Question 1
A North Carolina property management broker receives a signed property management agreement from an owner. The agreement is silent on whether the broker has authority to execute new leases on the owner's behalf. Under NCREC rules, what authority does the broker have to sign leases for the owner?
- A. The broker automatically has authority to sign leases because a property management agreement implies full leasing authority.
- B. The broker may sign leases only if the NCREC has issued a specific leasing endorsement to the broker's license.
- C. The broker has no authority to sign leases on the owner's behalf unless the property management agreement expressly grants that authority. ✓ Answer
- D. The broker may sign leases of up to one year without express authority but must obtain written authorization for longer terms.
Explanation: Under NCREC rules and agency law applicable in North Carolina, a property management broker's authority is limited to what is expressly granted or necessarily implied by the property management agreement. Because signing leases obligates the owner contractually, that authority must be expressly conferred in the written management agreement; it is not automatically implied from general management authority.
Question 2
Under G.S. 42-14, a North Carolina landlord has a tenant on a year-to-year tenancy. How much advance written notice must the landlord give to terminate that year-to-year tenancy?
- A. 7 days written notice before the end of any yearly period.
- B. 30 days written notice before the end of any yearly period.
- C. 60 days written notice before the end of any yearly period.
- D. One month written notice before the end of any yearly period. ✓ Answer
Explanation: Under N.C. G.S. 42-14, a tenancy from year to year may be terminated by a notice to quit given one month or more before the end of the current year of the tenancy. The 60-day period is not the statutory rule for an ordinary year-to-year tenancy under this provision.
Question 3
A North Carolina residential tenant gives proper written notice to terminate a month-to-month tenancy but then remains in possession and continues paying rent after the termination date. The landlord accepts two subsequent monthly rent payments without objection. Under North Carolina law, what is the most likely legal effect of the landlord's acceptance of those payments?
- A. The tenancy converts to a fixed-term one-year lease by operation of law.
- B. The landlord's acceptance of rent constitutes a waiver of the termination notice, and a new month-to-month tenancy is created. ✓ Answer
- C. The tenant is treated as a trespasser and the landlord may immediately seek summary ejectment without further notice.
- D. The landlord must file a declaratory judgment action before accepting any further rent payments.
Explanation: Under North Carolina common law and G.S. Chapter 42, when a landlord accepts rent from a holdover tenant after a valid termination notice has expired, the acceptance of rent is generally treated as a waiver of the termination and creates a new periodic tenancy on the same terms. A new month-to-month tenancy arises, requiring fresh notice to terminate.
Question 4
Under the North Carolina Vacation Rental Act (G.S. Chapter 42A), which party is responsible for remitting occupancy taxes collected from vacation tenants to the appropriate taxing authority?
- A. The vacation tenant is solely responsible for remitting occupancy taxes directly to the taxing authority.
- B. The property owner is always solely responsible, regardless of whether a broker manages the property.
- C. The real estate broker or property manager who collects the advance rent is responsible for remitting occupancy taxes to the taxing authority. ✓ Answer
- D. The North Carolina Real Estate Commission collects and distributes occupancy taxes on behalf of brokers.
Explanation: Under G.S. 42A-15 and related provisions of the North Carolina Vacation Rental Act, when a real estate broker or property manager collects advance rent and other payments from vacation tenants, the broker bears responsibility for collecting and remitting applicable occupancy taxes to the appropriate local taxing authority. The duty follows the party who handles the funds, not the absent property owner.
Question 5
Under North Carolina license law, which of the following actions by a broker in charge regarding the trust account constitutes misrepresentation to the NCREC?
- A. Submitting a monthly reconciliation to the NCREC that the BIC knows reflects manipulated ledger balances designed to conceal a shortage. ✓ Answer
- B. Failing to perform the monthly reconciliation on the exact last day of the month instead of within a few days after the month ends.
- C. Maintaining broker-owned funds of up to $100 in the trust account to cover bank service charges.
- D. Using a digital accounting system rather than paper ledger cards to maintain trust account records.
Explanation: Knowingly submitting false or manipulated trust account records to the NCREC constitutes misrepresentation, which is a violation of G.S. 93A and grounds for license revocation. Slight timing variations in reconciliation, maintaining a small amount of broker funds for bank charges (permitted), and using electronic records are not inherently violations.
Question 6
A North Carolina broker holds earnest money in trust for a transaction in which the buyer is represented by the same firm as the seller (dual agency). The transaction collapses and both the buyer and the seller demand the earnest money, each claiming the other is at fault. Under NCREC rules, the broker's obligation regarding the dual-agency relationship in this scenario is:
- A. The same as in any disputed earnest money situation — the broker must hold the funds in trust and may not disburse without a written agreement from both parties or a court order, regardless of the agency relationship. ✓ Answer
- B. The broker may release the funds to the seller because the firm's primary fiduciary duty in a dual agency runs to the seller.
- C. The broker must immediately refund the earnest money to the buyer because dual agency creates a conflict that favors the buyer.
- D. The broker must withdraw from the dispute and transfer the trust account to a neutral third-party escrow company.
Explanation: The rules governing disputed earnest money disbursement apply uniformly regardless of the agency configuration. Dual agency does not alter the requirement that the broker hold disputed trust funds until both parties provide written authorization or a court orders disbursement. Neither party's interests are automatically favored by virtue of the agency relationship.