EXAMINATION STUDY GUIDE DETAILED SOLUTIONS

Transcription

1 EXAMINATION STUDY GUIDE DETAILED SOLUTIONS The solutions for the Examination Study Guide (ESG) have been published in order to assist candidates in preparing for the Strata Management Licensing examination. However, no attempt should be made to memorize each solution. The Real Estate Division at the University of British Columbia has made every attempt to ensure the accuracy of the solutions, as of the date of publication. Please note that solutions are not provided to every question. Should you require assistance on any questions that are not listed here, please contact a tutor. The solutions in this guide are listed numerically. To find a specific solution in this guide you can scroll through the pages or use the Search function (Ctrl F) and type in question XXX. For example, if you wanted to go to question 220 you would open the search function and type in question 220. This will take you directly to question 220.

2 Exam Study Guide Detailed Solutions To Select Questions 2 Question 1 Option (1) is false. Any strata council or executive member who has a direct or indirect interest in a strata management contract must promptly disclose the interest, and cannot participate or vote in relation to the contract. Option (2) is false. It is the strata corporation, not the strata council, that has the capacity to enter into contracts. Option (3) is false. Owner developers may enter into service agreements provided that certain requirements are met. Question 5 Option (1) is false. In addition to annual general meetings ( AGMs ), the strata council is permitted to call special general meetings ( SGMs ). Option (2) is false. Owners must hold at least 20% of the strata corporation s votes (not 10%) in order to requisition an SGM. Option (3) is false. The Strata Property Act requires that notice of the AGM and any SGM be provided in writing. Option (4) is true. Section 47 of the Strata Property Act provides that as long as the strata corporation has made a reasonable attempt to give notice of the meeting to the person entitled to notice, the failure to give proper notice of the AGM or SGM does not invalidate a vote taken at the meeting. Question 7 Option (1) is false. Once consent is obtained, the individual s personal information may only be used for its original purpose. If a strata corporation intends to use the information for a new purpose, additional consent is required. Option (2) is false. Strata corporations should only collect the minimum amount of information necessary to fulfill their obligations under the Strata Property Act or other relevant legislation. Option (4) is false. An employee s contact information and information prepared or produced by employees during the course of their work is not a part of that employee s personal information. Question 11 If the contingency reserve fund (CRF) is currently less than 25% of the total budgeted contribution to the operating fund in the last fiscal year, a mandatory contribution to the CRF is required. The amount of the required contribution is the lesser of: (a) 10% of the total budgeted contribution to the operating fund for the upcoming fiscal year and (b) the amount required to bring the CRF to 25% of the total budgeted contribution to the operating fund for the upcoming fiscal year. Question 15 A depreciation report evaluates whether the amount of money currently in a strata corporation s contingency reserve fund and the amount of money to be collected from the strata lot owners for it will be sufficient to cover the anticipated costs relating to the repair and replacement of the corporation s common property and assets. Question 16 Option (2) is false. Strata managers are permitted by the Real Estate Services Act to receive fees on behalf of the strata corporation and section within the strata corporation in one blended payment. Option (3) is false. Either a strata corporation or a section may wish to maintain and manage its own trust accounts. This is permissible provided that the brokerage does not have signing authority or control of any account that belongs to the client wishing to maintain its own accounts.

3 Exam Study Guide Detailed Solutions To Select Questions 3 Question 17 To maximize the benefits of solar heat gains, buildings should be oriented so that their largest windows (such as sliding glass doors) are facing south as opposed to north. This enables the window to absorb passive solar energy (heat) thereby reducing the heating expense. Metal framed windows (option (1)) are energy-efficient as they will have a thermal break incorporated into their design to reduce conduction of heat to the outside. An air to heat exchanger (option (2)) is used in a system of forced-warm-air heating. This option is increasingly popular, and is energy-efficient. Only when heat is called for does the fan switch to high speed. R-2000 (option (3)) is an energy-efficient home standard which was introduced in the early 1980s which involves greatly increased insulation values and improved draft control and sealing measures. Question 18 The operating fund is for common expenses that occur one or more times each year. In contrast, common expenses that usually occur less often than once a year or that do not usually occur are paid from the contingency reserve fund. Question 21 The matching principle holds that expenses directly associated with particular revenues should be recognized in the same period in which the revenue is recognized. Question 25 Option (2) is incorrect. Liability insurance typically does not cover claims where the insured intentionally caused the damage giving rise to the claim. Option (3) is incorrect. The case of Economical Mutual Insurance Company v. Aviva Insurance Company of Canada makes it clear that whether an owner, tenant, or occupant is actually insured on the strata corporation s liability policy will depend on the wording of the insurance policy. Option (4) is incorrect. Liability arising from personal injury is commonly excluded from liability coverage. Question 29 Option (1) is incorrect. A purchaser will likely be found to have acted procedurally unfairly for allowing a bidder to amend its bid price after the close of bidding. Option (2) is incorrect. Procedural fairness means that purchasers must follow the disclosed rules. If a bid invitation states that bidders must be insured for a value of at least $100,000, a purchaser may not accept a bid if a bidder is insured for a lesser value. Option (3) is incorrect. If a purchaser lists evaluation criteria as price alone, this must be strictly adhered to. Question 30 Option (1) is true. In certain scenarios, a joint tenancy can be severed by one of the joint tenants even if the other joint tenant(s) may be unaware of his or her actions. Option (2) is true. In a joint tenancy, the co-owners each have an undivided share in the property. By definition, joint tenants are co-owners of the exact same interest, whatever that interest may be. Option (3) is true. A defining feature of joint tenancy is the right of survivorship. This means that when one joint tenant dies, that joint tenant s estate automatically vests in the surviving joint tenant(s). Question 32 Accounts are the devices used in a bookkeeping system to accumulate changes resulting from an entity s transactions; all transactions affecting similar assets or liabilities will be summarized in one account.

4 Exam Study Guide Detailed Solutions To Select Questions 4 Question 38 Option (2) is false. The notice period set out in the Standard Bylaws for strata council meetings may be amended to meet the requirements of the strata corporation. Option (3) is false. Notice may include posting on a website, an elevator notice, or predetermined schedule for the year, which is available to the owners through the minutes of the corporation. Option (4) is false. The Standard Bylaws require that a strata corporation must notify all the owners, as opposed to just council members, of a council meeting. Question 42 The maintenance for any building can be divided into routine, preventive, and corrective maintenance. Keeping the premises clean, maintaining landscaping, clearing snow and ice, and so on, are all examples of routine maintenance. Question 44 Option (1) is true. The Schedule of Standard Bylaws allocates the responsibility for windows, doors and skylights to the strata corporation. Option (2) is true. Pipes and cables located within a wall between a strata lot and common property are considered common property. The strata corporation bears the responsibility over common property pursuant to section 72(1) of the Act, and cannot make an owner responsible for its maintenance and repair. Option (3) is false. The strata corporation may be held liable for any injuries that occur on limited common property. In Cater v. Ghag Enterprises Ltd., the court found that the strata corporation and individual owner were equally liable in negligence for injuries suffered by a child as a result of crashing his bike into a pothole in a driveway that was deemed to be limited common property. Option (4) is true. Section 68 of the Strata Property Act defines the boundaries of a strata lot as midway between the surfaces of the structural portion of a wall. Question 47 It is not necessary to include the headings debit and credit in the journal. Accounts that are debited are listed first and are placed closest to the left column. Accounts that are credited are indented to the right. Question 48 According to the Employment Standards Act, an employer must pay the employee all wages and holiday entitlement within 48 hours after termination. Question 56 Option (1) is incorrect. Before going to the negotiation table, consider inventive solutions that can be combined to make both parties satisfied. The more possibilities for both parties to consider, the more likely it is that one of those possibilities will satisfy everyone s needs. Option (2) is incorrect. A more constructive approach is to focus less on what each party wants, and more on identifying and agreeing upon some objective standard by which to find an acceptable solution. Option (3) is incorrect. It is a good idea to set a high goal and to avoid communicating your resistance point too early in the process. Question 59 Annual Depreciation Expense = (Cost Salvage Value) / Estimated Life (in years). Annual Depreciation Expense = ($55,000 $5,000)/10 Annual Depreciation Expense = $5,000

5 Exam Study Guide Detailed Solutions To Select Questions 5 Question 60 Option (1) is false. Codes of ethics ensure that human actions will be morally fair, as well as lawful. Option (2) is false. Suspension or cancellation of a licensee s membership in a professional association, such as the SPABC, does not disentitle the licensee to continue his or her professional practice. Option (3) is false. Written codes of ethics, such as the SPABC Code of Ethics, are imposed by professional associations on its members, rather than by the Superintendant of Real Estate on all strata management licensees. Question 61 Option (1) is incorrect. A capital budget is a budget that provides for capital expenditures that will occur from time to time to offset economic obsolescence. Option (2) is incorrect. An annual operating budget is a budget prepared for one fiscal year. Option (3) is incorrect. A fixed (static) budget is a budget that is based on one level of activity. Question 63 The main objective of a strata manager is to ensure that the strata corporation collects appropriate revenues to fund its daily operations while also providing a reserve fund for major repairs or contingencies. One aspect of this is to manage the property at a minimum of expense so that the owners are able to properly fund their operating and contingency reserves. While a strata manager might proofread the minutes for strata meetings (option (2)), that is not a core objective of a strata manager. Question 70 Pursuant to sections 45 and 103(2) of the Strata Property Act, the annual operating budget, together with a copy of the financial statements for the upcoming fiscal year, must be distributed with the notice of the annual general meeting at least two weeks before the annual general meeting. Question 73 It is not a contravention of the Human Rights Code to express a preference on the basis of sex, ancestry, or any of the other prohibited grounds when such a preference is based on a bona fide job qualification or occupational requirement. Question 76 In the aftermath of an explosion, a strata manager should have a contingency plan to deal with the possibility of toxic fumes spreading from another location to his or her building. In order to prevent this, occupants should be advised to close all doors and windows, and to shut down all air conditioning systems. Question 79 Generally speaking, any person of sound mind can act as an agent. Option (1) is correct. A sound mind and capacity are different concepts. An infant is presumed to have a sound mind, but they do not have capacity to contract. However, an agent is not a party to the contract between the principal and the third party. Accordingly, acting as an agent requires only a sound mind, and not necessarily capacity to contract. This is why an infant is able to act as an agent. Options (2) and (3) are incorrect. The agency relationship can be terminated by operation of law. For example, the death, insanity or bankruptcy of either principal or agent would terminate the agency relationship.

6 Exam Study Guide Detailed Solutions To Select Questions 6 Question 80 The sources of revenue for strata corporations are maintenance fees, special levies (option (1)), and miscellaneous revenues (option (2)); however, the primary source of revenue is maintenance fees (option (3)), which are required to be paid by the first of each month. Question 85 Option (2) is false. Section 43(1) of the Strata Property Act allows any persons holding at least 20% of the strata corporation s votes to demand, in writing, that the strata corporation hold a special general meeting. Option (3) is false. Only mortgagees who have given the strata corporation a Mortgagee s Request for Notification will receive notification of general meetings. Option (4) is false. There is no requirement that all strata council members be present at a general meeting, only that a quorum is present. Question 86 Option (1) is false. Since this defect was discoverable using ordinary diligence, it is a patent defect as opposed to a latent defect. Option (2) is false. The rule for patent defects is that in most cases, the buyer assumes the risk (caveat emptor let the buyer beware ). Therefore, Madison was not required to bring the defect to Tyler s attention. Question 93 Strata properties in British Columbia with five or more strata lots are required to obtain depreciation reports on a periodic basis. According to section 94 of the Strata Property Act and section 6.2 of the Strata Property Regulation, strata corporations must obtain a depreciation report every three years, unless this requirement is waived by a resolution passed by a 3/4 vote at an annual or special general meeting. Question 100 According to the Employment Standards Act, a request for pregnancy leave made during the pregnancy must be made in writing at least four weeks before the proposed start date. Question 107 The Zero Balance Model keeps contributions as low as possible. If large expenditures were to arise, this can lead to the need for a special levy. Question 108 Option (1) is false. Although an official community plan is a policy statement adopted by bylaw, it is not mandatory for every detail to be carried out. Adoption of an official community plan does not commit or authorize a municipality or regional district to proceed with any project specified in the plan, nor is the official community plan a zoning bylaw. Option (2) is false. All bylaws enacted, permits issued, and work undertaken by a local government subsequent to, rather than prior to, the enactment of an official community plan must be consistent with that plan. Official community plans do not apply retroactively to existing zoning bylaws. Option (3) is false. If a regional district wishes to prepare an official community plan, it may be required to provide the Minister of Municipal Affairs with information regarding public support for the plan. Once prepared, the plan must be referred to the council of any adjoining municipality affected by the plan for its comment.

7 Exam Study Guide Detailed Solutions To Select Questions 7 Question 111 According to the Employment Standards Act, wages must be paid at least twice a month (a pay period cannot be longer than 16 days) and not later than eight days after the expiration of each pay period. Question 120 Option (1) is false. Security personnel are the only component of a security system that have reasoning capabilities and can act pre-emptively to prevent problems. Option (3) is false. Occupants such as fast food restaurants and video arcades tend to attract, rather than decrease, the probability of crime. Option (4) is false. It is unusual for there to be security personnel on duty in a residential complex. Question 122 Current assets are cash and other assets that are expected to be converted to cash within one year or the normal operating cycle of the entity whichever is longer. Examples of current assets include cash, marketable securities, accounts receivable, inventories, and prepaid expenses. Question 125 In the event that there is not enough money in the contingency reserve fund to cover a major repair, the strata corporation usually has two options for raising the required funds. The first option is to borrow money and collect additional amounts from the strata lot owners each month (by increasing the monthly assessments paid by the owners) to repay the loan. The second option is to levy a special assessment against each strata unit. Question 133 A landlord can only terminate a residential tenancy in limited circumstances. In option (1), Roger would likely be able to terminate the tenancy pursuant to section 47(1)(e) of the Residential Tenancy Act (the Act ) because his tenant has engaged in illegal activity that is likely to cause damage to Roger s property, and is likely to adversely affect the security and safety of other occupants of the residential property. A landlord can give notice to end a tenancy agreement to a tenant who is repeatedly late paying rent pursuant to section 47(1)(b) of the Act (option (3)). Under section 47(1)(a) of the Act, a landlord may, at any time, give the tenant a notice of the end of the tenancy if the tenant does not pay the security deposit within 30 days of the date it is required (option (4)). With respect to option (2), where the landlord intends in good faith that the landlord, or a spouse, child or parent of the landlord or landlord s spouse will occupy the premises, the landlord can give notice to end the tenancy agreement. However, Jean Paul s nephew does not fall within this list of family members and such notices are not effective until the end of a fixed-term tenancy. Question 134 Prepaid expenses are a type of current assets. Prepaid expenses represent services or rights to services for which cash has been paid but the services have not yet been consumed by the entity at the time the balance sheet is prepared.

8 Exam Study Guide Detailed Solutions To Select Questions 8 Question 135 For annual and special general meetings, unless the bylaws stipulate otherwise, the Act generally provides that a quorum is 1/3 of the total number of eligible voters. Option (2) is false. For a strata council meeting, the quorum is four for a strata council with seven members. There is no requirement that one of these individuals be the chair or vice chair. Option (3) is false. While it is true that a strata corporation may amend the definition of a quorum in the form of a bylaw at an annual or special general meeting, the amendment must be effected by a 3/4 vote resolution as opposed to majority (1/2) vote. Question 141 The amount of compensation that employees will receive is not considered in a job analysis. A job analysis is the process of determining the nature of a job by collecting and organizing information about its various aspects, including: what the job seeks to accomplish (option (4)); duties and responsibilities of the job (option (1)); equipment and machines used and operated (option (2)); characteristics of the work environment; and skills, abilities, knowledge, education, and experience required to successfully perform the job (job specifications). Question 144 Option (1) is false. Cooperative corporations in British Columbia are created under the Cooperative Association Act through incorporation, not the filing of a plan at the Land Title Office. The act of filing a plan at the Land Title Office describes the process of subdivision, one type of subdivision being a strata development. Option (2) is false. Cooperative ownership differs from strata title ownership in that it does not bestow an individual with fee simple title to the cooperative owner s unit. Instead, the owner in a cooperative possesses shares in a nonprofit corporation. In turn, this corporation holds title to the land. Option (3) is true. A cooperative owner does not own an estate in land, making the process of financing a cooperative purchase more difficult. Option (4) is false. Typically, a cooperative association s board of directors must approve the person who proposes to buy a cooperative owner s shares, and the proposed sale of those shares will be subject to the board s approval. Question 148 This question is drawn from Livingstone v. Evans. Option (1) is false. Charlotte made an offer, and Dennis made a counter-offer. This counter-offer has the effect of terminating Charlotte s initial offer. In response, Charlotte could have accepted the counter-offer or rejected the counter-offer and ended their dealings. Instead, Charlotte replied by stating, cannot reduce price, which the law has stated is a renewal of her original offer. Therefore, Dennis was entitled to accept her renewed original offer, forming a contract. Option (3) is false. If no reasonable person would think there was a serious intent on the part of the offeror to be bound by the terms of the advertisement, an offer has not been made, and an invitation to treat may be found instead. In this scenario, a reasonable person would likely find Charlotte s clear and unambiguous communication to Dennis to contain serious intent to form a binding contract. Accordingly, Charlotte has likely made an offer rather than an invitation to treat.

9 Exam Study Guide Detailed Solutions To Select Questions 9 Question 151 Option (1) is false. If the court of original jurisdiction is the British Columbia Small Claims Court, the appeal would be to the British Columbia Supreme Court. Option (3) is false. Leave (permission) to appeal to the Supreme Court of Canada may be sought, but the Supreme Court of Canada may decide not to hear the appeal. If this happens, the Court of Appeal s decision will stand. Option (4) is false. An appeal from Small Claims Court is to the British Columbia Supreme Court, and the proceeding will be heard by a single judge. Question 154 A budget surplus occurs when the contributions to the operating fund for the previous fiscal year exceed the actual expenditures. Section 105 of the Strata Property Act requires that a budget surplus be dealt with by being transferred to the CRF, by being carried forward as a surplus, or by being used to reduce the strata fees in the following year. The strata corporation could deal with the surplus in some other way by a 3/4 vote. Question 161 Deferred maintenance is often used to keep operating expenses to a minimum, but it is, in fact, a false economy. Ultimately, the problem will have to be addressed when it can no longer be ignored. There is a high likelihood that the cost of remedial work will far exceed the cost of addressing the issue from the outset. Question 170 Option (1) is true. A key feature of joint tenancy is the right of survivorship. This means that when one joint tenant dies, the entire estate automatically vests in the surviving joint tenant(s). Options (2) and (4) are true. A joint tenancy can be terminated by operation of law. One way to effect this severance is if a joint tenant transfers his interest to a third party, as this would disrupt the unity of time and title. The result is that the third party would be a tenant in common with the remaining joint tenant(s). Option (3) is false. This option describes the operation of the right of survivorship, which is a feature unique to joint tenancy as opposed to a tenancy in common. Question 171 Concrete framing is the most common type of construction today for high-rise apartment buildings. This is because most high-rise residential buildings normally require a two-hour fire-rating for floors and columns, and concrete will achieve this rating without any additional protection for most applications. Question 174 The development of new principles using the case law approach is relatively slow. Accordingly, the role most often played by legislation (statutes) is to change the common law. Option (2) is incorrect. The concept of precedents refers to earlier case law which is followed by judges in deciding new matters, and not to the passing of statutes. Option (3) is incorrect. The Constitution sets out the power of the provinces and the federal government to make laws. Since these levels of government derive their powers from the Constitution, they cannot pass ordinary legislation which alters this allocation of legislative authority. Option (4) is incorrect. Governments may pass legislation in response to important judicial decisions, but they do not pass legislation in order to publicize such decisions.

10 Exam Study Guide Detailed Solutions To Select Questions 10 Question 176 Options (1), (2) and (3) are false. Under a limited representation arrangement, a brokerage will not be able to act in accordance with one client s instructions if the instructions conflict with the interest of another client in the limited representation relationship. Question 184 Option (2) is incorrect. Percy made the provision regarding size 12 font a mandatory requirement. The fact that there are no waivers or exclusions in the bid invitation means that Percy must disqualify any non-compliant bids. Option (3) is incorrect. If the bid invitation states that the bid will close on a certain date, Percy must adhere to that date. Late bids must be disqualified. Option (4) is incorrect. If the bid invitation states that bids are irrevocable for 60 days after the close of bidding, then this becomes a term of all bid contracts. This is a legally binding requirement for all bidders, which Bingo has breached. Question 191 The interest paid out on a loan taken out by the strata corporation would be considered an expense, not revenue. In a strata corporation, revenue comes from the following sources: Strata fees paid by unit owners on a quarterly or monthly basis Interest earned on bank balances (option (4)) Interest charged on overdue strata fee payments (option (1)) Rental charges for facilities, including guest rooms, parking, and amenities centres Revaluation gains on investments valued at market value Fines for violations of bylaws and rules (option (3)) Question 196 Collective bargaining is the process through which a labour union and an employer negotiate the working conditions (e.g., wages, benefits, etc.) of the union members. Question 197 Option (1) is false. Section 34 of the Residential Tenancy Act states that a residential tenant may not assign or sublet his/her rental unit unless the landlord consents in writing. Option (2) is false. There are no legal restrictions regarding security deposits for commercial tenancies. This is an item left open for negotiation. Option (3) is false. In the case of a commercial tenancy, a tenant is required to deliver up the premises as he or she found them, with the exception of reasonable wear and tear. In the case of a residential tenancy, section 32(4) of the Residential Tenancy Act states that a tenant is not required to make repairs for reasonable wear and tear. Question 200 A depreciation report is a physical and financial appraisal designed to facilitate planning for the long-term funding and maintenance of a strata corporation s common elements. The depreciation report is governed by section 94 of the Strata Property Act and should estimate the repair or replacement cost and the expected life of each major item of the common property or the common assets.

11 Exam Study Guide Detailed Solutions To Select Questions 11 Question 202 If there is a compactor, it should only be operated by maintenance staff. Owners and tenants have to deliver their own garbage to the service area, suitably bagged, at specific times. Owners and tenants should not be allowed to operate the compactor due to potential liability concerns. Question 203 Looking at current market demand for similar properties is unlikely to be beneficial in a depreciation report, as a depreciation report looks at a single strata corporation and its ability to maintain and repair its own common property and assets. Question 205 Unapproved expenditures may be incurred by the strata council, pursuant to section 98 of the Strata Property Act, provided that: the total unapproved expenditures for that fiscal year do not exceed the limit for unapproved expenditures set out in a strata corporation bylaws, or if no such unapproved expenditures bylaw has been passed, the lesser of $2,000 or 5% of the total contributions to the operating fund for the current year; or the expenditure is the minimum amount needed to ensure safety and prevent significant loss or damage and the owners are informed as soon as possible about the expenditure. Question 206 Because of the principle of indefeasibility, an individual who acquires and registers a fee simple estate in good faith (honestly) and for valuable consideration (a reasonable price) is indefeasibly entitled to that estate. Option (1) is incorrect. The buyer in this question, being a good faith purchaser for value, is able to keep his title despite the clerical error and Scott s fraudulent conduct. Unfortunately, this means that Michael will not be able to retain his land. Michael must now seek compensation from the assurance fund. Option (3) is incorrect. A lien on title denotes a claim for payment of funds owing to the claimant from the property owner. Accordingly, it would not make sense for Michael to register a lien on his own property to demonstrate to anyone searching title that he is the registered owner. Option (4) is incorrect. This option describes the operation of the common law doctrine of void deed, which no longer applies in the Torrens system. Question 213 The Strata Property Act does not contain a provision which denies an owner the right to vote if the strata corporation has filed a lien against that owner s strata lot. However, the Strata Property Act permits a strata corporation, if it chooses, to pass a bylaw to achieve this purpose pursuant to section 53(2). Question 214 Major jurisdiction in the area of labour legislation rests with the provinces as opposed to the federal government. The scope of federal powers with respect to this area is quite limited, covering less than 10% of the Canadian labour force (generally those interprovincial industries such as banks, airlines, railways, and so forth).

12 Exam Study Guide Detailed Solutions To Select Questions 12 Question 215 Option (1) is false. Local governments have more authority over privately owned land than both federal and provincial governments combined. Option (2) is false. The Constitution Act provided provincial governments with jurisdiction over matters affecting private property, and also empowered them to establish a third level of government by delegating some provincial powers to local governments created for that purpose. The province has delegated most of the authority to regulate land use to local governments, but still imposes certain controls. Option (4) is false. In British Columbia, local governments are not just regional districts, and include municipalities which derive their authority to control privately owned land from the Community Charter, with the exception of Vancouver. Vancouver derives its authority from the Vancouver Charter. Question 217 In the preparation of the trial balance, the sum of the debit column and the sum of the credit column of each T- account are calculated, and the lesser of these two sums is subtracted from the greater sum. The difference is the balance for that T-account at the end of the period. For example, if the sum of the debit column is greater than the sum of the credit column, the sum of the credit column is subtracted from the sum of the debit column, and the account will have a debit balance. Question 221 The purpose of personnel management can be defined in terms of several specific goals: Attract and select qualified personnel. Ensure that employees have the requisite skills, abilities, knowledge, and experience to perform their jobs well (option (1)). Train and motivate personnel. Undertake to increase the skills and knowledge of employees and enhance their motivation to perform well (option (3)). Retain desirable personnel. Develop policies and practices regarding the conditions of work (compensation, benefits, job safety) that foster employee attachment to the organization (option (3)). Question 222 Option (1) is false. The principle of indefeasibility extends only to fee simple interests, and not to charges (estates in land less than a fee simple, such as a mortgage). Accordingly, Handy Dandy s charge is not protected under the Torrens system. Option (2) is false. As there is evidence of fraud, Handy Dandy s mortgage is no longer valid, and Julia will not be obliged to repay it. Option (3) is false. In order to receive compensation from the assurance fund, Handy Dandy must prove that if the Land Title Act had not been passed, it would have recovered the loan at common law. At common law, once evidence of a void instrument (such as a fraudulent mortgage) is presented, all subsequent dealings with the land are of no effect. As Handy Dandy would not be able to assert its loan against Julia, it will not receive compensation from the assurance fund. Option (4) is true. As Handy Dandy will not be able to recover from the assurance fund, its only recourse is to pursue an action against Andrew. Question 224 If an agent acts outside his or her authority, as Audrey did in selling the boat for less than the authorized amount, the agent may be liable to the principal for breach of the agency contract. Options (2) and (3) are incorrect. A warranty of authority is an agent s promise or guarantee to third parties (not the principal) that his or her actions fall within the scope of authority given by the principal. Paul would not succeed here as he is the principal, and not the third party. Teresa, however, may be able to succeed against Audrey for her breach of her warranty of authority.

13 Exam Study Guide Detailed Solutions To Select Questions 13 Question 234 Except in limited circumstances (such as arson and vandalism), an insurer cannot bring an action against the insured(s) on the policy. Question 237 The funds of strata corporations are all restricted funds. The legislation and/or the resolutions of the strata corporation limit the purposes for which the strata fees and other revenues can be spent. Question 241 Option (1) is false. An occupier may still have a limited responsibility to trespassers. Option (2) is true. At common law, duties owed to children tend to be more onerous than duties owed to adults because of children s limited ability to appreciate danger and to act reasonably in the circumstances. Option (3) is false. Section 1 of the Occupiers Liability Act states that there may be more than one occupier of the same premises. Individuals who are in physical possession of the premises (such as a lessee) will be considered occupiers. Option (4) is false. Individuals who have responsibility for, and control over, the condition of the premises, the activities conducted on those premises and the persons allowed to enter those premises will be considered occupiers. Despite being away, Clara would likely be considered an occupier as she owns and operates the lot. Question 242 A complaint must be in writing, and cannot be provided orally, despite containing a full description of the events giving rise to a particular complaint. Question 246 A benefit of ADR is the fact that it can provide parties with a greater sense of privacy than going to court. This is because ADR records are not made public, as they would be in the case of litigation. Question 247 Formula for calculating a strata lot s contribution to a common expense: = (unit entitlement of strata lot/total unit entitlement of all strata lots) x total contribution = (100/1000) = 10% of the total contribution Question 248 The Real Estate Services Act (the Act ) was introduced to govern real estate services in British Columbia. Option (1) does not fall within the definition of real estate services, which is defined in the Act as rental property management services, strata management services, or trading services. Construction of a building falls outside this definition. Collecting rents or security deposits for the use of real estate (option (2)) falls under the definition of rental property management services. Options (3) and (4) fall within the definition of trading services.

14 Exam Study Guide Detailed Solutions To Select Questions 14 Question 249 Liquid funds are funds that can quickly be converted to cash. The opening balance of the operating fund represents any liquid funds from prior years, to the extent that the strata lot owners have not decided to transfer them to the contingency reserve fund or use them to reduce the total contribution to next fiscal year s operating fund. Question 250 Option (1) is false. A licensee should not hesitate to seek the advice of others who are more experienced. A managing broker is a particularly useful resource for licensees as they have likely encountered and dealt with similar situations. Furthermore, the service agreement is between the strata corporation and the brokerage (not the individual licensee), and the managing broker, under the Real Estate Services Act, is responsible for the exercise of the rights conferred on the brokerage, the performance of the duties imposed on the brokerage, and the control and conduct of the brokerage's real estate business. Option (2) is false. Each brokerage should have its own standard procedures and policies in place so that similar problems are dealt with in a similar manner. Option (3) is false. When a licensee is asked a technical question, the licensee should not hesitate to shift the risk by recommending that the client retain the services of an expert in that area. Question 253 Consulting strata lots owners is not a step in the six-step depreciation report framework. The six steps are problem identification, property identification/evaluation, lifecycle analysis, cost analysis, financial analysis, and communicating results. Question 256 The two key documents for financial reporting of the operating fund are the operating statement and the balance sheet. The operating statement lists the various categories of revenue and expenditure from the operating fund. The balance sheet typically contains more accounts than those for the CRF or any special project funds. The depreciation report serves a different purpose than the financial reporting of the operating fund.