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BOMI RPA practice questions

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Question 1Real Property Administration

In commercial real property management, which document establishes the manager's authority, compensation, and scope of duties?

  1. The lease abstract
  2. The estoppel certificate
  3. The management agreement Correct answer.
  4. The certificate of occupancy

Explanation

The management agreement is the contract that defines what the manager may do, how the manager is paid, and what reporting and spending limits apply. Leases, estoppels, and occupancy certificates are separate instruments that govern tenants or the building's legal use.

Question 2Real Property Administration

A property manager prepares an annual budget. Which category is normally treated as a capital expenditure rather than an operating expense?

  1. Roof replacement Correct answer.
  2. Janitorial supplies
  3. Landscaping contract
  4. Property insurance premium

Explanation

Capital expenditures are substantial outlays that extend the life or improve the value of the asset, such as replacing a roof or an elevator. Routine recurring costs like landscaping, supplies, and insurance are operating expenses funded from current income.

Question 3Real Property Administration

Under a typical gross lease, who pays the base year's operating expenses?

  1. The landlord, with increases over the base year often passed to the tenant Correct answer.
  2. The lender, through an escrow account
  3. The manager, from the management fee
  4. The tenant, who pays all operating expenses from the first year

Explanation

In a gross lease the landlord absorbs operating expenses up to a base-year level, and the tenant typically pays its proportionate share of increases above that base. This protects the tenant from ordinary cost fluctuations while sharing escalation risk.

Question 4Real Property Administration

Which statement best describes the manager's duty regarding tenant security deposits in most jurisdictions?

  1. Deposits may be commingled with operating funds if interest is credited
  2. Deposits may be spent on routine repairs as long as records are kept
  3. Deposits must be held in a segregated account and accounted for separately Correct answer.
  4. Deposits become landlord income once the lease begins

Explanation

Security deposits remain the tenant's funds held in trust, so they are generally kept in a separate account and tracked per tenant. Spending them for operations or treating them as income can create statutory liability and impair the ability to refund.

Question 5Real Property Administration

What is the primary purpose of a rent roll in property administration?

  1. To record building maintenance history
  2. To summarize the manager's staffing plan
  3. To document the owner's acquisition cost
  4. To list each unit, tenant, lease term, and current rent Correct answer.

Explanation

A rent roll is a snapshot of occupancy showing units, tenants, lease dates, rent, and often deposits and concessions. Managers and lenders use it to evaluate income stability and lease expiration exposure.

Question 6Real Property Administration

A property manager receives a tenant repair request. What is the best first administrative step?

  1. Deduct the cost from the tenant's deposit
  2. Promise a completion date before inspecting
  3. Order replacement parts immediately
  4. Log the request with date, unit, and description, then route it for action Correct answer.

Explanation

Documenting the request creates a record that supports tracking, response-time compliance, and later cost allocation. Dispatching work or making commitments before assessment risks unnecessary spending and unmet promises.

Question 7Real Property Administration

Which item is normally excluded from a property's operating expense budget?

  1. Repairs
  2. Management fees
  3. Utilities
  4. Mortgage principal payments Correct answer.

Explanation

Debt service, including principal and interest, is a financing cost below the net operating income line. Operating budgets cover the costs of running the property, such as utilities, repairs, and management fees.

Question 8Real Property Administration

What does a tenant estoppel certificate primarily confirm?

  1. The current status of a lease and any known defaults Correct answer.
  2. The building's replacement cost
  3. The manager's licensing status
  4. The owner's equity position

Explanation

An estoppel certificate is a signed statement by the tenant confirming lease dates, rent, security deposit, and whether defaults exist. Buyers and lenders rely on it because the tenant cannot later assert contrary facts.

Question 9Real Property Administration

A manager notices that a commercial tenant's monthly rent has not been received by the fifth of the month. According to standard practice, what should the manager do first?

  1. Immediately file for eviction
  2. Suspend all building services to the tenant
  3. Apply the lease's late-charge and notice provisions and contact the tenant Correct answer.
  4. Write off the balance as uncollectible

Explanation

The lease defines grace periods, late fees, and required notices, so the manager should follow those terms and communicate with the tenant. Eviction, write-offs, and service cutoffs are drastic steps that may violate the lease or local law if taken prematurely.

Question 10Real Property Administration

An owner wants to compare a property's performance against similar buildings. Which metric is most appropriate?

  1. Operating expense per rentable square foot Correct answer.
  2. Owner's original purchase price
  3. Total mortgage balance
  4. Number of management staff

Explanation

Expense and income ratios per rentable square foot allow meaningful comparison across buildings of different sizes and markets. Absolute dollar figures and financing details vary with ownership structure and do not benchmark operations.

Question 11Real Property Administration

A lease requires the landlord to provide HVAC service during business hours. The system fails on a weekday. What is the manager's most appropriate action?

  1. Wait for the next scheduled maintenance visit
  2. Arrange prompt repair consistent with the lease and document the response Correct answer.
  3. Terminate the lease for tenant inconvenience
  4. Charge the tenant for the repair without inspection

Explanation

The lease creates a service obligation, so the manager must act promptly to restore required services and keep records of the response. Delay can breach the lease, while shifting cost without evidence or terminating the lease is unsupported.

Question 12Real Property Administration

A manager is reconciling operating expense pass-throughs for a net lease with a base year. Which approach is correct?

  1. Bill the tenant for the landlord's income taxes
  2. Bill the tenant for capital improvements only
  3. Bill the tenant for the full current-year expense total
  4. Compare current-year expenses to the base year and bill the tenant's share of the increase Correct answer.

Explanation

With a base-year stop, the tenant pays only its proportionate share of expenses exceeding the base-year amount. Billing full expenses or unrelated items would exceed the lease's pass-through terms.

Question 13Real Property Administration

Which control best reduces the risk of fraud in a property's accounts payable process?

  1. Approving invoices without supporting documentation
  2. Having one person handle all purchasing and payment
  3. Separating invoice approval from check signing duties Correct answer.
  4. Paying vendors in cash to simplify records

Explanation

Segregation of duties ensures that no single person can both authorize a payment and disburse funds, which is a fundamental internal control. Concentrating duties or paying without documentation removes the checks that deter and detect fraud.

Question 14Real Property Administration

A tenant vacates before lease expiration and stops paying rent. What is the landlord's typical remedy under a standard commercial lease?

  1. Seize the tenant's business equipment
  2. Cancel the lease with no further claim
  3. Relet the space and hold the tenant liable for resulting damages Correct answer.
  4. Keep the deposit and release the tenant from all further liability

Explanation

Most commercial leases allow the landlord to mitigate damages by reletting and then recover unpaid rent and reletting costs from the defaulting tenant. Simply releasing the tenant or self-help seizures are generally not permitted.

Question 15Real Property Administration

Which statement about a property's replacement reserve is accurate?

  1. It covers monthly utility bills
  2. It pays the manager's commission
  3. It funds anticipated major component replacements over time Correct answer.
  4. It replaces the security deposit account

Explanation

A replacement reserve sets aside funds gradually so that predictable capital items such as roofs and mechanical systems can be replaced without a sudden cash call. It is distinct from operating expenses and tenant deposits.

Question 16Real Property Administration

A manager must select a vendor for recurring janitorial service. Which practice best supports a defensible selection?

  1. Award to the lowest verbal quote
  2. Obtain comparable written bids and evaluate scope and references Correct answer.
  3. Award to a company owned by a relative without disclosure
  4. Rotate vendors monthly without contracts

Explanation

Written bids with defined scope and reference checks create an auditable basis for selection and protect against conflicts of interest. Verbal quotes, undisclosed relationships, and undocumented rotation undermine accountability.

Question 17Real Property Administration

In a retail lease, what does a percentage rent clause typically require?

  1. The tenant pays a fixed percentage of the purchase price
  2. The tenant pays a percentage of operating expenses
  3. The tenant pays a share of sales above a stated breakpoint Correct answer.
  4. The landlord pays a percentage of tenant profits

Explanation

Percentage rent supplements base rent when a retailer's gross sales exceed a negotiated breakpoint, aligning landlord and tenant interests. It is not a purchase-price term, a profit share to the tenant, or an expense mechanism.

Question 18Real Property Administration

A manager reviews a lease abstract and sees a co-tenancy clause. What risk does this clause create for the landlord?

  1. The tenant forfeits its security deposit on closure
  2. The landlord must raise rents annually
  3. The tenant must pay all landlord legal fees
  4. The tenant may reduce rent or terminate if key tenants leave Correct answer.

Explanation

Co-tenancy clauses tie a tenant's obligations to the continued presence or occupancy of specified other tenants, giving remedies such as reduced rent or termination. This shifts occupancy risk to the landlord and must be modeled in lease analysis.

Question 19Real Property Administration

Which action best demonstrates a manager's compliance with fair housing obligations during tenant screening?

  1. Charge different deposits based on religion
  2. Steer applicants to units based on national origin
  3. Ask applicants about their family status
  4. Apply written, consistent criteria to every applicant Correct answer.

Explanation

Consistent written screening criteria applied uniformly show that decisions rest on legitimate business factors rather than protected characteristics. Inquiries into family status, steering, and differential terms are discriminatory practices.

Question 20Real Property Administration

A manager prepares a monthly variance report. Which situation most warrants explanation to the owner?

  1. Insurance was paid on schedule
  2. Repairs exceeded budget by 20 percent due to a burst pipe Correct answer.
  3. Landscaping cost was within one percent of budget
  4. Rent income matched the budget exactly

Explanation

Material deviations from budget, especially unfavorable ones, require explanation so the owner understands cause and whether it is one-time or recurring. Items that match or nearly match budget need no narrative.

Question 21Real Property Administration

A lease grants the tenant a right of first refusal on adjacent space. How does this right differ from an option to lease?

  1. It guarantees the tenant a fixed rent for the adjacent space
  2. It lets the tenant match a third-party offer rather than compel a lease at preset terms Correct answer.
  3. It allows the tenant to cancel its current lease
  4. It transfers ownership of the adjacent space to the tenant

Explanation

A right of first refusal gives the tenant the chance to match an offer the landlord receives from another party. An option lets the tenant compel a lease on predetermined terms without waiting for a third-party offer.

Question 22Real Property Administration

An owner's property generates net operating income of 900,000 and debt service of 620,000. What does the debt service coverage ratio indicate?

  1. The property's expenses exceed its income
  2. The property cannot cover its debt service
  3. The property covers its debt service about 1.45 times Correct answer.
  4. The property's loan-to-value ratio is 1.45

Explanation

Debt service coverage is net operating income divided by debt service, here 900,000 divided by 620,000, or roughly 1.45. A ratio above 1.0 means income covers debt payments, and lenders typically require a cushion above that level.

Question 23Real Property Administration

A manager must allocate a common-area maintenance pool among tenants with different pro-rata shares. Which principle governs the allocation?

  1. The landlord absorbs all common-area costs in every lease type
  2. Costs are split equally regardless of square footage
  3. Each tenant bears its stated proportionate share as defined in its lease Correct answer.
  4. Only tenants who use the area pay the full cost

Explanation

Recovery is controlled by each lease's pro-rata share, usually based on the tenant's rentable area relative to the building. Equal splits or user-only charging would contradict the negotiated allocation and create audit disputes.

Question 24Real Property Administration

A building's insurance policy includes a coinsurance clause. What is the primary consequence for the owner?

  1. Premiums are refunded when no claims occur
  2. Coverage automatically extends to flood losses
  3. Recovery may be reduced if insured values fall below the required percentage of replacement cost Correct answer.
  4. The lender waives escrow requirements

Explanation

A coinsurance clause penalizes underinsurance by reducing claim payments proportionally when the limit is below a required percentage of the property's replacement cost. It does not create refunds, add flood coverage, or affect lender escrow.

Question 25Real Property Administration

A manager discovers a discrepancy between the rent roll and the general ledger. What is the most rigorous way to resolve it?

  1. Trace individual tenant charges and receipts to lease terms and postings Correct answer.
  2. Adjust the ledger to match the rent roll without investigation
  3. Bill tenants for the unexplained difference
  4. Ignore the difference if it is small

Explanation

Reconciliation requires tracing each tenant's billed rent, concessions, and payments to the lease and the accounting records to locate the cause. Plugging the ledger, ignoring differences, or billing tenants for an internal error is improper.

Question 26Real Property Administration

In property administration, which document typically establishes the manager's authority to operate bank accounts for a property?

  1. The tenant estoppel certificate
  2. The certificate of occupancy
  3. The management agreement Correct answer.
  4. The lease abstract

Explanation

The management agreement is the contract between the owner and the manager that defines the manager's scope of authority, including whether the manager may open and operate bank accounts, sign checks, and disburse funds on the owner's behalf. Other documents serve different purposes and do not grant operational authority.

Question 27Real Property Administration

A property manager is setting up a new vendor file. Which item is most important to collect before issuing the first payment?

  1. The vendor's social media handles
  2. A completed IRS Form W-9 Correct answer.
  3. A list of the vendor's other clients
  4. A copy of the vendor's marketing brochure

Explanation

A completed IRS Form W-9 provides the vendor's taxpayer identification number and certification, which the property must use for information reporting and to avoid backup withholding. Collecting this before the first payment supports tax compliance and proper vendor master file setup.

Question 28Real Property Administration

Which item is typically classified as a capital expenditure rather than an operating expense in property administration?

  1. Annual fire extinguisher inspections
  2. Routine HVAC filter changes
  3. Replacement of a building's roof Correct answer.
  4. Monthly landscaping service

Explanation

Capital expenditures are costs that extend the useful life of the property or add value, such as a roof replacement, and are generally depreciated over time. Operating expenses are recurring costs necessary for day-to-day operations, such as landscaping, filter changes, and inspections.

Question 29Real Property Administration

A property manager is preparing the annual budget and must estimate property tax expense. Which approach is most appropriate?

  1. Exclude property taxes because they are always passed through to tenants
  2. Estimate taxes as a fixed percentage of gross rents
  3. Use the current assessed value and the applicable millage rate, adjusted for any known reassessment Correct answer.
  4. Use the prior owner's tax bill without adjustment

Explanation

Property taxes are typically calculated by applying the local millage rate to the assessed value of the property. A sound budget reflects the current assessment, any scheduled reassessment, and known exemptions or abatements rather than relying on stale figures or arbitrary percentages.

Question 30Real Property Administration

A manager is reviewing the property's aged accounts receivable report. Which pattern most clearly signals a collection problem requiring escalation?

  1. A tenant paid in full two days after the due date once
  2. A tenant's balance has remained in the 90-plus-day bucket for three consecutive months Correct answer.
  3. A tenant's payment was posted to the wrong unit and corrected the same day
  4. A tenant's balance fluctuates slightly due to late fees

Explanation

Aging receivables by bucket reveals how long balances have been outstanding. A balance that remains in the 90-plus-day category for multiple months indicates a persistent collection issue that may require formal demand, legal action, or lease enforcement rather than routine follow-up.

Question 31Real Property Administration

A property manager is negotiating a service contract for elevator maintenance. Which contract term best protects the owner against unexpected cost increases?

  1. A clause allowing the vendor to set prices at its discretion
  2. A provision that the contract renews automatically without review
  3. A cap on annual increases with a defined index Correct answer.
  4. An open-ended time-and-materials rate

Explanation

A cap on annual increases tied to a published index gives the owner predictable escalations and limits the vendor's ability to raise prices arbitrarily. Open-ended or discretionary pricing shifts cost risk to the owner and undermines budgeting.

Question 32Real Property Administration

A manager is preparing a property's annual budget and must decide how to treat a scheduled parking lot resurfacing project. Which treatment is most consistent with property administration standards?

  1. Allocate it to tenants through the CAM pool as a recurring expense
  2. Include it in the operating budget as a routine repair
  3. Exclude it because it benefits future periods only
  4. Include it in the capital budget and fund it through reserves or a capital call Correct answer.

Explanation

Resurfacing extends the useful life of the asset and is therefore a capital item, not a routine operating repair. Capital projects are typically funded through replacement reserves or owner capital contributions and are budgeted separately from operating expenses.

Question 33Real Property Administration

A manager is analyzing a property's utility costs and notices that electricity expense has risen 18 percent year over year while occupancy is unchanged. Which analytical step is most appropriate first?

  1. Immediately rebid the electricity supply contract
  2. Compare consumption in kilowatt-hours and the effective rate per kilowatt-hour to isolate whether the increase is volume or price driven Correct answer.
  3. Assume the increase is due to weather and make no adjustment
  4. Allocate the entire increase to tenants without further review

Explanation

Separating consumption from price effects is the fundamental first step in utility variance analysis. It reveals whether the increase stems from operational changes, equipment inefficiency, or rate increases, and it informs the appropriate corrective action.

Question 34Real Property Administration

A manager is reviewing a property's insurance program and notes that the policy includes a coinsurance clause. What is the primary consequence of this clause for the owner?

  1. The owner is guaranteed full replacement cost regardless of the insured limit
  2. The owner may face a reduced claim payment if the property is insured for less than the required percentage of its value Correct answer.
  3. The owner is relieved of the duty to obtain any other coverage
  4. The owner must share premium costs equally with tenants

Explanation

A coinsurance clause requires the insured to carry coverage equal to a specified percentage of the property's value. If the insured limit falls short, the claim payment is reduced proportionally, so the owner bears part of the loss. This makes accurate valuation and periodic review of limits essential.

Question 35Property and Asset Management

Which document most directly establishes the annual operating budget for a commercial property and serves as the benchmark for monthly variance reporting?

  1. The building's original construction budget
  2. The broker's opinion of value
  3. The property's approved annual operating budget Correct answer.
  4. The owner's personal income tax return

Explanation

The approved annual operating budget sets planned revenue and expense levels for the year and is the baseline against which actual results are compared in monthly variance reports. Construction budgets, tax filings, and valuation opinions serve different purposes and do not govern operating performance.

Question 36Property and Asset Management

A tenant pays a fixed base rent plus a share of increases in operating expenses above a base year. This lease structure is best described as:

  1. Ground lease
  2. Gross lease
  3. Net lease with expense stop Correct answer.
  4. Percentage rent lease

Explanation

A lease with an expense stop makes the landlord absorb expenses up to a base-year or stop level, with the tenant paying its proportionate share of any excess. This protects the landlord from inflation-driven cost increases while giving the tenant a predictable base.

Question 37Property and Asset Management

Under a typical commercial lease, which item is most commonly recovered from tenants through operating expense escalations?

  1. Landlord's federal income taxes
  2. Mortgage principal amortization
  3. Leasing commissions for new tenants
  4. Common area maintenance costs Correct answer.

Explanation

Common area maintenance, or CAM, covers shared costs such as cleaning, landscaping, security, and repairs to common areas, and is routinely passed through to tenants. Income taxes, debt principal, and most leasing capital costs are typically excluded as landlord obligations.

Question 38Property and Asset Management

What does a property's net operating income (NOI) represent?

  1. Sale price minus outstanding mortgage balance
  2. Total cash flow after debt service and capital reserves
  3. Effective gross income minus operating expenses Correct answer.
  4. Gross rents collected before any deductions

Explanation

NOI equals effective gross income less operating expenses, excluding debt service, income taxes, and capital expenditures. It measures the property's operating performance independent of how it is financed.

Question 39Property and Asset Management

A property manager receives a work order for a leaking roof during a storm. Which action best reflects proper risk management?

  1. Repair the roof without documenting the incident
  2. Immediately mitigate damage and notify the insurer per policy Correct answer.
  3. Wait until the next scheduled inspection to assess the leak
  4. Bill the cost directly to a random tenant

Explanation

Prompt mitigation limits further damage and preserves the claim, and timely notice to the insurer is usually a condition of coverage. Documentation of the incident supports both the claim and later cost recovery.

Question 40Property and Asset Management

Which metric best indicates how much of a property's potential rent is actually being collected?

  1. Occupancy cost ratio
  2. Economic occupancy Correct answer.
  3. Debt service coverage ratio
  4. Capitalization rate

Explanation

Economic occupancy compares collected rent to potential gross rent, capturing the effect of vacancy, concessions, and delinquencies. Physical occupancy counts occupied space only and can overstate realized revenue.

Question 41Property and Asset Management

In property accounting, which of the following is classified as a capital expenditure rather than an operating expense?

  1. Replacement of the building's HVAC chiller Correct answer.
  2. Seasonal landscaping contract
  3. Monthly janitorial service
  4. Annual fire alarm inspection

Explanation

Capital expenditures extend the useful life or materially improve the asset, such as replacing a major building system, and are depreciated over time. Routine services and inspections are recurring operating costs expensed in the period incurred.

Question 42Property and Asset Management

A property manager is asked to recommend a reserve level for replacing short-lived building components. Which approach is most appropriate?

  1. Reserve nothing and fund replacements from future rent increases
  2. Estimate component replacement cost divided by remaining useful life Correct answer.
  3. Use the prior owner's reserve balance without review
  4. Set reserves equal to one month of gross rent

Explanation

A component-based reserve analysis divides the cost of each short-lived item by its remaining useful life to derive an annual funding requirement. This links reserves to actual replacement obligations rather than arbitrary amounts.

Question 43Property and Asset Management

A tenant's proportionate share of operating expenses is generally calculated by dividing the tenant's rentable square feet by:

  1. The tenant's gross sales
  2. The number of tenants in the building
  3. The total rentable square footage of the building Correct answer.
  4. The building's total land area

Explanation

Proportionate share allocates shared costs based on the ratio of the tenant's rentable area to total rentable building area. This ensures each tenant bears costs in proportion to the space it occupies.

Question 44Property and Asset Management

A property has potential gross income of $1,200,000, vacancy and collection losses of $120,000, and operating expenses of $430,000. What is the net operating income?

  1. $1,080,000
  2. $650,000 Correct answer.
  3. $770,000
  4. $890,000

Explanation

Effective gross income is $1,200,000 minus $120,000, or $1,080,000. Subtracting operating expenses of $430,000 yields NOI of $650,000.

Question 45Property and Asset Management

An owner wants to compare a property's operating expenses against similar buildings in the same market. Which tool is most useful?

  1. A title report
  2. An income and expense benchmarking survey Correct answer.
  3. A lease abstract
  4. A rent roll

Explanation

Benchmarking surveys compile comparable expense ratios and per-square-foot costs across peer properties, highlighting areas of overspending. Rent rolls and lease abstracts describe tenancy, while title reports address ownership and encumbrances.

Question 46Property and Asset Management

A retail tenant pays base rent plus a percentage of gross sales once sales exceed a natural breakpoint. The natural breakpoint is generally calculated as:

  1. Base rent plus CAM charges
  2. Base rent divided by the percentage rate Correct answer.
  3. Percentage rate multiplied by gross sales
  4. Gross sales minus operating expenses

Explanation

The natural breakpoint equals base rent divided by the agreed percentage rate, the sales level at which percentage rent begins. Above that threshold, the tenant pays the percentage applied to the excess sales.

Question 47Property and Asset Management

A property manager discovers that a vendor has been invoicing for services not performed. Which control would best prevent recurrence?

  1. Allowing the vendor to self-certify without review
  2. Requiring purchase orders and documented service verification before payment Correct answer.
  3. Paying invoices faster to preserve vendor relationships
  4. Consolidating all vendor payments into a single annual check

Explanation

Purchase orders establish prior authorization, and documented verification confirms the service was delivered before payment. Segregating authorization, verification, and payment duties reduces the opportunity for fraudulent billing.

Question 48Property and Asset Management

Which lease clause most directly protects a landlord when a tenant seeks to assign its lease to a financially weaker party?

  1. Assignment and subletting consent clause Correct answer.
  2. Force majeure clause
  3. Condemnation clause
  4. Estoppel certificate clause

Explanation

An assignment and subletting clause typically requires landlord consent and sets standards for evaluating a proposed transferee's creditworthiness. This lets the landlord control who assumes the lease obligations.

Question 49Property and Asset Management

A property's annual debt service is $300,000 and its NOI is $390,000. What is the debt service coverage ratio?

  1. 1.90
  2. 1.30 Correct answer.
  3. 2.30
  4. 0.77

Explanation

DSCR equals NOI divided by annual debt service, so $390,000 divided by $300,000 equals 1.30. A ratio above 1.0 indicates income covers debt payments with a cushion.

Question 50Property and Asset Management

In a lease audit, a landlord's recovery of capital improvements is most defensible when the improvement:

  1. Benefits only the landlord's ownership exit strategy
  2. Was completed before the tenant signed any lease
  3. Is required by law or reduces operating expenses and is amortized over its useful life Correct answer.
  4. Increases the building's market value without tenant benefit

Explanation

Capital costs that are legally mandated or that reduce operating expenses may be recoverable when amortized over the improvement's useful life, often with an interest factor. Purely value-enhancing landlord investments generally remain landlord costs.