NYS Real Estate U: Core Concepts to Know Flashcards

Question

Vicarious Liability

Answer 1

Vicarious liability is a situation in which one party is held partly responsible for the unlawful actions of a third party.

Answer 2

The Sherman Anti-Trust Act made the following actions illegal: 1) Price fixing 2) Group boycotts 3) Market allocation 4) Tie-in arrangements

Answer 3

Misrepresentation consists of: 1) A false representation of a material fact. 2) A person making the false representation knew or should have known it to be false. 3) A person acts or does not act based on the misrepresentation. 4) A person who relies on the misrepresentation in acting or not acting. Positive misrepresentation means the broker concealed a material defect from the buyer. Self-dealing is another example of positive misrepresentation.

Answer 4

Positive misrepresentation means the broker concealed a material defect from the buyer. Self-dealing is another example of positive misrepresentation.

Answer 5

Unintentional misrepresentation occurs when the broker makes a false statement to the buyer about the property and the broker does not know whether the statement is true or false.

Answer 6

The Property Condition Disclosure Act requires the seller to submit to the buyer, a Property Condition Disclosure Statement, prior to signing the contract of sale. If the statement is not signed, the buyer shall receive a $500 credit against the purchase price of the property. Most seller attorneys advise their clients NOT to sign the statement, as it opens them up to a vast amount of liability.

Answer 7

Real property is the land and improvements, and all legal rights, powers, and privileges of real estate ownership. Real property includes the bundle of rights.

Answer 8

A fixture is personal property that attaches permanently to the land or improvements and becomes part of the real property. A few typical examples of a fixture include: - chandelier - custom book shelves - wall-to-wall carpeting - plumbing fixtures

Answer 9

Trade fixtures are items of personal property that a business operator installs in rented building space. Unlike a typical fixture, a trade fixture is considered personal property of the business owner. It is assumed the business owner will take the trade fixtures with them when moving out of the rented space. A display case is a common example of a trade fixture.

Answer 10

Fee simple absolute provides the most complete form of ownership. Most properties in New York have a Fee Simple Absolute deed, unless specified otherwise!

Answer 11

When title to real estate is in the name of only one person or entity, it is an estate (ownership) in severalty. Think of it as a single individual owns real estate, therefore, the ownership is ‘severed’ from all others.

Answer 12

Joint tenancy is a form of co-ownership by two or more persons, each of whom has an undivided interest WITH the “right of survivorship”.

Answer 13

Tenancy is common is a form of co-ownership by two or more persons, each of whom has an undivided interest, WITHOUT the “right of survivorship”.

Answer 14

This form of co-ownership is limited to married couples.

Answer 15

The 4 possible unities include: 1) Time 2) Title 3) Interest 4) Possession

Answer 16

A life estate is ownership, possession, and control of a property for someone’s lifetime. For example: Joe will grant ownership of his property to Sarah until the death of Nancy. Once Nancy passes away, the ownership of the property will revert back to Joe (or Joe’s heirs). A life estate is a form of fee simple estate.

Answer 17

An estate for years exists for a fixed period of time. It can be as short as a day and as long as many years. Once the term of the lease ends, the rental agreement is automatically terminated. Most residential leases are an estate for years.

Answer 18

A periodic lease automatically renews itself for another period at the end of each period unless one party gives notice to the other party at a time specified in the lease before the lease ends.

Answer 19

The duration of an estate at will is for an unknown period of time. This is an open-ended estate.

Answer 20

Littoral Rights = Lake Littoral rights apply to property bordering a stationary body of water.

Answer 21

Riparian Rights = River (stream) Riparian rights belong to the owner of a property bordering a flowing body of water.

Answer 22

An easement is the right to cross or otherwise use someone else’s property for a specified purpose. The common term for an easement is “right-of-way”. Easements “run with the land”.

Answer 23

A right of use in the land of another without the requirement that the holder of the right own adjoining land. Also known as a commercial easement in gross. This type of easement is commonly used by utility companies.

Answer 24

Used when a property owner is landlocked and needs to cross an adjacent property to get access to their property.

Answer 25

Obtained by use of land without the owner’s permission for a legally prescribed length of time. In New York, the use must be open and obvious and must continue uninterrupted for 10 years.

Answer 26

This type of easement arises by implication from the conduct of the parties. For example, if a landowner sells mineral rights to a company, that company has an easement by implication to go onto the property to do mining.

Answer 27

An encroachment is a building, part of a building, or obstruction which intrudes upon the property of another. Common encroachments include: - a fence that was partially built onto the neighbor’s property. - a tree that has grown to cantilever over the property line. - a deck that was built slightly over the property line. - a garage or shed, part of which was built over the neighbor’s property line.

Answer 28

This type of lien applies to individuals or companies who have “supplied labor or materials that improve a property”. For example, if a roofing contractor does not get paid for work performed on a person’s property, they may file a mechanic’s lien against the property. A mechanic’s liens is a type of an involuntary, specific lien.

Answer 29

This is the most common type of lien. When a homeowner obtains a mortgage, they are granting the lender a mortgage lien on their property. If the mortgage is not paid, the lender may exercise the mortgage lien and demand full payment of the loan through the sale of the property (also known as foreclosure). A mortgage lien is another example of a voluntary, specific lien.

Answer 30

When a taxpayer is delinquent in paying property taxes, a tax lien attaches against the property. A tax lien takes the highest priority among other liens (even higher than a mortgage lien).

Answer 31

- Must be in-writing (according to the Statute of Frauds). - Include a grantor (the person conveying title to the property). - Include a grantee (the person receiving title). - Contain a granting clause, which includes words of conveyance. - Provide evidence of consideration (something of value). - Include a legal description of the property. - Include an habendum clause (this clause begins with the words “to have and to hold”). - Include limitations and subject-to clause (any deed restrictions or easements must be noted). - The signature of the grantor (the grantee is not required to sign the deed). - Acknowledgement/recording (the deed must be notarized and recorded). - Delivery and acceptance (a valid deed must be delivered to the grantee).

Answer 32

The transfer of the title of land from one to another. The means or medium by which title of real estate is transferred.

Answer 33

1) Metes and bounds 2) Description by reference, lot and block 3) Monuments

Answer 34

A survey is a drawing prepared by a licensed surveyor, which shows the exact dimensions of a property and any improvements located on the property (including a garage, deck, fend, driveway). A survey is drawn using the metes and bounds method.

Answer 35

The Full Covenant and Warranty deed contains the broadest form of guarantee of title of any type of deed and provides the greatest protection to the grantee.

Answer 36

Ownership of property

Answer 37

Chain of title refers to the sequence of historical transfers of title to a property. It runs from the present owner all the way back to the original owner of the property.

Answer 38

An abstract of title is a condensed history of title. | It is a summary of all links in the chain of title.

Answer 39

The seller’s attorney uses the old deed to prepare a new deed for the closing.

Answer 40

A bi-lateral contract includes two parties. Most contracts in real estate are bi-lateral. A few common examples include listing contracts, sales contracts, buyer representation agreements and independent contractor agreements.

Answer 41

A uni-lateral contract is an “open contract” where one party promises to pay another party if the other party performs a specific action. An open listing contract is an example of a uni-lateral contract.

Answer 42

- Listing agent (seller’s broker) | - Seller’s attorney

Answer 43

A deposit that a buyer makes at the time of submitting an offer to demonstrate the true intent of the purchase; also referred to as a binder, good faith deposit, and escrow deposit. An earnest money deposit is usually binding.

Answer 44

This is the act of either: 1) replacing an obligation to perform with a new obligation; or 2) adding an obligation to perform; or 3) replacing a party to an agreement with a new party.

Answer 45

When the duties of the contract are performed by both parties, full performance is achieved. This is the most common and desirable way to discharge a contract.

Answer 46

This is an order from the court requiring specific performance means that the contract is to be completed as the parties originally agreed.

Answer 47

Compensatory damages equal the amount of money actually lost due to the breach of contract.

Answer 48

Liquidated damages are damages agreed to be paid in the contract.

Answer 49

A doctrine that permits the court to rewrite a contract.

Answer 50

It allows the holder to purchase (or lease) a property if the seller decides to sell or another purchaser (or lessee) comes along. The holder of the right of first refusal can match the offer from the third party or forfeit their claim to purchase or lease the property.

Answer 51

The ‘use provisions’ is a clause in a lease that requires a tenant reasonably use the space for its intended use. For example, a tenant cannot continuously throw loud, late-night parties, which disturb the other tenants in the building.

Answer 52

Actual eviction is where the tenant is physically removed from the premises. The most obvious case is when the landlord wrongfully evicts the tenant by physically throwing the tenant out or by locking the tenant out of the property.

Answer 53

This occurs when the tenant is prevented from the quiet enjoyment of the property. In other words, the landlord deliberately renders the property unfit or unsuitable to live in. An example may be refusing to repair a broken toilet or bathtub.

Answer 54

Mortgagor is the borrower (typically the person buying the house)

Answer 55

Mortgagee is the lender or bank who provides a loan to the borrower or homeowner.

Answer 56

This is the most common type of loan. The borrower makes installment payments (usually once a month). Over time the balance on the loan decreases. At the end of the term of the loan (30 years for examples), the loan balance reaches $0 and the loan is paid in full. In a fixed-rate mortgage, the borrower pays both principal and interest with each mortgage payment.

Answer 57

This is an interest-only loan. The balance of the loan always remains the same. At the end of the term of the loan, the borrower must pay the full balance back.

Answer 58

In this type of loan, the monthly payment fluctuates based on a standard index. These are considered high-risk loans for borrowers because the monthly payment may increase to an amount the borrower cannot afford.

Answer 59

A blanket mortgage is a type of commercial mortgage in which two or more parcels of real estate are pledged as security for payment of the mortgage debt.

Answer 60

A purchase money mortgage is a type of seller financing in which a mortgage is given by the buyer to the seller to cover part of the purchase price. In this type of loan, the seller becomes the mortgagee and the buyer becomes the mortgagor.

Answer 61

A wraparound mortgage is another type of seller financing. The seller extends to the buyer a junior mortgage, which wraps around the existing in addition to any superior mortgages already secured by the property.

Answer 62

A type of short-term loan, typically taken out for a period of 2 weeks to 3 years. A bridge loan is a type of gap mortgage in which funds are provided over and above an already existing loan until more permanent financing is in place.

Answer 63

In a graduated payment mortgage, the monthly payments are lower in the early years of the mortgage term, but increase at specific intervals until the payment amount is sufficient to amortize the loan over the remaining term. The monthly payments are low in the early years because the borrower does not pay all of the interest that is then added to the principal balance.

Answer 64

A construction mortgage is a form of interim, or temporary, short-term financing for creating improvements or buildings on a property.

Answer 65

Occurs when the monthly payment is less than full interest and does not pay any principal. The interest that is unpaid accrues and the principal balance owed increases.

Answer 66

Conventional loans are loans issued by commercial lenders without any participation by an agency of the federal government.

Answer 67

Government loans involve some kind of participation by a government agency. The most common type of government loan is an FHA-insured loan. VA-guaranteed loans are another example of government loans.

Answer 68

A pre-payment penalty clause states that the borrower cannot pay off the loan at any time before expiration of the full mortgage term without a financial penalty for early payoff.

Answer 69

The primary mortgage market is where lending institutions originate mortgages. Example: Bank of America gives a loan to the home buyer.

Answer 70

The secondary mortgage market is where the loans originated in the primary mortgage market are bought and sold.

Answer 71

A consumer protection statute, first passed in 1974. The purpose of RESPA is: 1) To help consumers become better shoppers for settlement services and 2) To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.

Answer 72

The Truth in Lending Act of 1968 is United States federal law designated to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed. TILA requires four main disclosures: 1) Annual percentage rate 2) Finance charge 3) Amount financed 4) Total amount of money to be paid toward the mortgage in principal and interest payments With regards to advertisements, the only specific item that may be stated in an advertisement, without making a full disclosure is the annual percentage rate.

Answer 73

1 point equals 1% of the loan amount. For example: If a lender charges 1-1/2 points as a loan origination fee, the fee will equal 1.5% of the loan amount.

Answer 74

Usury laws govern the amount of interest that can be charged on a loan.

Answer 75

Zoning determines the usage allowed for a building or subdivision.

Answer 76

The Zoning Board of Appeals is a local appointed Board that has the power to review administrative rulings made by the Planning Board or another legislative body. One of the main duties of a Zoning Board of Appeals is to maintain the essential character of neighborhoods. It is the interpreter of the zoning ordinance. The Zoning Board of Appeals is also responsible for granting variances.

Answer 77

A non-conforming use is a preexisting use of a property that no longer complies with the current zoning regulations. The non-conforming use is “grandfathered” in. For example, a property owner has been using his building as a manufacturing facility for the past 30 years; however, the neighborhood has since been re-zoned for residential use.

Answer 78

Variance is the authorization to improve or develop a particular property in a manner not authorized by the local zoning code.

Answer 79

A use variance allows a homeowner to use their property in a way that is not currently permitted by the local zoning code. For example: convert an existing structure into a medical office where the zoning only permits residential use for the property.

Answer 80

An area variance allows the property owner to expand the building on their property to a size larger than is permitted by zoning. This can include total square footage of the building as well as size and height of the building. For example: add an additional story to a building, which will make the building taller than is permitted by zoning.

Answer 81

The primary purpose of building codes is to ensure a safe, properly functioning environment for the occupants.

Answer 82

If a property owner dies intestate (without having a valid will), the decedent’s property is distributed to their heirs. If the deceased property owner does not have any heirs, the property reverts to the State. This is known as escheat.

Answer 83

Eminent domain is the right of the government to acquire private property for necessary public use. The property owner must receive fair compensation. Remember: eminent domain is the RIGHT to take private property, while condemnation is the actual ACT of doing so.

Answer 84

Condemnation is the act of taking private property for public use. Remember: eminent domain is the RIGHT to take private property, while condemnation is the actual ACT of doing so.

Answer 85

Percolation is the movement of water through soil.

Answer 86

Platform framing is the most common type of framing used in residential construction.

Answer 87

Balloon framing is an alternative to platform framing; however, it is considered illegal in New York State.

Answer 88

A footing is a horizontal concrete member, set in the soil, which supports a building’s foundation wall. The footing is located at the bottom of the foundation wall. The footing is the lowest structural member in a house/building.

Answer 89

The sill plate is a horizontal wood member that sits on top of the house’s foundation. It is used as a nailing surface for the floor system. A sill plate is considered the lowest horizontal beam and wood member in the frame of a house.

Answer 90

Studs are vertical wood members used to construct walls.

Answer 91

Joists are horizontal beams or timbers that support a floor.

Answer 92

Eave – the lowest part of the roof that projects beyond the wall of the structure. Soffit – The area under the roof extension. Fascia – The area of material facing the outer edge of the soffit.

Answer 93

Also known as the slope. Typically used in describing the slope of a roof, driveway, sidewalk, etc. The slope of the roof is known as the 'pitch of the roof'.

Answer 94

Flashing is added at joints/bends/corners on the exterior of a house (typically made of metal and/or rubber materials), which prevents water from entering the house. For example, flashing is added around the base of a chimney (where the chimney meets the roof).

Answer 95

refers to panels that span between wall studs and cover the exterior wall or interior walls. Sheathing is typically made of plywood on the exterior of the building, and gypsum board on interior walls.

Answer 96

Siding materials on buildings can be metal (such as aluminum), wood or vinyl. Behind the siding is a layer of sheathing.

Answer 97

Urea Formaldehyde Foam Insulation (UFFI) is a type of foamed in-place insulation that releases formaldehyde gas. UFFI contains large amounts of formaldehyde, which is why it has rarely been used by building contractors since the 1980s.

Answer 98

R-value is a measurement of the ability of insulation to slow the transfer of heat or cold. In other words, it is the degree of resistance to heat transfer of a wall. The higher the R-value, the greater the insulating power. Generally, the higher the R-value, the thicker the insulation.

Answer 99

BTU stands for British Thermal Unit. BTU is a measure of heat energy. It measures the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.

Answer 100

A document provided by Architects that describes the quality of construction.

Answer 101

Architectural drawings that describe the layout and construction of a house. These drawings describe the quantities used in construction

Answer 102

A forced warm air system consists of a furnace that contains a fan, a heat source such as gas or oil, and filters. The system extracts cool air from in and out doors and passes this cool air through the heat sources. The warmed air flows through ducts to the rooms. A forced warm air system provides cooling as well as heating through the same ducts.

Answer 103

A device used in electrical systems to protect against excessive current. The fuse melts and opens the circuit, causing electric power to stop when overheating occurs.

Answer 104

Circuit breakers perform a similar function but are more convenient and safer than fuses. Circuit breakers trip; that is, they switch off the electric power for a given circuit when the current increases beyond the system’s capacity.

Answer 105

CFCs are synthetic chemical substances used in refrigerators and air conditioners, Styrofoam products, aerosol dispensers, and cleaning agents. CFCs have been shown to lead to the depletion of the ozone layer. Most home air conditioning units use HCFCs, known as Freon.

Answer 106

PCBs were widely used as dielectric and coolant fluids, for example in transformers, capacitors, and electric motors. PCBs have been known to leak in to the ground from electrical transformers. PCBs appear in groundwater and soil.

Answer 107

Radon is a colorless, odorless gas that is emitted from soils, rocks and water as a result of radioactive decay. Radon from surrounding soil enters a home through small spaces such as cracks in concrete, floor drains, sump pump openings, wall and floor joints in basements, and pores in hollow block walls. Remember: radon typically enters the house through the basement or cracks in the foundation.

Answer 108

Asbestos is a naturally occurring mineral fiber sometimes found in older homes. It is hazardous to health when a possibility exists of exposure to inhalable fibers (also known as friable asbestos).

Answer 109

The Residential Lead-Based Paint Hazard Reduction Act of 1992 sets forth the procedures in disclosing the presence of lead-based paint for sales of properties built before 1978. Remember: “Lead-based paint 1978”

Answer 110

A CMA is a property evaluation that determines property value by comparing other properties currently on the market, properties that have recently sold, and expired listings. A CMA is NOT an appraisal. Instead, it is an opinion of value. A CMA is typically prepared by a real estate agent.

Answer 111

Market value is the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress. Market value applies to an “arm’s length transaction”.

Answer 112

Market price refers to the actual selling price of a property. Remember: market value is the probable price, while market price is the actual selling price.

Answer 113

also known as hard costs, they include the cost of labor and materials.

Answer 114

Costs that create and support the project. These include architectural and engineering fees, attorney fees, and financing costs, among others.

Answer 115

One of the causes of depreciation. It is the loss of desirability and usefulness caused by new inventions, changes in design, and improved processes for production, or from the influence of external factors. Obsolescence may be either economic or functional. Functional Obsolescence can be an outdated design or floor plan.

Answer 116

The Civil Rights Act of 1866 has no exemptions and contains the blanket statement that ‘citizens have the same rights to inherit, buy, sell, or lease real and personal property. The Civil Rights Act of 1866 is primarily interpreted to prohibit racial discrimination.

Answer 117

The Fair Housing Act was included as part of the Civil Rights Act of 1968. The initial protected classes under the Fair Housing Act included: - Race - Color - Religion - National origin

Answer 118

The Housing and Community Development Act of 1974 added sex as a protected class to the Fair Housing Act.

Answer 119

The 1988 Amendment to the Civil Rights Act added two new protected classes: – Persons with mental or physical disabilities – Familial status

Answer 120

The practice of inducing homeowners in a particular neighborhood to sell their homes quickly, often at below market prices, by creating the fear that the entry of a minority group or groups into the neighborhood will cause a precipitous decline in property values.

Answer 121

The practice in which real estate brokers guide prospective home buyers towards (or away) from certain neighborhoods based on their race.

Answer 122

The refusal to lend money within a specific area for various reasons. This practice is illegal. Before the Fair Housing Act, some lenders circled certain local areas with a red line on the map, refusing to make loans within the circled areas based on some characteristic of property owners in the area.

Answer 123

Testers are volunteers, employees of federal programs, and people from civil rights groups who visit real estate offices posing as prospective home buyers to see if race influences the information or services that the broker or salesperson offers.

Answer 124

43,560 square feet

Answer 125

2.47 Acres

Answer 126

The Building Department is responsible for enforcing the building code and issuing building/construction permits.

Answer 127

Oversees and upholds the quality and aesthetics of a neighborhood, town, or city.

Answer 128

– Estimate the costs of paving, sewers and sidewalks, and other public works projects. – Supervise streets and other public works activities – Issue permits to private contractors for street openings and curb and gutter construction. – Assume responsibility for sewage, water supply, distribution systems.

Answer 129

The NYS Department of Health performs the following basic functions: – Drinking water safety, including standards for private and community well construction and well water safety and regulation. – Septic tank approval. – Certain wastewater treatment approval.

Answer 130

This is a basic policy that insures the home and its contents against perils, including fire, theft, or vandalism. An HO-1 policy does not cover falling objects.

Answer 131

The most widely used and recommended homeowners policy. It covers the home for all risks or physical loss except damage caused by flood, earthquake, war, or nuclear accident.

Answer 132

Commonly referred to as renters insurance, regardless if you are renting a home, condo, or apartment. This policy also covers cooperative owners since they hold a proprietary lease (not real property)

Answer 133

Insure against damage to the contents of an apartment, cooperative, or condominium.

Answer 134

Insurance policy that covers amounts above those covered under one or more other primary policies, and which does not pay until the losses exceed a certain sum. - Also called excess insurance

Answer 135

Commercial general liability insurance is a basic business liability policy that covers four forms of injury: bodily injury that results in actual physical damage or loss, property damage that results in actual physical damage or loss, personal injury, and advertising injury. CGL may be purchased by landlords for their rental/income properties

Answer 136

Actual cash value means that the insured is reimbursed for the replacement cost minus the physical depreciation of the lost or damaged property.

Answer 137

Replacement cost means that the insured is covered and reimbursed for the actual cost of replacing the damaged property. For example, if a refrigerator is destroyed in a fire, the replacement cost will be the cost of buying another refrigerator

Answer 138

The NYPIUA is a pool of all insurance companies writing fire insurance in New York. It offers fire and extended coverage as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies.

Answer 139

Property is taxed on an ad valorem basis, that is, according to value. In New York, the real property tax is based on the fair market value of real property.

Answer 140

Special assessments are assessments made against a property to pay for a public improvement by which the assessed property is supposed to be especially benefit from. A special assessment may be for such things as streets, sidewalks, sewers, rural drainage ditches and other public improvements.

Answer 141

``` Homestead properties include: – 1-3 family houses – Condominiums – Mixed-use properties when they are mostly residential – Mobile homes – Vacant land under 10 acres – Farm land / farm dwellings ``` Homestead = Residential

Answer 142

``` Non-homestead includes everything else: – Commercial – Industrial – Special franchise – Utility properties ``` Non-homestead = Commercial

Answer 143

Condominiums are considered real property. For that reason, condo owners receive a deed a closing. - Condominiums are considered freehold estates. - For tax purposes, a condominium is classified as a residence.

Answer 144

Cooperatives are NOT considered real property. The owner of a co-op receives a proprietary lease at closing. A proprietary lease is considered personal property. - Co-ops are considered a leasehold estate. The leasehold estate gives the right to possession of an apartment and use of the common areas.

Answer 145

A condop is a building that includes condominium and cooperative ownership in the same structure. In other words, the building is part condo, part co-op.

Answer 146

The Board of Directors manages a cooperative. | The Board oversees the maintenance, finances, and policy decisions of the cooperative.

Answer 147

The by-laws are the owner’s rights and obligations for a condominium. The by-laws may include: - The powers and duties of the Board of Managers - Sublet provisions - Restrictions on the use of units and common spaces - Pet restrictions Remember: House rules are associated with cooperatives, while by-laws are associated with condominiums.

Answer 148

Rules in a cooperative that cover common issues including garbage disposal, maintenance, noise, and conflict resolution. House rules are generally more detailed than items in the proprietary lease and deal with the day-to-day behavior of tenants and general operations.

Answer 149

If a prospective buyer is looking to purchase a unit in a cooperative, the Board of Directors will most likely want the buyer to submit a board package. The board package includes mostly financial documents. The Board of Directors will review the buyer’s board package and use it help determine if they will approve the buyer’s application or not. If the buyer’s application is not approved, they cannot purchase a unit in the cooperative.

Answer 150

Condominium contracts typically contain a ‘Right of First Refusal’ clause. The clause allows the condominium association the first opportunity to purchase the condominium when it goes up for sale.

Answer 151

The developer of a new condominium or cooperative building (or the conversion of a building into a condo/coop) must file an Offering Plan with the NY Attorney General’s office.

Answer 152

CPS-1 stands for Cooperative Policy Statement. | It is used by real estate developers to test the market before building a condominium or cooperative building.

Answer 153

In a gross lease, the landlord pays all expenses. These include property taxes, insurance and maintenance. The residential lease is a common example of a gross lease.

Answer 154

In a net lease, the tenant pays some or all of the expenses. For example, in a triple net lease, the tenant pays all of the expenses in addition to the rent. A net lease, in particular a triple net lease, is commonly used by commercial tenants. A large company may have a triple net lease and rent an entire office building.

Answer 155

A lease of property in which the rent is based upon the percentage of the volume of sales made upon the leased premises, usually provides for minimal rent. A percentage lease is typically used with retail tenants.

Answer 156

A ground lease is a long-term lease of unimproved land, usually for construction purposes. For example, a lessee may be given a 99-year ground lease for a large vacant property. The lessee will build a large multi-family building on the property. At the end of the 99-year lease, the lessor (the original land owner) will take back the land and any improvements on the land (including the multi-family building). A ground lease is also known as a land lease.

Answer 157

A loft lease is for the rental of floor space this is not generally divided into rooms. A loft lease is typically for an open, unfinished space.

Answer 158

A graduated lease is a lease in which the rent changes from period to period over the lease term. The lease contract specifies the change in rental amount, which is usually an increase in stair-step fashion.

Answer 159

An escalation clause allows landlords to raise rents during the term of the lease. Lease escalation clauses call for the increased costs to the tenant for different reasons at specified times during the lease term. These clauses protect the property owner against increases during the lease term.

Answer 160

Rentable square footage is the total area of a space, some of which cannot be used. Rentable square footage equals the entire space, including the usable square footage and the tenant’s pro rata share of the building’s common areas, such as the lobby, hallways, and restrooms.

Answer 161

Usable square footage is the area contained within a building that is actually occupied by a commercial tenant. Usable space typically does not include elevators, stairs, mechanical spaces, etc..

Answer 162

A pro forma is an accounting statement that forecasts income and expenses for a period of time, typically five or more years. Pro forma statements are typically used by investors to estimate their rate of return for a particular property.

Answer 163

Real estate is considered an illiquid asset because it cannot quickly or easily be sold.

Answer 164

Money earned through salaries or in a business in which the taxpayer actively participates. (Example: a typical full-time job).

Answer 165

Money earned from investing in a business venture or partnership. (Example: income earned from a rental property)

Answer 166

Money earned from Interest, annuities, dividends, and royalties. (Example: income earned from investing in stocks, bonds, mutual funds).

Answer 167

Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments.

Answer 168

Depreciation is a paper loss required for estimated wear, tear, and obsolescence of a property. The IRS allows real estate investors to depreciate their investment properties.

Answer 169

Residential buildings and improvements are depreciable over 27.5 years using straight-line depreciation.

Answer 170

Commercial buildings and improvements depreciate over 39 years using straight-line depreciation.

Answer 171

A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition. An example of corrective maintenance would include fixing a leaky faucet.

Answer 172

Preventative maintenance involves keeping property and equipment in a good state of repair so as to minimize the need for more costly repair work or replacement. An example of preventative maintenance would include changing air filters in air conditioners and furnaces.

Answer 173

The operating statement is used by property managers to project the net operating income for the property. The operating statement defines all of the income and expenses for the property.

Answer 174

A tax based on the assessed value of an item, such as real estate or personal property. The Latin phrase means "according to value." So all ad valorem taxes are based on the assessed value of the item being taxed

Answer 175

Interest-only loan

Answer 176

Sill plate

Answer 177

Labor cost

Answer 178

Market price

Answer 179

Adjustable-Rate Mortgage (ARM)

Answer 180

Condemnation

Answer 181

Appraisal fees

Answer 182

Swing loan

Answer 183

PCBs (Polychlorinated bihpenyls)

Answer 184

Obsolescence

Answer 185

Disability and familial status

Answer 186

House Rules

Answer 187

Capital reserve budget

NYS Real Estate U: Core Concepts to Know Flashcards

(225 cards)