusing to make mortgage loans or issue insurance policies

in specific areas for reasons other than the economic

qualifications of the applicants is known as redlining.

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Broker Pre-License Topics

Policies or practices resulting in unequal treatment of persons in the protected classes are

considered discriminatory

regardless of any innocent intent

Intent And Effect

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Broker Pre-License Topics

• Implication for Licensees

• Professional Ethics

• Code of Ethics

Fair Housing And Ethical Practices

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Broker Pre-License Topics

Quick-Fire Review

(29)

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Broker Pre-License Topics

• In addition to Illinois and federal fair housing laws, does your community have additional fair housing laws?

Quick-Fire Review

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Broker Pre-License Topics

Quick-Fire Review

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Broker Pre-License Topics

• In order to file a complaint of discrimination, the complainant must be able to prove that discrimination occurred.

Quick-Fire Review

(30)

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Broker Pre-License Topics

• In order to file a complaint of discrimination, the complainant must be able to prove that discrimination occurred.

• FALSE!

Quick-Fire Review

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Broker Pre-License Topics

• A house for sale was advertised: “Fine executive home in an exclusive neighborhood, suitable for an older couple, near St. Mary’s Church.” This is descriptive of the property for sale and a good ad.

Quick-Fire Review

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Broker Pre-License Topics

• A house for sale was advertised: “Fine executive home in an exclusive neighborhood, suitable for an older couple, near St. Mary’s Church.” This is descriptive of the property for sale and a good ad.

• FALSE!

Quick-Fire Review

(31)

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Broker Pre-License Topics

 American With Disabilities Act (ADA)

 Blockbusting

 Code of Ethics

 Ethics

 Fair Housing Act

 Home Mortgage Disclosure Act

 Redlining

 Steering

Key Terms Review

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Broker Pre-License Topics

• Identify – the classes of people who are protected against discrimination in housing by various laws

• Describe – how the Fair Housing Act is enforced

• Explain – how fair housing laws address a variety of discriminatory practices and regulate real estate advertising

Learning Objectives - Review

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Environmental Issues and the Real Estate Transaction

Unit 22

(32)

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Broker Pre-License Topics

• Identify – the basic environmental hazards a real estate agent should be aware of in order to protect the client’s interests

• Describe – the warning signs, characteristics, causes and solutions for various environmental hazards most commonly found in real estate transactions

• Explain – the fundamental liability issues arising under environmental protection laws

• Distinguish – lead-based paint issues from other environmental issues

Learning Objectives

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Broker Pre-License Topics

Environmental Issues

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The Illinois Environmental Protection Agency is charged with maintaining and enhancing the state’s air, land, and water quality through education, inspection, regulation, enforcement, and recycling and prevention activities.

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Broker Pre-License Topics

Environmental Issues

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

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Broker Pre-License Topics

• Residential dwellings built before 1978

• Landlords must disclose known information

• Sellers must disclose known information

• Buyers have up to ten days to conduct a risk assessment

• Licensees provide buyers and lessees with HUD pamphlet

Lead- Based

Paint Hazard Reduction

Act

Environmental Issues

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

22 22

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Broker Pre-License Topics

Hazardous Substances

• Asbestos

• Lead-based paint and other lead hazards

• Radon

• Illinois Radon Awareness Act

• Urea-formaldehyde

• Carbon monoxide

• Mold

Environmental Issues

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Broker Pre-License Topics

Groundwater

Protection Underground

Storage Tanks

MTBE

Illinois -The Leaking Underground Storage Tank (LUST) program

Environmental Issues

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Broker Pre-License Topics

• Landfills

• Capping

Waste Disposal Sites

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Broker Pre-License Topics

Brownfields

• Small Business Liability Relief and Brownfields Revitalization Act

Environmental Issues

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Broker Pre-License Topics

Comprehensive Environmental

Response, Compensation, and Liability Act

(CERCLA)

Superfund Amendments Reauthorization and

Act (SARA) Environmental Protection

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(37)

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Broker Pre-License Topics

Discovery of Environmental Hazards

Environmental Auditors

Liability Of Real Estate Professionals

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Broker Pre-License Topics

Quick-Fire Review

111

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Broker Pre-License Topics

• Why is it important for a licensee to be aware of environmental hazards? How might environmental hazards impact a transaction?

Quick-Fire Review

(38)

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Broker Pre-License Topics

Quick-Fire Review

© Real Estate Institute | InstituteOnline.com 113

Broker Pre-License Topics

• The Illinois Radon Awareness act requires the seller to provide buyers with a Disclosure of Information on Radon Hazards Form and pamphlet on Radon Testing Guidelines.

Quick-Fire Review

114

© Real Estate Institute | InstituteOnline.com

Broker Pre-License Topics

• The Illinois Radon Awareness act requires the seller to provide buyers with a Disclosure of Information on Radon Hazards Form and pamphlet on Radon Testing Guidelines.

• TRUE!

Quick-Fire Review

(39)

© Real Estate Institute | InstituteOnline.com 115

Broker Pre-License Topics

• Anyone who performs lead abatement or mitigation activities in Illinois without a license is guilty of a Class A misdemeanor.

Quick-Fire Review

© Real Estate Institute | InstituteOnline.com 116

Broker Pre-License Topics

• Anyone who performs lead abatement or mitigation activities in Illinois without a license is guilty of a Class A misdemeanor.

• TRUE!

Quick-Fire Review

117

© Real Estate Institute | InstituteOnline.com

Broker Pre-License Topics

 Asbestos

 Brownfield

 Capping

 Carbon Monoxide

 Comprehensive Environmental Response, Compensation, And Liability Act (CERCLA)

 Encapsulation

 Formaldehyde

 Groundwater

Key Terms Review

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Broker Pre-License Topics

 Innocent Landowner Immunity

 Landfill

 Lead

 Mold

 Radon

 Small Business Liability And Brownfield Revitalization Act

 Superfund Amendments And Reauthorization Act (SARA)

 Underground Storage Tank (UST)

 Water Table

Key Terms Review (cont’d)

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© Real Estate Institute | InstituteOnline.com 119

Broker Pre-License Topics

• Identify – the basic environmental hazards a real estate agent should be aware of in order to protect the client’s interests

• Describe – the warning signs, characteristics, causes and solutions for various environmental hazards most commonly found in real estate transactions

• Explain – the fundamental liability issues arising under environmental protection laws

• Distinguish – lead-based paint issues from other environmental issues

Learning Objectives - Review

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120

Broker Pre-License Topics

What did you learn in this class?

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121

Broker Pre-License Topics

Read Units: 

17, 18, 21, 22 Take Online: 

Lesson Exam 3 Homework

© Real Estate Institute | InstituteOnline.com 122

Thank You For Attending Today’s Class!

InstituteOnline.com

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