Question 1

What document establishes the legal relationship between a property owner and a property manager?

Accepted Answer

A property management agreement, which defines the scope of authority, duties, compensation, and duration of the manager's role as the owner's agent.

Question 2

What type of agency relationship is created when a property owner hires a property manager?

Accepted Answer

A general agency relationship, where the manager is authorized to handle a range of ongoing tasks on behalf of the owner.

Question 3

Which element in a property management agreement specifies what percentage or flat fee the manager earns for collecting rents?

Accepted Answer

The compensation clause, which details how and when the property manager is paid, typically as a percentage of collected rents.

Question 4

What is the primary purpose of an 'owner's reserve fund' established in a property management agreement?

Accepted Answer

To maintain a cash buffer that allows the property manager to cover routine operating expenses and minor repairs without seeking prior owner approval for each transaction.

Question 5

If a property management agreement is silent on a specific repair expense, what principle guides the manager's authority to spend owner funds?

Accepted Answer

The manager may only spend up to the authorized limit stated in the agreement; expenses beyond that threshold require explicit owner approval.

Property Management – Real Estate Broker Exam

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