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AIC CAC practice questions

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Question 1Property Management Fundamentals and Operations

Which document typically establishes the legal framework and authority for a community association and is recorded with the local government?

  1. The board meeting minutes
  2. The declaration or covenants, conditions, and restrictions Correct answer.
  3. The reserve study report
  4. The annual operating budget

Explanation

The recorded declaration (often called CC&Rs) is the governing instrument that creates the association, binds owners, and sets core use restrictions. Budgets, minutes, and reserve studies are operational documents that do not create the association's legal authority.

Question 2Property Management Fundamentals and Operations

In community association budgeting, the operating budget primarily covers which type of expense?

  1. Recurring day-to-day expenses such as utilities, insurance, and routine maintenance Correct answer.
  2. Replacement of major components such as roofs and elevators
  3. Owner unit interior renovations
  4. Long-term capital projects funded over decades

Explanation

The operating budget funds recurring, predictable expenses of running the property during the year. Major component replacement and long-term capital projects belong to reserves, and unit interiors are generally owner responsibility.

Question 3Property Management Fundamentals and Operations

A property manager is reviewing a vendor's certificate of insurance before allowing work to begin. Which element confirms the vendor's insurer will pay claims arising from the vendor's work?

  1. The vendor's payment schedule
  2. The vendor's business license number
  3. The certificate's expiration date
  4. The additional insured endorsement naming the association Correct answer.

Explanation

An additional insured endorsement extends the vendor's liability coverage to the association, protecting it against claims tied to the vendor's work. Expiration dates, licenses, and payment terms do not transfer insurance protection.

Question 4Property Management Fundamentals and Operations

Which item is most appropriately funded from an association's reserve account?

  1. Manager's salary
  2. Routine pool chemical supplies
  3. Replacement of the community's aging clubhouse roof Correct answer.
  4. Monthly landscaping contract

Explanation

Reserve funds are set aside for the repair or replacement of major common components with long useful lives, such as a clubhouse roof. Recurring operating items like landscaping, supplies, and salaries are paid from the operating budget.

Question 5Property Management Fundamentals and Operations

A board wants to compare its reserve funding level against the ideal fully funded position. Which metric best expresses this comparison?

  1. The operating expense ratio
  2. The delinquency rate
  3. The percent funded Correct answer.
  4. The debt service coverage ratio

Explanation

Percent funded measures actual reserve balances against the fully funded ideal, showing how prepared the association is for future capital needs. The other metrics describe operating efficiency, borrowing capacity, or collections, not reserve adequacy.

Question 6Property Management Fundamentals and Operations

Under the accrual basis of accounting, when is an expense recognized?

  1. When the fiscal year closes
  2. When the obligation is incurred, regardless of when paid Correct answer.
  3. When the invoice is paid in cash
  4. When the board approves the budget

Explanation

Accrual accounting matches expenses to the period in which the obligation arises, independent of the cash payment date. Cash basis instead records expenses only when money changes hands.

Question 7Property Management Fundamentals and Operations

An association's balance sheet shows assets of $800,000 and liabilities of $300,000. What is the association's fund balance (equity)?

  1. $1,100,000
  2. $500,000 Correct answer.
  3. $300,000
  4. $800,000

Explanation

Fund balance equals total assets minus total liabilities, so $800,000 minus $300,000 equals $500,000. Adding the figures or reporting only one side misstates equity.

Question 8Property Management Fundamentals and Operations

Which statement summarizes an association's cash inflows and outflows over a period?

  1. The statement of cash flows Correct answer.
  2. The reserve study
  3. The balance sheet
  4. The annual disclosure statement

Explanation

The statement of cash flows tracks actual cash receipts and payments during a period. The balance sheet is a point-in-time snapshot, while a reserve study and disclosure statement are planning and disclosure documents.

Question 9Property Management Fundamentals and Operations

A manager receives a homeowner's written request to inspect the association's financial records. What is the most appropriate first step?

  1. Deny the request because records are confidential
  2. Provide all records immediately including personnel files
  3. Follow the governing documents and applicable statute for permitted records, timing, and any reasonable copying fees Correct answer.
  4. Refer the owner to the developer

Explanation

Owners generally have a statutory or governing-document right to inspect specified records, subject to defined procedures, exclusions, and reasonable costs. The manager should apply those rules rather than deny outright or over-disclose.

Question 10Property Management Fundamentals and Operations

Which practice best supports fair and consistent enforcement of community rules?

  1. Applying written rules uniformly with documented notices and a consistent process Correct answer.
  2. Enforcing rules only when a board member complains
  3. Letting the manager decide case by case without records
  4. Enforcing rules only against new owners

Explanation

Uniform, documented enforcement reduces claims of selective treatment and gives owners clear notice and due process. Ad hoc or selective enforcement exposes the association to legal challenge.

Question 11Property Management Fundamentals and Operations

A homeowner submits an architectural change request to install a fence. Which action is most consistent with sound association governance?

  1. Reject it because changes are never allowed
  2. Have the manager approve it without review
  3. Route it to the designated architectural review body per the governing documents and respond within required timeframes Correct answer.
  4. Approve it automatically because fences are common

Explanation

Architectural requests should follow the process set out in the governing documents, typically review by an architectural committee with defined criteria and timelines. Automatic approval, unilateral manager decisions, or blanket rejection all bypass that process.

Question 12Property Management Fundamentals and Operations

Which of the following is a primary responsibility of an association board of directors?

  1. Setting policy, approving budgets, and overseeing the manager Correct answer.
  2. Managing the day-to-day operations of the property personally
  3. Performing routine maintenance tasks
  4. Representing individual owners in disputes with neighbors

Explanation

The board governs by setting policy, adopting budgets, and overseeing management rather than performing daily tasks. Day-to-day operations and maintenance are delegated to staff or the managing agent.

Question 13Property Management Fundamentals and Operations

A quorum requirement in the bylaws determines which of the following?

  1. The length of a director's term
  2. The maximum number of items on a meeting agenda
  3. The minimum number of members or directors who must be present for business to be validly conducted Correct answer.
  4. The number of votes needed to pass a special assessment

Explanation

A quorum is the minimum participation needed before a meeting can validly transact business. Voting thresholds, agenda limits, and term lengths are separate provisions.

Question 14Property Management Fundamentals and Operations

A board wants to hold an executive session. Which topic is generally appropriate to discuss in closed session?

  1. Pending litigation and personnel matters Correct answer.
  2. Reviewing the reserve study summary
  3. Approving the annual budget
  4. Announcing the date of the annual meeting

Explanation

Closed or executive sessions are typically reserved for sensitive matters such as litigation, personnel, or contract negotiations. Budget approval, meeting announcements, and general planning belong in open session.

Question 15Property Management Fundamentals and Operations

An owner's assessment payment is received after the due date. Which action reflects a sound collections policy?

  1. Waive the late fee to avoid conflict
  2. Immediately file a lien without any prior notice
  3. Apply the written late-fee and collection schedule consistently and document the action Correct answer.
  4. Suspend all common-area access without following any procedure

Explanation

A defensible collections policy applies the documented schedule of late fees and notices uniformly and records each step. Waiving fees inconsistently or skipping required notice undermines enforceability.

Question 16Property Management Fundamentals and Operations

A lien for unpaid assessments generally attaches to which interest?

  1. The association's reserve account
  2. The owner's personal vehicle
  3. The managing agent's business assets
  4. The owner's unit or lot and its appurtenant interest Correct answer.

Explanation

An assessment lien attaches to the owner's unit or lot (and its appurtenant interest) as a recorded encumbrance, giving the association a claim against the property. It does not reach unrelated personal or third-party assets.

Question 17Property Management Fundamentals and Operations

Which statement best describes a special assessment?

  1. A one-time charge levied to cover an unanticipated or unbudgeted expense Correct answer.
  2. A fee paid only by new owners at closing
  3. A tax imposed by the local government
  4. A routine monthly charge for operating expenses

Explanation

A special assessment is a separate, typically one-time charge to fund costs not covered by the regular budget, such as an emergency repair. It is distinct from regular assessments, taxes, and closing fees.

Question 18Property Management Fundamentals and Operations

A manager is preparing a preventive maintenance schedule. Which task is the clearest example of preventive maintenance?

  1. Repainting a wall after a water stain appears
  2. Repairing a boiler after it fails
  3. Replacing a window broken by a resident
  4. Scheduled annual servicing of the HVAC system Correct answer.

Explanation

Preventive maintenance is planned, scheduled work intended to avoid failures, such as routine HVAC servicing. The other items are reactive or corrective responses to damage or breakdowns.

Question 19Property Management Fundamentals and Operations

A vendor submits a bid for a large landscaping contract. Which practice best supports sound contract management?

  1. Obtain comparable bids, verify references and insurance, and document the evaluation Correct answer.
  2. Skip a written contract to save time
  3. Award the contract to the lowest bidder without checking references
  4. Award it to a board member's company without disclosure

Explanation

Competitive bidding with reference and insurance checks and documented evaluation supports defensible vendor selection. Awarding without due diligence, undisclosed conflicts, or skipping a written contract creates risk.

Question 20Property Management Fundamentals and Operations

Which of the following best describes the manager's fiduciary duty to the association?

  1. Favoring the board president's preferences over the community's interest
  2. Keeping financial records confidential from the board
  3. Acting in the association's best interest and avoiding conflicts of interest Correct answer.
  4. Maximizing the manager's own fees

Explanation

A fiduciary duty requires the manager to act loyally in the association's best interest and to avoid or disclose conflicts. Self-dealing, favoritism, or withholding records from the board breach that duty.

Question 21Property Management Fundamentals and Operations

An association's governing documents require board meetings to be open to members except for specified closed-session topics. A director proposes discussing a vendor contract negotiation in open session. What is the most appropriate response?

  1. Discuss it openly because all contracts must be public
  2. Move the negotiation discussion to a properly noticed closed session Correct answer.
  3. Let the manager decide in private without any record
  4. Cancel the meeting to avoid disclosure

Explanation

Contract negotiations often fall within permitted closed-session topics, so the discussion should move to a properly noticed executive session. Handling it openly may harm the association's position, while cancelling or deciding without record bypasses governance.

Question 22Property Management Fundamentals and Operations

A reserve specialist reports that a component's remaining useful life is shorter than previously estimated and replacement costs have risen. What is the most appropriate board response?

  1. Ignore the update until the component fails
  2. Transfer reserve funds to the operating budget
  3. Re-evaluate the reserve funding plan and adjust contributions or special assessment planning accordingly Correct answer.
  4. Immediately levy a special assessment without analysis

Explanation

When remaining life or costs change materially, the board should update the reserve plan and adjust funding strategy to remain adequate. Ignoring the data, acting without analysis, or raiding reserves undermines financial health.

Question 23Property Management Fundamentals and Operations

A board is considering a large unbudgeted repair and must decide between using reserves, a special assessment, or a loan. Which analysis is most relevant to the decision?

  1. The impact on owners' cash flow, the reserve's long-term adequacy, and total borrowing cost Correct answer.
  2. The manager's tenure with the association
  3. The color of the building's exterior
  4. The number of board meetings held last year

Explanation

Choosing among funding options requires weighing owner affordability, the effect on reserve adequacy, and the total cost of borrowing. Cosmetic, historical meeting, or personnel factors do not bear on the financial decision.

Question 24Property Management Fundamentals and Operations

An owner repeatedly violates a parking rule. After documented warnings go unanswered, what is the most defensible next step under a well-structured enforcement policy?

  1. Immediately tow the vehicle without notice
  2. Revoke the owner's membership in the association
  3. Publicly shame the owner at the next meeting
  4. Apply the graduated enforcement steps in the policy, such as fines or a hearing, with documentation Correct answer.

Explanation

Graduated enforcement with documented warnings, fines, and a hearing opportunity provides due process and a defensible record. Skipping notice, revoking membership, or public shaming exceeds authority or violates fairness.

Question 25Property Management Fundamentals and Operations

A manager notices that the association's operating budget has run a deficit for two consecutive years. Which action best addresses the underlying issue?

  1. Use reserve funds to cover the shortfall permanently
  2. Analyze expense trends and assessment levels, then propose budget adjustments to the board Correct answer.
  3. Reduce reserve contributions to zero
  4. Ignore the deficit because reserves exist

Explanation

Recurring operating deficits signal a structural mismatch between revenue and expenses that should be corrected through analysis and budget adjustments. Covering shortfalls with reserves or cutting reserve funding merely postpones the problem.

Question 26Property Management Fundamentals and Operations

Which document typically establishes the legal authority for a community association to collect assessments from owners?

  1. The board meeting minutes
  2. The annual operating budget
  3. The declaration or covenants, conditions, and restrictions (CC&Rs) Correct answer.
  4. The reserve study

Explanation

The declaration (CC&Rs) is the recorded governing document that creates the assessment obligation and lien rights. Budgets, reserve studies, and minutes are operational or informational documents, not sources of assessment authority.

Question 27Property Management Fundamentals and Operations

What is the primary purpose of a reserve fund in a community association?

  1. To pay for legal defense of the board in all disputes
  2. To cover day-to-day operating expenses such as utilities and landscaping
  3. To accumulate funds for future major repairs and replacements of common elements Correct answer.
  4. To provide a source of petty cash for the manager's office

Explanation

Reserve funds are set aside to fund major repairs and replacements of common elements whose useful lives exceed one year, avoiding reliance on special assessments. Operating expenses are funded through the annual operating budget, not reserves.

Question 28Property Management Fundamentals and Operations

Which of the following is a common characteristic of a homeowners association (HOA) as opposed to a condominium association?

  1. The association typically owns and maintains the exterior of individual homes
  2. Owners hold title to their individual units and share ownership of common elements
  3. Owners own their lots and the association maintains common areas Correct answer.
  4. Assessments are always lower than in condominiums

Explanation

In an HOA, owners typically own their lots and the association maintains common areas. In a condominium, owners hold title to units and share ownership of common elements, and the association often maintains building exteriors.

Question 29Property Management Fundamentals and Operations

What is the primary role of a community association manager?

  1. To implement board decisions and manage the day-to-day operations of the association Correct answer.
  2. To represent individual owners in disputes with the board
  3. To set policy and make decisions on behalf of the board
  4. To serve as the association's legal counsel

Explanation

The manager implements board decisions and handles daily operations, while the board sets policy. The manager does not set policy, represent individual owners, or act as legal counsel.

Question 30Property Management Fundamentals and Operations

A board is preparing the annual operating budget. Which of the following is typically included as an operating expense?

  1. Installation of a new elevator
  2. Landscaping services Correct answer.
  3. Roof replacement
  4. Paving of the parking lot

Explanation

Operating expenses are recurring costs for day-to-day operations, such as landscaping. Roof replacement, paving, and elevator installation are major repairs or replacements typically funded through reserves.

Question 31Property Management Fundamentals and Operations

An association's governing documents require a supermajority vote of owners to amend the CC&Rs. What is the primary reason for this requirement?

  1. To protect the fundamental rights of owners from being changed by a simple majority Correct answer.
  2. To allow the board to amend the CC&Rs without owner input
  3. To ensure that amendments are approved quickly
  4. To reduce the cost of holding a membership meeting

Explanation

Supermajority requirements protect owners' fundamental rights by making it harder to change the governing documents. They do not speed up approvals, allow board-only amendments, or reduce meeting costs.

Question 32Property Management Fundamentals and Operations

A manager is preparing a monthly financial report for the board. The report shows actual expenses exceeding budgeted amounts in several categories. What is the most appropriate action for the manager to take?

  1. Ignore the variances because they are likely temporary
  2. Investigate the causes of the variances and report them to the board with recommendations Correct answer.
  3. Reallocate funds from the reserve account to cover the overruns
  4. Reduce services without board approval to bring expenses in line

Explanation

The manager should analyze and report variances to the board, along with recommendations, so the board can make informed decisions. Reallocating reserves, ignoring variances, or unilaterally reducing services are not appropriate.

Question 33Property Management Fundamentals and Operations

An owner requests a copy of the association's most recent reserve study. What is the manager's most appropriate response?

  1. Provide the document in accordance with the association's records inspection policy and applicable law Correct answer.
  2. Provide the document only if the owner pays a fee equal to the cost of preparing the study
  3. Refer the owner to the association's attorney
  4. Deny the request because reserve studies are confidential board documents

Explanation

Reserve studies are generally considered association records that owners are entitled to inspect, subject to the association's policy and applicable law. Denying the request, charging an excessive fee, or referring to an attorney is not appropriate.

Question 34Property Management Fundamentals and Operations

Which of the following best describes the purpose of a reserve study?

  1. To evaluate the performance of the community manager
  2. To set the rules for architectural control
  3. To analyze the physical condition and financial needs of major components Correct answer.
  4. To determine the annual operating budget

Explanation

A reserve study analyzes the physical condition and financial needs of major components to plan for future repairs and replacements. It does not set the operating budget, evaluate the manager, or establish architectural rules.

Question 35Property Management Fundamentals and Operations

A board is considering a motion to increase the monthly assessment by 10%. Which of the following must the board generally ensure before adopting the increase?

  1. Compliance with any notice and meeting requirements in the governing documents and applicable law Correct answer.
  2. Approval by the association's lender
  3. A vote of the architectural committee
  4. Approval by a majority of owners

Explanation

The board must follow the procedures in the governing documents and applicable law, which typically include notice and a board meeting. Owner approval, architectural committee approval, or lender approval is not generally required for a budget-based assessment increase unless the documents specify otherwise.

Question 36Property Management Fundamentals and Operations

What is the primary purpose of an association's architectural control committee?

  1. To prepare the annual budget
  2. To manage the association's reserve funds
  3. To enforce parking rules
  4. To review and approve proposed changes to the exterior of properties Correct answer.

Explanation

The architectural control committee reviews and approves proposed exterior changes to ensure compliance with the association's architectural standards. It does not enforce parking rules, manage reserves, or prepare the budget.

Question 37Property Management Fundamentals and Operations

A manager discovers that a contractor hired for a common area repair is not insured. What is the manager's most appropriate immediate action?

  1. Stop the work and notify the board, then require proof of insurance before allowing work to resume Correct answer.
  2. Ignore the issue because the contractor was hired by the board
  3. Pay the contractor in cash to avoid liability
  4. Allow the contractor to continue working while obtaining insurance later

Explanation

The manager should stop work to protect the association from liability and inform the board. Proof of insurance should be obtained before work resumes. Allowing work to continue, paying in cash, or ignoring the issue creates risk.

Question 38Property Management Fundamentals and Operations

An association's bylaws require that board meetings be held at least quarterly. The board has not met for six months. What is the most likely consequence?

  1. The association's insurance is cancelled
  2. The board's actions since the last meeting are automatically void
  3. The manager is automatically terminated
  4. The board is in violation of the bylaws and may face legal challenges or owner action Correct answer.

Explanation

Failure to hold required meetings is a violation of the bylaws and can lead to legal challenges or owner action to compel meetings. It does not automatically void actions, terminate the manager, or cancel insurance.

Question 39Property Management Fundamentals and Operations

A manager is developing a risk management plan for the association. Which of the following is the first step in the risk management process?

  1. Identifying potential risks Correct answer.
  2. Documenting incidents
  3. Implementing safety procedures
  4. Purchasing insurance

Explanation

The first step in risk management is to identify potential risks. Once risks are identified, they can be analyzed, and then strategies such as insurance, safety procedures, and incident documentation can be implemented.

Question 40Property Management Fundamentals and Operations

An association's governing documents allow the board to levy a special assessment without owner approval for emergencies. A hurricane causes severe damage to a common area roof. The board wants to levy a special assessment to fund repairs. Which of the following is the most appropriate action?

  1. Use reserve funds without board approval
  2. Wait for the annual meeting to seek owner approval
  3. Borrow money from a board member without disclosure
  4. Levy the special assessment without owner approval, documenting the emergency and the board's decision Correct answer.

Explanation

If the governing documents permit special assessments for emergencies without owner approval, the board may act, but should document the emergency and its decision. Waiting for the annual meeting could worsen the damage, using reserves without approval is improper, and borrowing from a board member without disclosure creates a conflict.

Question 41Leasing and Occupancy Management

In a commercial lease, which term identifies the party who holds the right to occupy the premises under the lease agreement?

  1. The broker
  2. The lessee Correct answer.
  3. The lessor
  4. The guarantor

Explanation

The lessee is the tenant who receives the right of possession and use of the premises in exchange for rent. The lessor is the owner or landlord who grants that right.

Question 42Leasing and Occupancy Management

Which lease structure most directly passes a proportional share of operating expenses, taxes, and insurance through to the tenant?

  1. Ground lease
  2. Percentage lease
  3. Gross lease
  4. Net lease Correct answer.

Explanation

A net lease requires the tenant to pay some or all property operating costs in addition to base rent. The most common commercial form is the triple net lease, where taxes, insurance, and maintenance are tenant obligations.

Question 43Leasing and Occupancy Management

A tenant signs a lease for 5,000 square feet at $24 per square foot per year. What is the monthly base rent?

  1. $12,000
  2. $10,000 Correct answer.
  3. $24,000
  4. $2,000

Explanation

Annual rent equals 5,000 square feet times $24, which is $120,000. Dividing by 12 months gives $10,000 per month.

Question 44Leasing and Occupancy Management

In leasing practice, what does the term 'usable area' describe?

  1. The area of the building's common corridors and lobbies
  2. The total rentable area of the entire building
  3. The area actually occupied and used by the tenant Correct answer.
  4. The land area within the property boundary

Explanation

Usable area measures the space a tenant actually occupies and can use for its operations. Rentable area is generally larger because it allocates a share of common areas to each tenant.

Question 45Leasing and Occupancy Management

What is the primary purpose of a security deposit in a commercial lease?

  1. To prepay the final month's rent
  2. To fund building capital improvements
  3. To compensate the leasing broker
  4. To protect the landlord against tenant default or damage Correct answer.

Explanation

A security deposit gives the landlord a fund to draw on if the tenant defaults on rent or leaves damage beyond normal wear. It is held as security rather than applied automatically to future rent.

Question 46Leasing and Occupancy Management

Which document typically summarizes the agreed business terms of a lease before the full lease is drafted?

  1. Subordination agreement
  2. Certificate of occupancy
  3. Letter of intent Correct answer.
  4. Estoppel certificate

Explanation

A letter of intent records the key negotiated terms such as rent, term, and concessions so the parties can proceed to formal documentation. It is usually non-binding except for specified provisions.

Question 47Leasing and Occupancy Management

A tenant occupies space under a lease that has expired but continues paying rent that the landlord accepts. This arrangement is best described as:

  1. A ground lease
  2. A holdover tenancy Correct answer.
  3. An assignment
  4. A sublease

Explanation

When a tenant remains in possession after lease expiration and the landlord accepts rent, a holdover tenancy arises, typically on terms defined by statute or the original lease.

Question 48Leasing and Occupancy Management

In a percentage rent clause, what is the 'breakpoint'?

  1. The point at which the lease may be terminated
  2. The sales level above which the tenant pays additional rent Correct answer.
  3. The maximum rent the landlord may charge
  4. The date rent escalates annually

Explanation

The breakpoint is the sales threshold, often a natural breakpoint computed by dividing base rent by a percentage rate. Sales above that level trigger percentage rent on the excess.

Question 49Leasing and Occupancy Management

A lease grants the tenant 3,000 rentable square feet at $30 per square foot, plus operating expenses of $8 per square foot. What is the tenant's total annual occupancy cost?

  1. $90,000
  2. $24,000
  3. $114,000 Correct answer.
  4. $102,000

Explanation

Base rent is 3,000 times $30, or $90,000. Operating expenses are 3,000 times $8, or $24,000. Adding the two gives $114,000 per year.

Question 50Leasing and Occupancy Management

A landlord grants a tenant an allowance of $50,000 for tenant improvements, disbursed as work is completed. How should the landlord account for this allowance?

  1. As an immediate reduction of rental revenue
  2. As a deduction from the tenant's security deposit
  3. As a leasing cost amortized over the lease term Correct answer.
  4. As a capital contribution with no accounting effect

Explanation

Tenant improvement allowances are treated as leasing costs and amortized over the lease term, matching the expense to the period benefiting from the improvements.