ON Residential Transactions Exam cheat sheet
ON Residential Transactions Exam · Keep the key ideas within reach.
Professional Conduct, Ethics and Regulatory Obligations
In Ontario, registrants are governed by the Trust in Real Estate Services Act, 2002 (TRESA) and its regulations, plus the REBBA Code of Ethics (O. Reg. 580/05) as amended; TRESA replaced most of REBBA on December 1, 2020.
Duties owed to clients under the Code of Ethics: loyalty, obedience to lawful instructions, disclosure, confidentiality, competence, and full and fair disclosure of material facts; these duties survive termination of the brokerage agreement.
Confidentiality survives the end of the relationship, but it does not extend to material facts about the property itself; latent defects and known material facts must be disclosed to all parties.
Registrants must disclose conflicts of interest in writing and obtain informed consent; a brokerage acting for both buyer and seller is multiple representation and requires written consent from both clients.
Commissions and rebates must be disclosed in writing before an agreement is signed; undisclosed referral fees or undisclosed dual commissions are a breach of the Code.
Registrants may not act in a way that is misleading, fraudulent, or that brings the profession into disrepute; advertising must not be false or deceptive and must include the brokerage name as required.
RECO administers registration, complaints, and discipline; the Real Estate Council of Ontario can suspend or revoke registration and impose fines, and its decisions are published.
Client money must be held in a trust account at a Canadian financial institution; the brokerage must keep records for at least six years and reconcile trust accounts monthly.
Legislation Governing Residential Transactions
TRESA, 2002 governs brokerage registration, representation, and trading in real estate in Ontario; the Act is supplemented by O. Reg. 567/05 (general) and O. Reg. 579/05 (records and trust accounts).
The Real Estate Brokers Act (REBA) was largely repealed and replaced by TRESA; legacy references to REBA in older study material should be read as TRESA.
The Residential Tenancies Act, 2006 governs most residential tenancies, rent increases, and eviction; it does not apply to tenancies where the landlord and tenant share a kitchen or bathroom with the landlord.
The Condominium Act, 1998 governs condo creation, status certificates, reserve funds, and condo corporation governance; the Act was substantially amended by the Protecting Condominium Owners Act, 2015.
The Planning Act governs land use, severances, and subdivision; the Ontario Building Code and municipal zoning bylaws control permitted uses and construction standards.
The Land Titles Act governs registered title in Ontario; the Registry system still applies to some older properties, and the two systems have different search and assurance rules.
The Family Law Act gives a spouse a possessory right to the matrimonial home regardless of title; a non-titled spouse must consent to a sale or encumbrance of the matrimonial home.
The Human Rights Code prohibits discrimination in the sale or rental of accommodation on enumerated grounds, including race, religion, family status, and disability; a registrant may not follow discriminatory instructions.
Agency, Representation and Client Relationships
TRESA replaced the old common-law agency model with a representation model: a brokerage either represents a client or provides services to a self-represented party without representing them.
A client is a person who has entered into a representation agreement with a brokerage; a customer is a person to whom the brokerage provides services without a representation agreement.
Under TRESA, a self-represented party must be given a prescribed information guide before the brokerage provides services, and the brokerage must keep a record of that disclosure.
Multiple representation occurs when the same brokerage represents two or more clients in the same trade; it requires written disclosure and informed consent from all clients, and the brokerage must be impartial.
A designated representative is a registrant within a brokerage who is assigned to represent a client; the brokerage itself holds the representation, but the designated representative owes the client duties.
The duty of confidentiality ends when the representation ends, but the duty to disclose material facts about the property continues and cannot be waived.
A representation agreement must be in writing, must state the term and the services provided, and must disclose how and when the brokerage will be compensated.
A registrant may not act for a party whose interests conflict with a client's without disclosure and consent; if consent cannot be obtained, the registrant must decline or terminate the representation.
Listing and Buyer Representation Agreements
A listing agreement must be in writing and signed by the seller; it must state the listing price, term, commission, and the services the brokerage will provide.
A buyer representation agreement (BRA) must be in writing and must state the term, the geographic area or property type, and the commission or compensation arrangement.
A BRA with a holdover clause can entitle the brokerage to commission if the buyer purchases a property introduced during the term after the agreement ends; the holdover period must be stated and reasonable.
Under TRESA, a listing agreement must include a statement that the seller may be represented by the brokerage and that the brokerage may also represent a buyer in multiple representation only with consent.
The listing term should not exceed what is reasonable; a common term is 60 to 120 days, and the agreement should specify the notice required to terminate.
A seller may cancel a listing agreement; the brokerage may be entitled to commission if a ready, willing, and able buyer was introduced before cancellation, depending on the agreement terms.
A BRA should specify whether the buyer will pay the brokerage directly if the seller does not offer cooperating compensation, and whether the buyer is liable for any shortfall.
Amendments to a listing or buyer agreement must be in writing and signed by all parties; verbal changes to commission or term are not enforceable.
Property Marketing, Advertising and Disclosure
Advertising must be truthful and not misleading; it must include the brokerage name and must not misrepresent the property, the registrant, or the services offered.
A registrant must not advertise a property without the seller's written consent, and must not advertise a property that is subject to an exclusive listing with another brokerage.
Material facts about a property, including known latent defects and environmental issues, must be disclosed to buyers; a registrant cannot withhold information at the seller's request.
The seller's property information form must be completed accurately; a registrant should verify the information and should not complete it on the seller's behalf without the seller's confirmation.
Advertising a price that is not the seller's actual asking price, or a price designed to attract buyers to a different property, is misleading and prohibited.
Testimonials and claims about results must be accurate and must not create unrealistic expectations; comparative claims must be verifiable.
A registrant must not use another brokerage's listing content, photos, or branding without permission; copyright in listing photos generally belongs to the photographer or brokerage.
Disclosure of a stigmatized property (for example, a death or crime in the home) is governed by materiality; a registrant should not misrepresent the property's history if asked directly.
Pricing, Market Analysis and Listing Preparation
A comparative market analysis (CMA) estimates value from recent comparable sales, adjusting for differences in size, condition, location, and features.
The CMA should use closed sales, active listings, and expired listings; the most weight goes to recent closed sales of similar properties in the same area.
Adjustments are made by adding value for features the subject lacks and subtracting for features the subject has in excess of the comparable.
Price per square foot is a rough guide only; it varies with lot size, basement finish, garage, and condition and should not be the sole basis for pricing.
Absorption rate = number of sales in a period divided by active listings at the end of that period; a low absorption rate indicates a buyer's market.
Months of inventory = active listings divided by average monthly sales; roughly six months of inventory is often treated as a balanced market.
A listing price should be supported by the CMA and by the seller's goals; overpricing can extend days on market and ultimately reduce the sale price.
Listing preparation includes decluttering, repairs, staging, and professional photography; disclose known defects rather than concealing them with cosmetic fixes.
Agreements of Purchase and Sale and Contract Law
An Agreement of Purchase and Sale (APS) must be in writing and signed by both parties; it must identify the parties, the property, the price, and the closing date.
The APS becomes binding when acceptance is communicated to the offeror; a counter-offer terminates the original offer and must be accepted in the form presented.
A condition precedent must be satisfied for the contract to become binding; a condition subsequent allows the contract to end if the condition is not met.
A deposit is part of the purchase price; it is generally held in trust and is forfeited to the seller if the buyer fails to complete without a lawful excuse.
Time is of the essence in the APS; a party who fails to close on the closing date is in breach unless the contract provides otherwise.
The standard APS includes warranties that the property and chattels are in good working order on closing, subject to the stated limitations.
The seller warrants that the property will be conveyed free of encumbrances except those disclosed; the buyer should search title before closing.
A waiver of a condition must be in writing and communicated to the other party; a verbal waiver may not be enforceable.
Financing, Mortgages and Transaction Conditions
A financing condition protects the buyer if a mortgage cannot be obtained; it must state a deadline by which the buyer must waive or satisfy the condition.
The mortgage stress test requires most buyers to qualify at the greater of the contract rate plus 2 percentage points or the Bank of Canada benchmark rate.
Loan-to-value (LTV) ratio = mortgage amount divided by property value; a higher LTV generally requires mortgage default insurance.
Mortgage default insurance is required for high-ratio mortgages (LTV above 80%) and is provided by CMHC, Sagen, or Canada Guaranty.
The gross debt service (GDS) ratio = housing costs divided by gross annual income; the total debt service (TDS) ratio includes all debt payments.
A buyer should obtain a mortgage pre-approval before making an offer; pre-approval is not a guarantee and is subject to property appraisal and verification.
The APS should specify that the deposit is held in trust and that the buyer's financing condition is for the buyer's sole benefit and may be waived by the buyer.
Closing costs include land transfer tax, legal fees, title insurance, and adjustments; the buyer should confirm the funds available before the closing date.
Title, Ownership and Encumbrances
Title is the legal right to own and use land; in Ontario, title is registered under the Land Titles Act, which provides assurance for registered owners.
Encumbrances include mortgages, easements, restrictive covenants, liens, and rights-of-way; they may bind the buyer even if not noted in the APS.
A title search reveals registered owners, encumbrances, and executions; the buyer's lawyer should search title before closing.
Title insurance protects the buyer and lender against certain title defects, including fraud, survey errors, and undisclosed encumbrances.
Joint tenancy includes the right of survivorship; tenants in common hold distinct shares without survivorship.
An easement grants a right to use another's land for a specific purpose; a restrictive covenant limits how the land may be used.
A lien or execution against the seller must be discharged before or at closing; the buyer should not close with an undisclosed lien on title.
A survey or property identifier (PIN) helps confirm boundaries and easements; the buyer should review it before waiving conditions.
Property Condition, Inspections and Environmental Issues
A home inspection is a visual, non-invasive examination of accessible systems and components; it is not a warranty and does not cover concealed defects.
The seller must disclose known latent defects that are not discoverable by a reasonable inspection; patent defects are discoverable and do not require disclosure.
Common environmental issues include asbestos, mold, radon, lead, urea-formaldehyde foam insulation, and underground oil tanks.
An underground oil tank must be removed and the soil tested; a leaking tank can create significant remediation liability.
Radon is a radioactive gas that can accumulate in homes; Health Canada recommends testing and mitigation above 200 Bq/m3.
Asbestos is commonly found in older insulation, floor tiles, and pipe wrap; disturbance can release fibres and requires professional abatement.
A buyer should include an inspection condition in the APS and should obtain a written report before waiving it.
The seller's warranty that the property is in good working order does not cover environmental contamination; the buyer should investigate separately.
Closing, Trust Accounting and Deposit Handling
The closing date is the date the buyer receives title and the seller receives the purchase price; the parties may agree to extend it in writing.
The deposit must be held in trust in a brokerage trust account or by the seller's lawyer; it must not be used for the brokerage's operating expenses.
Trust funds must be deposited within five business days of receipt and must be reconciled monthly; the brokerage must keep records for at least six years.
A trust account must be at a Canadian financial institution and must be designated as a trust account; the brokerage must maintain a separate trust ledger for each client.
On closing, the buyer's lawyer registers the transfer, discharges encumbrances, and provides the seller with the net proceeds.
Adjustments at closing include prepaid property taxes, utilities, and rent; these are prorated to the closing date.
A holdback may be used to secure completion of repairs or outstanding items; the APS should state the amount and release conditions.
If a transaction fails to close, the deposit is generally held in trust until the parties agree or a court orders its release.
Residential Tenancies
The Residential Tenancies Act, 2006 applies to most residential tenancies in Ontario; it does not apply where the tenant shares a kitchen or bathroom with the landlord.
A tenancy agreement may be written or oral; the landlord must use the standard lease for most residential tenancies entered into on or after April 30, 2018.
Rent increases are generally limited to the annual guideline set by the province; above-guideline increases require approval from the Landlord and Tenant Board.
A landlord may require a security deposit equal to one month's rent; it must be applied to the last month's rent and earns interest.
A landlord must give 24 hours' written notice to enter the unit, except in emergencies or where the tenant agrees.
A tenant may assign or sublet with the landlord's consent; the landlord cannot unreasonably refuse consent.
Eviction requires notice and, in most cases, an order from the Landlord and Tenant Board; a landlord cannot self-help by changing locks or removing belongings.
A buyer of a residential property with tenants takes subject to the existing tenancy; the buyer should review the leases and the rent roll before closing.
Condominiums and Special Property Types
A condominium consists of a unit and a share of the common elements; the unit boundaries and common elements are defined in the declaration, description, and by-laws.
The condominium corporation is governed by a board of directors; the board must maintain the common elements and manage the reserve fund.
A status certificate must be provided to a buyer within 10 days of a written request; the buyer has a 10-day cooling-off period after receiving it to review the certificate.
The reserve fund study must be updated every three years, and the reserve fund must be funded according to the study; a shortfall can lead to special assessments.
Common expenses are allocated according to the unit's percentage of common interest; the buyer should review the budget and any special assessments.
A condominium declaration may contain restrictive covenants and rules; the buyer should review the rules and the corporation's financial statements.
Special property types include co-operatives (shares in a corporation, not title to a unit), co-ownership, and life leases; each has different ownership and financing rules.
A co-operative buyer purchases shares in the corporation and a right to occupy a unit; the corporation's board must approve the buyer, and financing differs from a condo mortgage.
Professional Conduct, Ethics and Regulatory Obligations
A registrant must be honest and act with integrity; misrepresenting a property or a client's position is a breach of the Code of Ethics.
A registrant must not act for a client if the registrant has a personal interest in the transaction without full written disclosure and consent.
A registrant must keep client information confidential and must not disclose it without consent, except where required by law or to prevent a crime.
A registrant must not accept compensation from more than one party in a transaction without written disclosure and consent from all parties.
A registrant must cooperate with other brokerages and must not interfere with another brokerage's representation agreement.
A registrant must maintain competence and must not provide services outside their knowledge without obtaining assistance.
A registrant must report known breaches of the Code to RECO and must cooperate with RECO investigations.
A registrant must not discriminate and must not follow instructions that would result in discrimination under the Human Rights Code.
Legislation Governing Residential Transactions
The Trust in Real Estate Services Act, 2002 is the primary statute governing trading in real estate in Ontario; it replaced most of REBA.
The Act requires registration of brokerages and registrants and sets out the duties of brokerages and registrants.
The Act and regulations set out trust account requirements, record-keeping, and the handling of client money.
The Act gives RECO the authority to investigate complaints, impose discipline, and suspend or revoke registration.
The Act requires written representation agreements and disclosure of the nature of the relationship to clients and self-represented parties.
The Act requires disclosure of remuneration and any conflicts of interest in writing.
The Act is supplemented by the Code of Ethics regulation, which sets out specific duties and prohibited conduct.
The Act does not apply to private sales where no brokerage is involved; however, a registrant who assists a private sale may still be subject to the Act.
Agency, Representation and Client Relationships
A brokerage represents a client only when a written representation agreement is in place; otherwise, the brokerage provides services without representation.
A designated representative is a registrant assigned to a client; the brokerage remains responsible for the representation.
A self-represented party must receive the prescribed information guide before services are provided.
Multiple representation requires written disclosure and informed consent from all clients; the brokerage must not favour one client over another.
A registrant must not disclose a client's confidential information to another party without consent.
A registrant must disclose any personal interest in a transaction and obtain consent.
A representation agreement may be terminated by mutual agreement or according to its terms; the brokerage may be entitled to commission for services already provided.
A registrant must not act for a party whose interests conflict with a client's without disclosure and consent.
Listing and Buyer Representation Agreements
A listing agreement must be in writing and must state the term, the listing price, the commission, and the services provided.
A buyer representation agreement must be in writing and must state the term, the area or property type, and the compensation arrangement.
A holdover clause in a buyer representation agreement must be reasonable and must be stated in the agreement.
A listing agreement should specify the seller's consent to advertise the property and to cooperate with other brokerages.
A representation agreement should disclose whether the brokerage will act for more than one client in a transaction.
Amendments to a representation agreement must be in writing and signed by all parties.
A seller may cancel a listing agreement; the brokerage may be entitled to commission if a ready, willing, and able buyer was introduced.
A buyer representation agreement should state whether the buyer will pay the brokerage if the seller does not offer cooperating compensation.
Property Marketing, Advertising and Disclosure
Advertising must be truthful, accurate, and not misleading; it must include the brokerage name.
A registrant must obtain the seller's written consent before advertising a property.
A registrant must not advertise a property that is subject to an exclusive listing with another brokerage.
Material facts, including known latent defects, must be disclosed to buyers.
A registrant must not misrepresent the property's price, condition, or features.
Testimonials and claims about results must be accurate and verifiable.
A registrant must not use another brokerage's listing content without permission.
A registrant should disclose known stigmatized property history if asked directly and should not misrepresent it.
Pricing, Market Analysis and Listing Preparation
A CMA estimates value from recent comparable sales, adjusting for differences in size, condition, location, and features.
The CMA should use closed sales, active listings, and expired listings, with the most weight on recent closed sales.
Adjustments add value for features the subject lacks and subtract for features the subject has in excess.
Price per square foot is a rough guide only and should not be the sole basis for pricing.
Absorption rate = sales in a period divided by active listings at the end of that period.
Months of inventory = active listings divided by average monthly sales; about six months is often balanced.
A listing price should be supported by the CMA and the seller's goals; overpricing can extend days on market.
Listing preparation includes decluttering, repairs, staging, and professional photography, and disclosure of known defects.
Agreements of Purchase and Sale and Contract Law
An APS must be in writing and signed by both parties and must identify the parties, property, price, and closing date.
The APS becomes binding when acceptance is communicated to the offeror.
A counter-offer terminates the original offer and must be accepted in the form presented.
A condition precedent must be satisfied for the contract to become binding.
A deposit is part of the purchase price and is generally held in trust.
Time is of the essence; a party who fails to close on the closing date is in breach unless the contract provides otherwise.
The standard APS includes warranties that the property and chattels are in good working order on closing.
A waiver of a condition must be in writing and communicated to the other party.
Financing, Mortgages and Transaction Conditions
A financing condition protects the buyer if a mortgage cannot be obtained and must state a deadline.
The mortgage stress test requires most buyers to qualify at the greater of the contract rate plus 2 percentage points or the Bank of Canada benchmark rate.
LTV ratio = mortgage amount divided by property value; a higher LTV generally requires mortgage default insurance.
Mortgage default insurance is required for high-ratio mortgages (LTV above 80%).
GDS ratio = housing costs divided by gross annual income; TDS includes all debt payments.
A mortgage pre-approval is not a guarantee and is subject to appraisal and verification.
Closing costs include land transfer tax, legal fees, title insurance, and adjustments.
The APS should specify that the deposit is held in trust and that the financing condition is for the buyer's sole benefit.
Title, Ownership and Encumbrances
Title is the legal right to own and use land; in Ontario, title is registered under the Land Titles Act.
Encumbrances include mortgages, easements, restrictive covenants, liens, and rights-of-way.
A title search reveals registered owners, encumbrances, and executions.
Title insurance protects the buyer and lender against certain title defects.
Joint tenancy includes the right of survivorship; tenants in common hold distinct shares without survivorship.
An easement grants a right to use another's land for a specific purpose.
A lien or execution against the seller must be discharged before or at closing.
A survey or PIN helps confirm boundaries and easements.
Property Condition, Inspections and Environmental Issues
A home inspection is a visual, non-invasive examination of accessible systems and components.
The seller must disclose known latent defects that are not discoverable by a reasonable inspection.
Common environmental issues include asbestos, mold, radon, lead, urea-formaldehyde foam insulation, and underground oil tanks.
An underground oil tank must be removed and the soil tested.
Radon is a radioactive gas; Health Canada recommends mitigation above 200 Bq/m3.
Asbestos is commonly found in older insulation, floor tiles, and pipe wrap.
A buyer should include an inspection condition and obtain a written report before waiving it.
The seller's warranty of good working order does not cover environmental contamination.
Closing, Trust Accounting and Deposit Handling
The closing date is the date the buyer receives title and the seller receives the purchase price.
The deposit must be held in trust in a brokerage trust account or by the seller's lawyer.
Trust funds must be deposited within five business days of receipt and reconciled monthly.
A trust account must be at a Canadian financial institution and designated as a trust account.
On closing, the buyer's lawyer registers the transfer, discharges encumbrances, and provides the net proceeds.
Adjustments at closing include prepaid property taxes, utilities, and rent, prorated to the closing date.
A holdback may secure completion of repairs or outstanding items.
If a transaction fails to close, the deposit is held in trust until the parties agree or a court orders release.
Residential Tenancies
The Residential Tenancies Act, 2006 applies to most residential tenancies in Ontario.
A tenancy agreement may be written or oral; the standard lease is required for most tenancies entered into on or after April 30, 2018.
Rent increases are generally limited to the annual guideline; above-guideline increases require Landlord and Tenant Board approval.
A landlord may require a security deposit equal to one month's rent.
A landlord must give 24 hours' written notice to enter, except in emergencies or with the tenant's agreement.
A tenant may assign or sublet with the landlord's consent, which cannot be unreasonably refused.
Eviction requires notice and, in most cases, an order from the Landlord and Tenant Board.
A buyer of a property with tenants takes subject to the existing tenancy.
Condominiums and Special Property Types
A condominium consists of a unit and a share of the common elements defined in the declaration, description, and by-laws.
The condominium corporation is governed by a board that maintains common elements and manages the reserve fund.
A status certificate must be provided within 10 days of a written request; the buyer has a 10-day cooling-off period after receiving it.
The reserve fund study must be updated every three years.
Common expenses are allocated according to the unit's percentage of common interest.
The declaration may contain restrictive covenants and rules the buyer should review.
Special property types include co-operatives, co-ownership, and life leases.
A co-operative buyer purchases shares and a right to occupy; the board must approve the buyer.
Professional Conduct, Ethics and Regulatory Obligations
A registrant must be honest and act with integrity.
A registrant must not act for a client with a personal interest in the transaction without written disclosure and consent.
A registrant must keep client information confidential.
A registrant must not accept compensation from more than one party without written disclosure and consent.
A registrant must cooperate with other brokerages and not interfere with another brokerage's representation agreement.
A registrant must maintain competence and obtain assistance when needed.
A registrant must report known breaches of the Code to RECO.
A registrant must not discriminate or follow discriminatory instructions.
Legislation Governing Residential Transactions
TRESA, 2002 is the primary statute governing trading in real estate in Ontario.
The Act requires registration of brokerages and registrants.
The Act and regulations set out trust account and record-keeping requirements.
The Act gives RECO authority to investigate, discipline, and suspend or revoke registration.
The Act requires written representation agreements and disclosure of the relationship.
The Act requires disclosure of remuneration and conflicts of interest in writing.
The Code of Ethics regulation sets out specific duties and prohibited conduct.
The Act does not apply to private sales where no brokerage is involved.
Agency, Representation and Client Relationships
A brokerage represents a client only when a written representation agreement is in place.
A designated representative is a registrant assigned to a client; the brokerage remains responsible.
A self-represented party must receive the prescribed information guide before services are provided.
Multiple representation requires written disclosure and informed consent from all clients.
A registrant must not disclose a client's confidential information without consent.
A registrant must disclose any personal interest in a transaction and obtain consent.
A representation agreement may be terminated by mutual agreement or according to its terms.
A registrant must not act for a party whose interests conflict with a client's without disclosure and consent.
Listing and Buyer Representation Agreements
A listing agreement must be in writing and state the term, price, commission, and services.
A buyer representation agreement must be in writing and state the term, area or property type, and compensation.
A holdover clause must be reasonable and stated in the agreement.
A listing agreement should specify the seller's consent to advertise and cooperate with other brokerages.
A representation agreement should disclose whether the brokerage will act for more than one client.
Amendments must be in writing and signed by all parties.
A seller may cancel a listing agreement; the brokerage may be entitled to commission if a ready, willing, and able buyer was introduced.
A buyer representation agreement should state whether the buyer will pay the brokerage if the seller does not offer cooperating compensation.
Property Marketing, Advertising and Disclosure
Advertising must be truthful, accurate, and not misleading and must include the brokerage name.
A registrant must obtain the seller's written consent before advertising a property.
A registrant must not advertise a property subject to an exclusive listing with another brokerage.
Material facts, including known latent defects, must be disclosed to buyers.
A registrant must not misrepresent the property's price, condition, or features.
Testimonials and claims about results must be accurate and verifiable.
A registrant must not use another brokerage's listing content without permission.
A registrant should disclose known stigmatized property history if asked directly.
Pricing, Market Analysis and Listing Preparation
A CMA estimates value from recent comparable sales, adjusting for differences.
The CMA should use closed sales, active listings, and expired listings.
Adjustments add value for features the subject lacks and subtract for features in excess.
Price per square foot is a rough guide only.
Absorption rate = sales in a period divided by active listings at the end of that period.
Months of inventory = active listings divided by average monthly sales.
A listing price should be supported by the CMA and the seller's goals.
Listing preparation includes decluttering, repairs, staging, and professional photography.
Agreements of Purchase and Sale and Contract Law
An APS must be in writing and signed by both parties.
The APS becomes binding when acceptance is communicated to the offeror.
A counter-offer terminates the original offer.
A condition precedent must be satisfied for the contract to become binding.
A deposit is part of the purchase price and is generally held in trust.
Time is of the essence; failure to close on the closing date is a breach.
The standard APS includes warranties that the property and chattels are in good working order.
A waiver of a condition must be in writing and communicated to the other party.
Financing, Mortgages and Transaction Conditions
A financing condition protects the buyer and must state a deadline.
The mortgage stress test requires most buyers to qualify at the greater of the contract rate plus 2 percentage points or the Bank of Canada benchmark rate.
LTV ratio = mortgage amount divided by property value.
Mortgage default insurance is required for high-ratio mortgages (LTV above 80%).
GDS ratio = housing costs divided by gross annual income; TDS includes all debt payments.
A mortgage pre-approval is not a guarantee.
Closing costs include land transfer tax, legal fees, title insurance, and adjustments.
The APS should specify that the deposit is held in trust and that the financing condition is for the buyer's sole benefit.
Title, Ownership and Encumbrances
Title is the legal right to own and use land; in Ontario, title is registered under the Land Titles Act.
Encumbrances include mortgages, easements, restrictive covenants, liens, and rights-of-way.
A title search reveals registered owners, encumbrances, and executions.
Title insurance protects the buyer and lender against certain title defects.
Joint tenancy includes the right of survivorship; tenants in common hold distinct shares without survivorship.
An easement grants a right to use another's land for a specific purpose.
A lien or execution against the seller must be discharged before or at closing.
A survey or PIN helps confirm boundaries and easements.
Property Condition, Inspections and Environmental Issues
A home inspection is a visual, non-invasive examination of accessible systems and components.
The seller must disclose known latent defects that are not discoverable by a reasonable inspection.
Common environmental issues include asbestos, mold, radon, lead, urea-formaldehyde foam insulation, and underground oil tanks.
An underground oil tank must be removed and the soil tested.
Radon is a radioactive gas; Health Canada recommends mitigation above 200 Bq/m3.
Asbestos is commonly found in older insulation, floor tiles, and pipe wrap.
A buyer should include an inspection condition and obtain a written report before waiving it.
The seller's warranty of good working order does not cover environmental contamination.
Closing, Trust Accounting and Deposit Handling
The closing date is the date the buyer receives title and the seller receives the purchase price.
The deposit must be held in trust in a brokerage trust account or by the seller's lawyer.
Trust funds must be deposited within five business days of receipt and reconciled monthly.
A trust account must be at a Canadian financial institution and designated as a trust account.
On closing, the buyer's lawyer registers the transfer, discharges encumbrances, and provides the net proceeds.
Adjustments at closing include prepaid property taxes, utilities, and rent, prorated to the closing date.
A holdback may secure completion of repairs or outstanding items.
If a transaction fails to close, the deposit is held in trust until the parties agree or a court orders release.
Residential Tenancies
The Residential Tenancies Act, 2006 applies to most residential tenancies in Ontario.
A tenancy agreement may be written or oral; the standard lease is required for most tenancies entered into on or after April 30, 2018.
Rent increases are generally limited to the annual guideline; above-guideline increases require Landlord and Tenant Board approval.
A landlord may require a security deposit equal to one month's rent.
A landlord must give 24 hours' written notice to enter, except in emergencies or with the tenant's agreement.
A tenant may assign or sublet with the landlord's consent, which cannot be unreasonably refused.
Eviction requires notice and, in most cases, an order from the Landlord and Tenant Board.
A buyer of a property with tenants takes subject to the existing tenancy.
Condominiums and Special Property Types
A condominium consists of a unit and a share of the common elements defined in the declaration, description, and by-laws.
The condominium corporation is governed by a board that maintains common elements and manages the reserve fund.
A status certificate must be provided within 10 days of a written request; the buyer has a 10-day cooling-off period after receiving it.
The reserve fund study must be updated every three years.
Common expenses are allocated according to the unit's percentage of common interest.
The declaration may contain restrictive covenants and rules the buyer should review.
Special property types include co-operatives, co-ownership, and life leases.
A co-operative buyer purchases shares and a right to occupy; the board must approve the buyer.
Professional Conduct, Ethics and Regulatory Obligations
A registrant must be honest and act with integrity.
A registrant must not act for a client with a personal interest in the transaction without written disclosure and consent.
A registrant must keep client information confidential.
A registrant must not accept compensation from more than one party without written disclosure and consent.
A registrant must cooperate with other brokerages and not interfere with another brokerage's representation agreement.
A registrant must maintain competence and obtain assistance when needed.
A registrant must report known breaches of the Code to RECO.
A registrant must not discriminate or follow discriminatory instructions.