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Real Estate Law 11th Edition By Jennings – Test Bank

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Real Estate Law 11th Edition By Jennings – Test Bank

Chapter 11 Real Estate Communities Multiunit Interests and Owners apos Associations

TRUEFALSE

1. ​A condominium unit cannot be mortgaged. (A) True (B) False Answer : (B)
2. ​A co‑op interest cannot be mortgaged or pledged. (A) True (B) False Answer : (B)
3. ​In a co‑op, the unit occupants do not hold an undivided joint interest in the common areas. (A) True (B) False Answer : (A)
4. ​Transfer restrictions on co‑op interests are invalid. (A) True (B) False Answer : (B)
5. ​Time‑sharing interests can be fee simple interests. (A) True (B) False Answer : (A)
6. ​The Uniform Condominium Act has been adopted in a majority of the states. (A) True
(B) False Answer : (B)
7. ​A Declaration of Horizontal Property Regime is a Declaration of Condominium. (A) True (B) False Answer : (A)
8. ​Common areas are specified in the Declaration of Condominium. (A) True (B) False Answer : (A)
9. ​Condominium owners have no ownership rights in the common areas. (A) True (B) False Answer : (B)
10. ​Bylaws specify meeting requirements. (A) True (B) False Answer : (A)
11. ​A proprietary lease is used in a co‑op development. (A) True (B) False Answer : (A)
12. A co‑op need not be incorporated. (A) True (B) False
Answer : (B)
13. ​A time‑sharing interest can only be a lease. (A) True (B) False Answer : (B)
14. ​Developers are responsible for pre-conversion expenses. (A) True (B) False Answer : (A)
15. ​Unit owners are responsible for torts committed in their condominium units. (A) True (B) False Answer : (A)
16. ​Torts in common areas permit the injured party to sue the association of homeowners. (A) True (B) False Answer : (A)
17. ​Condominium associations can file liens for non‑payment of monthly association fees. (A) True (B) False Answer : (A)
18. ​Condominium ownership is not fee simple ownership. (A) True (B) False Answer : (B)
19. ​Time‑sharing interest owners have transfer restrictions on their interests. (A) True (B) False Answer : (B)
20. ​Co‑ops, townhomes and condominiums are all incorporated non‑profit associations. (A) True (B) False Answer : (A)
21. ​A patio home is a form of condominium. (A) True (B) False Answer : (A)
22. ​Turn‑offs of services must be authorized in the bylaws to be a means of enforcement of assessments. (A) True (B) False Answer : (A)
23. ​There are no warranties of habitability for condominium purchasers. (A) True (B) False Answer : (B)
24. ​The laws on multi‑unit housing are uniform among the states. (A) True (B) False Answer : (B)
25. ​A developer has the authority to change the declaration as needed to make accommodations to buyers. (A) True (B) False Answer : (B)
26. ​A vacation lease is a form of condominium ownership. (A) True (B) False Answer : (B)
27. Landlord tenant laws apply to cooperatives. (A) True (B) False Answer : (B)
28. ​Any proposed or modification use of common areas must be approved by the condominium association. (A) True (B) False Answer : (A)
29. ​A co-op interest cannot be transferred. (A) True (B) False Answer : (B)
30. A co-op need not be incorporated. (A) True (B) False Answer : (B)
31. ​Time-sharing interests cannot be transferred. (A) True (B) False Answer : (B)
32. Condominium owners can be restricted on construction and alteration of their units. (A) True (B) False Answer : (A)
33. ​Hybrids still require associations and CC&Rs. (A) True (B) False Answer : (A)
34. ​Homeowners’ associations cannot restrict color schemes. (A) True (B) False Answer : (B)
35. ​Homeowners’ associations cannot promulgate rules that are not part of the CC&Rs. (A) True (B) False Answer : (B)
36. ​Homeowners’ associations are restricted on foreclosure options for nonpayment of association fees. (A) True (B) False Answer : (A)
37. ​Cooperative boards can review and reject applicants who wish to purchase a unit in the co-op. (A) True (B) False Answer : (A)
38. ​To collect fees and assessments, homeowners’ associations need only a rule change. (A) True (B) False Answer : (B)
39. ​Architectural Control Committees cannot enforce rules on aesthetics only. (A) True (B) False Answer : (B)
40. ​A homeowner must obtain permission from the Architectural Control Committee before making external modifications to his/her home. (A) True (B) False Answer : (A)
41. State laws governing homeowner associations have increased in the past few years. (A) True (B) False Answer : (A)
42. ​Bylaws are the deed restrictions for a community that run with the land. (A) True (B) False Answer : (B)
43. ​Most states place limitations on association foreclosures for nonpayment of monthly fees by owners. (A) True (B) False Answer : (A)
44. ​An amendment to the bylaws is invalid if it is adopted after the developer has turned over control of the association. (A) True (B) False Answer : (B)
45. ​HOAs must take reasonable precautions for security purposes, but they are not insurers against criminal conduct. (A) True (B) False Answer : (A)
46. ​Condo and co-op boards are subject to the standards of the business judgment rule. (A) True (B) False Answer : (A)
47. Condo and co-op board members have immunity from personal liability. (A) True (B) False Answer : (B)
48. A co-op owner cannot be removed from his or her unit through eviction processes. (A) True (B) False
Answer : (A)
49. ​Multi-unit housing associations do not have a right of foreclosure for unpaid fees. (A) True (B) False Answer : (B)
50. Associations can recover from developers for defects in construction in the common areas. (A) True (B) False Answer : (A)
51. ​The penalty for the failure to obtain ACC approval for modifications is removal of the modifications. (A) True (B) False Answer : (A)
52. ​A vacation license is the same as a time-share interest. (A) True (B) False Answer : (B)
53. ​A vacation license is a fee simple interest. (A) True (B) False Answer : (B)
54. ​A time-share interest is a fee simply interest. (A) True (B) False
Answer : (A)
55. ​HOA rules are not valid unless they existed originally in the formation documents for the association. (A) True (B) False Answer : (B)
MULTICHOICE 56. ​Which of the following forms of multi‑unit housing requires a corporation? (A) ​Condominium (B) ​Co‑op (C) ​Time‑sharing (D) ​None of the above Answer : (B)
57. ​Which of the following is not included in the Declaration of Condominium? (A) ​Legal description of the property (B) ​Limitations on use of common areas (C) ​Legal agent or representative (D) ​All of the above are included Answer : (D)
58. ​In which of the following forms of multi‑unit housing does the owner own the land? (A) ​Condominium (B) ​Co‑op (C) ​Townhouse (D) ​All of the above Answer : (C)
59. ​What remedies exist for nonpayment of association fees? (A) ​Lien and judgment (B) ​Revocation of title (C) ​Restriction on transfer (D) ​None of the above Answer : (A)
60. ​Who is responsible for pre‑conversion/pre‑association expenses and improvements in a condo conversion? (A) ​Unit owners (B) ​Developers (C) ​Both a and b (D) ​None of the above Answer : (B)
61. ​Who is responsible for torts occurring within an individual condominium unit? (A) ​Association (B) ​Unit owner (C) ​There is no liability (D) ​None of the above Answer : (B)
62. ​Which of the following parties could recover for injuries resulting from a tort committed in the common area of a condominium development? (A) ​Unit owners (B) ​Delivery person (C) ​Postal employee (D) ​All of the above Answer : (D)
63. ​Parking spaces in a condominium development:
(A) ​Are common areas. (B) ​Are individually owned. (C) ​Need not be covered in the bylaws. (D) ​None of the above Answer : (A)
64. ​A proprietary lease: (A) ​Is for perpetuity or a long period. (B) ​Has no provision for rent. (C) ​Both a and b (D) ​None of the above Answer : (C)
65. ​Transfer restrictions on co‑op interests: (A) ​Are invalid per se. (B) ​Are generally invalid. (C) ​Are void restraints on alienation. (D) ​None of the above Answer : (D)
66. ​A vacation lease: (A) ​Is a time sharing interest. (B) ​Is an actual lease. (C) ​Is a condominium interest. (D) ​None of the above Answer : (A)
67. ​The air space above a condominium: (A) ​Is owned by the individual condominium owner. (B) ​Is a common area.
(C) ​Is not a real property interest. (D) ​None of the above Answer : (B)
68. ​Which of the following is not a valid restriction in a cooperative interest? (A) ​A requirement to offer the interest first to the corporation. (B) ​A requirement on transfer at death. (C) ​A requirement for approval prior to leasing. (D) ​All of the above are valid restrictions. Answer : (D)
69. ​What is a hybrid? (A) ​A form of ownership that combines features of various forms of multi-unit housing (B) ​Patio homes (C) ​Garden homes (D) ​All of the above Answer : (D)
70. ​An architectural control committee: (A) ​Is created by the bylaws for a condominium project. (B) ​Expires when the developer completes the condominium project. (C) ​Has authority only over the common areas. (D) ​Has no authority until owners approve its decisions. Answer : (A)
71. ​Who has liability for injuries to visitors that occur in condominium common areas? (A) ​No one is liable (B) ​The maintenance firm only (C) ​The condominium association (D) ​None of the above
Answer : (C)
72. ​Alteration of a property located in an area with a homeowners’ association: (A) ​Can be done so long as the homeowner’s fees are current. (B) ​Can be done with approval by the Architectural Control Committee. (C) ​Cannot be done except by the homeowners’ association. (D) ​None of the above Answer : (B)
73. ​Which of the following powers do homeowners’ associations always have? (A) ​Control of common areas (B) ​Right to enforce CC&Rs (C) ​Power to access fees (D) ​Both a and b (E) ​a, b and c Answer : (D)
74. ​If there is criminal activity in the common areas of a condominium or co-op, who would be liable for any injuries that result? (A) ​The criminals only (B) ​The association if security was inadequate (C) ​The association if it was aware of criminal conduct (D) ​Both b and c (E) ​None of the above Answer : (D)
75. ​No pet rules in associations are: (A) ​Constitutionally invalid. (B) ​Valid if exemptions are made for smaller pets. (C) ​Valid and enforceable.
(D) ​None of the above Answer : (C)
76. ​Which of the following is NOT a test courts use in determining whether action taken by an homeowners’ association is valid? (A) ​The reasonableness test (B) ​The business judgment test (C) ​The contracts test (D) ​The timing test Answer : (D)
77. ​Which of the following best describes the judicial decisions on no-pet policies adopted by homeowner’ associations? (A) ​These no-pet policies have been declared unconstitutional. (B) ​These no-pet policies cannot be enforced against owners who have indoor pets only. (C) ​These no-pet policies are valid as long as they are adopted properly. (D) ​These no-pet policies are unenforceable in California. Answer : (C)
78. ​Which of the following is not a remedy available to homeowners’ associations for violations of CCRs and rules? (A) ​Fines (B) ​Liens (C) ​Foreclosures (D) ​All of these remedies are available to homeowners’ associations for violations Answer : (D)
79. ​Which of the following would be a valid basis for a homeowner’s challenge to enforcement action by the homeowners’ association? (A) ​The association was trying to enforce a rule that was not adopted by proper procedures (B) ​The association formerly consisted only of the developer
(C) ​The association is incorporated (D) ​The association is trying to enforce an assessment in addition to regular fees Answer : (A)
80. ​A proprietary lease: (A) ​Is the same as a regular lease, but longer in length. (B) ​Is the same as a regular lease, and includes the right of eviction for nonpayment. (C) ​Is a form of ownership that carries greater rights than a leasehold interest. (D) ​Is required for all forms of multi-unit ownership. Answer : (C)
81. ​Flowing Stream Townhouse Development’s homeowners’ association has adopted a rule that no owner can sell or lease his or her unit to a Tier 3 registered sex offender. Alice Strom is a Flowing Stream owner who has sold her townhome to a registered Tier 3 sex offender. The homeowners’ association board has refused to allow the buyer to move into his townhome and has obtained a court injunction prohibiting his taking occupancy. ​What standard will the court use in reviewing the actions of the association board? (A) ​The business judgment rule (B) ​Whether the rule is a breach of privacy (C) ​Whether the rule is wise (D) ​Whether the rule is a common one for homeowners’ associations Answer : (A)
82. ​Which of the following factors will the court consider in determining the validity of the rule? (A) ​Whether such rules will serve to exclude a group of citizens from being able to own a home (B) ​How long the rule has been in place (C) ​Whether Alice had actually read the rule (D) ​Whether the real estate broker in the sale disclosed the rule Answer : (A)
83. ​Stacy Harris owned a condominium in the 4215 Harding Road Condominiums. Her fellow condo owners complained about grossly unsanitary conditions in Harris’s unit and resulting extremely
offensive odors that emanated from her unit into common areas. Despite warnings and fines, Ms. Harris did not clean up her apartment. The association brought suit to have the condo unit sold and asked for $116,037.77 in fees and attorney’s fees. Which of the following is correct? (A) ​A condo cannot be sold to satisfy fines assessed for rules violations. (B) ​An association cannot take back title to a unit without the consent of the owner. (C) ​The association can bring a foreclosure action for noncompliance and to collect unpaid fees. (D) ​The action by the association violates the due process clause. Answer : (C)
84. ​John is a member of the board for his condominium development. John has missed 8 of the last 12 board meetings. The other board members have missed at least 50% of the meetings. The board did not hire an accountant to review the financial reports of the condo manager. Eighteen months after John took his position on the board, an accountant was retained to examine the books of the condo development. The accountant discovered that the manager had embezzled $250,000. Which of the following statements is correct? (A) ​The board members can be held liable for the missing amount if the condo owners are able to establish a violation of the business judgment rules. (B) ​Condo board members are immune from liability. (C) ​The business judgment rule does not apply to condo boards. (D) ​The board members can be held liable only for gross negligence. Answer : (A)
85. Janice Greyson was visiting the condo development, Rushing Springs, to see her nephew. As she walked across the grassy area in between major building of the development, she tripped and fell in a sink hole in the grass. She suffered a broken ankle. Who is liable for her injury? (A) ​No one is liable because she is not an owner (B) ​Janice’s nephew would be liable because he invited her there (C) ​The condo association is liable for her injuries, but only if it was aware of the sink hole (D) ​The condo association is liable for her injuries because of a duty to maintain common areas Answer : (D)
86. ​A vacation license: (A) ​Gives the owner of the license a fee simple interest in the property. (B) ​Is subject to the laws on the sale of securities.
(C) ​Is the same as a time-sharing interest. (D) ​Is the same as a time-sharing network. Answer : (B)
87. ​When is it possible to have removal of a condominium owner? (A) ​For non-payment of association fees’ (B) ​For alterations without board approval (C) ​For creation of a nuisance or public health reasons (D) ​None of the above because there is an ownership interest Answer : (C)
88. ​How does the business judgment rule apply to HOA boards? (A) ​It provides liability protection if the board follows its processes (B) ​The board members are exempt from liability (C) ​The board must always have external advisers to protect itself from liability (D) ​The business judgment rule does not apply to HOA board Answer : (A)
89. ​How have the courts handled the issue of smoking in condo and co-op association rules? (A) ​Smoking is treated as a public nuisance and can be prohibited by boards (B) ​Proof of harm from secondhand smoke is necessary to establish the basis for an HOA rule banishing smoking within units (C) ​Smoking cannot be prohibited by HOA rules (D) ​Federal law requires no-smoking rules in condos and co-ops Answer : (B)
90. ​What are the penalties for the failure to obtain ACC approval for modifications? (A) ​Removal of the modifications (B) ​A fine (C) ​Attorneys’ fees
(D) ​All of the above Answer : (D)
ESSAY 91. ​Discuss the liability of unit owners and their association for the following incidents: a. A postal employee slipping and falling over a sprinkler b. A unit owner slipping and falling over a sprinkler c. A unit owner’s guest slipping and falling over a sprinkler

Graders Info : ​In all three cases, the association (and indirectly the unit owners) would be liable. 92. ​Discuss the documents necessary for the creation of a co‑op and a condominium.

Graders Info : ​Co‑op: incorporation, bylaws, proprietary lease, rules and regulations Condominium: Declaration of Condominium, bylaws, rules and regulations, deeds 93. ​What is the purpose of an architectural control committee?

Graders Info : ​To maintain uniformity in project so that colors, structure and design remain uniform. 94. ​Why is an unincorporated association liable for torts committed in its common areas?

Graders Info : ​Because it controls the area. Otherwise, it would have immunity and no standard for upkeep. 95. ​Discuss the liability of a builder for defects in common areas vs. units in a condominium project.

Graders Info : ​Builder has same liability but in one, the association sues and in the other the unit owner sues.
96. ​Discuss the differences and similarities between a condominium, townhouse and cooperatives.

Graders Info : Condo – actual ownership of area in unit Co-op – ownership of interest in corporation Townhouse – own land and walls All have an association, all have bylaws and controls on use. Co-ops control transfer. All have fees paid for common area maintenance.
97. ​Ralph Regier, a homeowner in the Shady Rest subdivision, has not paid his association fees in six months. The board of directors has revoked his power to vote for the board members at the upcoming annual election. Discuss this enforcement tool and any others the association might have.

Graders Info : ​The association can revoke the power to vote, or it may simply be a requirement for voting that all fees be current. Such a power is fairly universal. The homeowners association may also have the power to bring suit to collect back fees. The power to foreclose for non-payment of fees is generally very limited. What the HOA can do is a matter of what is spelled out in the articles and CC&Rs. 98. ​Explain how the business judgment rule applies to the boards of homeowners’ associations.

Graders Info : ​The courts have begun deferring to the boards of the associations so long as the board holds meetings, obtains the necessary information (such as bids, expert opinions, etc.) prior to making decisions, and follows appropriate procedures in making decisions, including following processes such as notice and seeking input. The courts are, in effect, applying corporation law to these boards to allow them some latitude and room for judgment if the boards are acting responsibly even though reasonable minds could differ on the board’s decisions, actions, and choices. 99. ​Deborah L. Furniss was the executrix and sole beneficiary of the estate of her mother, Brenda E. Furniss, who owned a condominium at Coach Run Condominiums. With the issues of managing her mother’s estate, Ms. Furniss failed to pay the association $6,017.88 in common charges and assessments. The association brought an action to foreclose on the Furniss unit. Discuss all the issues involved in foreclosure on such a unit for nonpayment of fees.

Graders Info : ​Answer should include discussion of state limitations on foreclosure and that it is a foreclosure action, not an eviction. There could be defenses to nonpayment and foreclosure is a due process that is required before property ownership can be taken away. 100. ​Norma and Mark Schwartz had a dog in their co-op, a violation of the co-op’s no-pet rule. They
promised the manager that they would make arrangements for the dog so that it was not living there, but each promise was followed by inaction. The manager would then warn again about the dog, another promise would follow, followed by inaction. The manager then brought an action against the Schwartzes for their removal from the co-op. Discuss the issues involved in this situation.

Graders Info : ​Co-op owners cannot simply be evicted. The co-op will need to take action related to the violation of the rule and assess fees for non-compliance. Those who do not follow the rules cannot simply be evicted. The co-op must follow its own rules for handling rules violations and take the necessary steps, such as imposing a fine or fee, and proceed from there. 101. Mechelle Medcalf (plaintiff) and a friend, Deborah Michelson, arrived at 1633 Washington Boulevard in Stamford, Connecticut, to visit their friend, Tracy Skiades, who resides at the Washington Heights Condominiums. Ms. Medcalf parked her car in the street level parking lot and walked to the lobby doors. The lighting in the parking lot was dim. She picked up the intercom and called Ms. Skiades. Ms. Skiades’s brother-in-law answered and tried to let Ms. Metcalf in using the electronic buzzer system. The system did not work, so Ms. Skiades indicated she would come down and open the door. As she traveled down to the lobby, Ms. Medcalf was attacked and injured by Kenneth Strickler.​ Ms. Medcalf filed suit against Washington Heights Condominium Association and Professional Property Management Company, Inc., its managing agent.. Ms. Medcalf alleged that their failure to maintain the buzzer system was the cause of her assault and injuries. Discuss whether the Association and the management firm would have liability.

Graders Info : What is missing in the case is any knowledge on the parts of the Association or management company that there was criminal activity. Also, the court noted that the failure of the intercom as the cause of the assault. The court noted that the buzzer system was not set up for safety, but convenience and was not designed to protect outsiders. The failure to maintain the intercom system was inconsequential and was not the proximate cause of the assault. The injury may likely have occurred without any negligence with respect to the intercom system. The Association could not have reasonably foreseen that a malfunctioning intercom system might provide a substantial incentive or inducement for the commission of a violent criminal assault on their property by one stranger upon another.
102. Puamana was established in 1968 as a Hawaii non-profit corporation. Several owners constructed “pop outs” that encroached onto the common areas owned by Puamana. The term “pop out” refers to an expansion of the dwelling by which the exterior walls are pushed out toward the area beneath the eaves of the building structure. The Board of Directors of Puamana initially assumed that the “pop outs” remained within the boundaries of the respective units because they did not protrude beyond the drip lines of the eaves. However, the Board subsequently discovered that the unit boundaries coincided with the original position of the exterior walls of the dwellings and that the “pop outs” encroached onto the common areas even though they remained under the eaves. Dale W. Hillman was one of the unit owners desiring to construct a “pop out,” and he proposed to extend nearly all of his 66-foot exterior wall 2.5 feet outward toward the eaves, creating an
additional 165 square feet of floor space. The Board rejected Hillman’s proposal unless and until the CCRs could be amended to expressly permit encroachments onto the common areas. On October 19, 1999, the Board recorded a document entitled “Amendment of Puamana Declaration, Covenants, Conditions and Restrictions.” The amended CCRs authorized the Board to approve “minor encroachments” of up to 200 square feet per unit. Allan and Barbara Lee and other owners brought suit challenging the authority of the board to amend the CCRs to allow the “pop outs.” The Lees also claimed that they enjoyed a scenic view of Kaho’olawe from their third-floor loft, which was blocked when their neighbor, Mark Ciaburri, impermissibly constructed his own third-floor loft. Did the board have the authority to allow the “pop outs” through the amendment?

Graders Info : ​The Association does have the authority to amend the CCRs and can do so with a vote according to the bylaws and the process provided. The change did not alter the nature of ownership or the structure of the condominiums – it simply allowed a unit to expand. On the other hand, the argument could be made that the owners were changing the space originally allocated to them, i.e., unit owners were expanding the size of the units originally granted to them. Such a change in ownership would be beyond the amendment process.

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