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ON Residential Transactions Exam study materials
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ON Residential Transactions Exam practice questions

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Question 1Professional Conduct, Ethics and Regulatory Obligations

A salesperson registered with a brokerage in Ontario wants to pay a $500 referral fee to an unregistered friend who introduced a buyer. Under the trust-in-real-estate framework administered by the regulator, what is the salesperson's position?

  1. The payment is permitted because the friend did not negotiate or show the property
  2. The payment is permitted if the buyer signs a written acknowledgment of the fee
  3. The payment is permitted if the brokerage records the fee in its trade file
  4. The payment is prohibited because referral fees may only be paid to registered persons or as otherwise permitted by the regulator's rules Correct answer.

Explanation

Under the trust-in-real-estate regime administered by the regulator, a registrant may not pay remuneration for the referral of a trade to a person who is not registered, unless a regulatory exemption applies. The friend's lack of involvement in negotiating does not change the registration requirement. Buyer acknowledgment or file recordkeeping does not cure the prohibition.

Question 2Professional Conduct, Ethics and Regulatory Obligations

Which statement best describes the role of the regulator's code of ethics for registrants in residential real estate transactions?

  1. It applies only to brokerages, not to individual salespersons
  2. It is advisory guidance that registrants may follow at their discretion
  3. It replaces the need for written service agreements with clients
  4. It sets minimum standards of conduct that registrants must meet, and breaches can lead to discipline Correct answer.

Explanation

The code of ethics establishes enforceable minimum standards of conduct for registrants, and the regulator may discipline those who breach it. It is not merely advisory, it applies to individual registrants as well as brokerages, and it operates alongside rather than instead of written service requirements.

Question 3Professional Conduct, Ethics and Regulatory Obligations

A buyer client tells her salesperson, in confidence, that she will pay up to $900,000 even though her offer is being drafted at $820,000. The seller's salesperson asks directly what the buyer is willing to pay. What should the buyer's salesperson do?

  1. Keep the buyer's ceiling confidential and disclose only information the buyer authorizes Correct answer.
  2. Disclose the ceiling only if the seller's salesperson promises confidentiality
  3. Disclose the $900,000 ceiling because fairness to the seller requires it
  4. Disclose the ceiling because it is material to the transaction

Explanation

A salesperson owes the client a duty of confidentiality and must not disclose the client's bargaining position or financial ceiling without authorization. Fairness to the other party does not override that duty. A promise of confidentiality from the other side's representative is not a lawful substitute for client consent.

Question 4Professional Conduct, Ethics and Regulatory Obligations

A salesperson represents the seller of a home with a known basement leak that has been repaired but not disclosed on the seller property information statement. What is the salesperson's ethical obligation?

  1. Say nothing because the seller decides what to disclose
  2. Disclose the leak to buyers without telling the seller
  3. Withdraw from the listing immediately without further discussion
  4. Encourage the seller to disclose the prior leak and, if the seller refuses, consider whether continued representation is appropriate Correct answer.

Explanation

Registrants must not knowingly assist a client in concealing a material latent defect, and should counsel disclosure. If the client refuses, the registrant must assess whether continuing to act would breach the duty to act honestly and with integrity. Silent disclosure to buyers without the seller's knowledge and immediate withdrawal are not the required first steps.

Question 5Professional Conduct, Ethics and Regulatory Obligations

Under the regulator's rules, when must a registrant provide a consumer with information about the brokerage's relationship and services before a trade?

  1. Only after an offer has been accepted
  2. Before the consumer enters into a service agreement or is asked to make a commitment Correct answer.
  3. Only when the consumer requests it in writing
  4. At the closing appointment

Explanation

Registrants must give consumers prescribed information about the brokerage and its services, and obtain acknowledgment, before the consumer commits to a service agreement. Providing it after an accepted offer, only on request, or at closing defeats the consumer-protection purpose.

Question 6Professional Conduct, Ethics and Regulatory Obligations

A salesperson holds a buyer's $25,000 deposit cheque made payable to the seller. What is the correct handling under the brokerage's trust account obligations?

  1. Deposit it promptly into the brokerage's trust account and keep it separate from operating funds Correct answer.
  2. Deposit it into the brokerage's general operating account and transfer later
  3. Hold the cheque uncashed in the salesperson's desk until the deal firms up
  4. Cash it and hold the funds personally until closing

Explanation

Deposits and other trust funds received in connection with a trade must be deposited promptly into the brokerage's trust account and kept separate from the brokerage's own money. Commingling with operating funds, holding cheques unbanked, or holding funds personally all breach trust obligations.

Question 7Professional Conduct, Ethics and Regulatory Obligations

Which situation creates a conflict of interest that a registrant must disclose to the client?

  1. The registrant wants to buy the client's property through a corporation the registrant controls Correct answer.
  2. The registrant advertises the listing on a public website
  3. The registrant uses a standard offer form approved by the brokerage
  4. The registrant's brokerage charges a commission set out in the service agreement

Explanation

A registrant who wishes to acquire a client's property, directly or through an entity the registrant controls, has a personal interest that conflicts with the client's and must be disclosed in writing. Standard commission terms, advertising, and approved forms do not by themselves create a disclosable conflict.

Question 8Professional Conduct, Ethics and Regulatory Obligations

A salesperson is representing both a buyer and a seller in the same residential trade with their informed written consent. Which practice is consistent with multiple representation obligations?

  1. Leaving the clients to negotiate entirely without the registrant's involvement
  2. Promoting the interests of both clients fairly while avoiding any preference for one side Correct answer.
  3. Sharing the seller's confidential bottom-line price with the buyer
  4. Advocating most strongly for whichever client is paying the higher commission

Explanation

In a permitted multiple representation, the registrant must deal fairly with all clients and cannot favour one party's interests over the other. Confidential information of each client remains protected, and the registrant must still provide competent service to both. Preferring the higher-paying client or leaking confidential price information breaches these duties.

Question 9Professional Conduct, Ethics and Regulatory Obligations

What is the primary purpose of the regulator's requirement that registrants keep records of trades and client communications?

  1. To allow the regulator to audit compliance and investigate conduct complaints Correct answer.
  2. To satisfy the salesperson's personal tax obligations
  3. To help the brokerage market additional services to past clients
  4. To reduce the brokerage's insurance premiums

Explanation

Recordkeeping supports regulatory oversight, allowing the regulator to verify compliance and investigate complaints about registrant conduct. Marketing, personal tax, and insurance benefits are not the purpose of the requirement.

Question 10Professional Conduct, Ethics and Regulatory Obligations

A registrant learns that a competing brokerage's salesperson made a factual error in a listing. What response is consistent with the code of ethics?

  1. Ignore it because only the other brokerage's clients are affected
  2. Publicly post on social media that the other salesperson is incompetent
  3. Contact the other registrant professionally to point out the error and seek correction Correct answer.
  4. Report the error to the regulator as a disciplinary matter without first raising it

Explanation

Registrants are expected to deal with each other courteously and professionally, and raising a factual error directly with the other registrant is the appropriate first step. Public disparagement, indifference where consumer harm is possible, and premature escalation are inconsistent with that standard.

Question 11Professional Conduct, Ethics and Regulatory Obligations

A seller instructs her salesperson to exclude buyers of a particular religion from learning about the home. How should the salesperson respond?

  1. Comply but note the instruction in the trade file
  2. Comply because the salesperson must follow all lawful client instructions
  3. Refuse to follow the instruction because discrimination in the provision of real estate services is prohibited Correct answer.
  4. Refer the listing to another salesperson without telling the brokerage

Explanation

Human rights law prohibits discrimination in the provision of real estate services, and a registrant cannot facilitate a client's discriminatory instruction. The duty to follow client instructions does not extend to unlawful directions. Documenting or quietly passing the listing along does not cure the discrimination.

Question 12Professional Conduct, Ethics and Regulatory Obligations

A salesperson is about to present an offer on a property listed by another brokerage. Which conduct is required by the regulator's rules on offers?

  1. Present the offer promptly and objectively, and disclose the existence of competing offers as required Correct answer.
  2. Delay presenting the offer until the buyer increases the price
  3. Tell the listing salesperson the buyer's maximum price to speed negotiations
  4. Present only the highest offer received that day

Explanation

Registrants must present offers promptly and objectively, and must comply with the disclosure rules regarding competing offers. Delaying to pressure a price increase, revealing the buyer's ceiling, or filtering offers by price breaches these obligations.

Question 13Professional Conduct, Ethics and Regulatory Obligations

A brokerage's designated representative is asked to act for a buyer in a trade where another salesperson in the same brokerage represents the seller. What is the correct characterization?

  1. It is permitted automatically because the brokerage is a single entity
  2. It is a multiple representation within one brokerage that requires informed written consent from both clients Correct answer.
  3. It is prohibited in all circumstances with no exceptions
  4. It is permitted if the two salespersons agree between themselves

Explanation

When two registrants at the same brokerage represent opposing parties in the same trade, this is a multiple representation that requires the informed written consent of both clients. It is not automatic, not absolutely prohibited, and cannot be authorized merely by agreement between the salespersons.

Question 14Professional Conduct, Ethics and Regulatory Obligations

A salesperson receives a $2,000 cash gift from a grateful buyer client after closing. Which statement reflects the regulator's expectations?

  1. Any gift from a client is prohibited outright
  2. A gift is acceptable if it is shared with the seller
  3. A gift may be accepted if it is not secret, does not compromise the registrant's judgment, and complies with brokerage policy Correct answer.
  4. A gift is acceptable if the salesperson does not tell the brokerage

Explanation

Gifts are not categorically prohibited, but a registrant must avoid secrecy, any compromise of independent judgment, and any breach of brokerage policy. Concealing the gift from the brokerage or sharing it with an opposing party is not the test.

Question 15Professional Conduct, Ethics and Regulatory Obligations

What does the regulator mean when it says a registrant must act with 'integrity' in a residential transaction?

  1. Following the client's instructions even when misleading
  2. Maximizing the client's sale price regardless of method
  3. Acting honestly and ethically, without misleading clients or the public Correct answer.
  4. Prioritizing the brokerage's commission over other duties

Explanation

Integrity requires honest, ethical conduct and prohibits misleading clients, customers, or the public. It is not measured by price outcomes, does not permit misleading conduct at a client's direction, and does not subordinate duties to commission interests.

Question 16Professional Conduct, Ethics and Regulatory Obligations

A salesperson advertises a listing on social media and describes it as 'guaranteed to increase in value by 20% next year.' What is the ethical concern?

  1. The statement is acceptable if the salesperson believes it
  2. The statement is misleading and could create an unfounded expectation, breaching advertising standards Correct answer.
  3. The statement is acceptable because it is only an opinion
  4. The statement is acceptable if the seller approved the wording

Explanation

Advertising by registrants must be accurate and must not mislead the public; a guaranteed appreciation claim is an unfounded promise that creates a misleading expectation. Seller approval or personal belief does not cure a misleading advertisement, and labeling it an opinion does not excuse a deceptive claim.

Question 17Professional Conduct, Ethics and Regulatory Obligations

A registrant suspects that a client is using the transaction to launder money. What should the registrant do?

  1. Confront the client publicly and cancel the transaction without records
  2. Follow the applicable anti-money-laundering reporting obligations and keep the client's file information confidential Correct answer.
  3. Ignore the suspicion because it is the lender's responsibility
  4. Disclose the suspicion to other buyers in the market

Explanation

Registrants must comply with anti-money-laundering and terrorist-financing reporting obligations, including reporting suspicious transactions to the appropriate authority as required, while protecting file confidentiality. Public confrontation, ignoring the suspicion, or tipping off others is improper.

Question 18Professional Conduct, Ethics and Regulatory Obligations

A salesperson is asked by a client to backdate a service agreement so it appears to pre-date a showing. What should the salesperson do?

  1. Comply if the brokerage's broker of record approves verbally
  2. Comply, because the client is the one who benefits
  3. Comply, but note the true date in a separate personal file
  4. Refuse, because falsifying records is dishonest and breaches recordkeeping and integrity obligations Correct answer.

Explanation

Backdating an agreement falsifies a business record and is dishonest, breaching both the duty of integrity and recordkeeping obligations. Client benefit, private notes, or verbal approval from the broker of record cannot authorize falsification.

Question 19Professional Conduct, Ethics and Regulatory Obligations

A registrant is considering acting for a buyer on a property the registrant personally owns. What is the most appropriate course under conflict-of-interest rules?

  1. Ask the buyer to waive all conflict disclosures in the service agreement
  2. Proceed if the price is set by an independent appraisal
  3. Disclose the personal interest in writing and obtain the buyer's informed consent before proceeding Correct answer.
  4. Proceed without disclosure because the registrant owns the property openly

Explanation

A registrant's personal ownership interest in a property creates a conflict that must be disclosed in writing, with the client's informed consent obtained before proceeding. Open ownership, an appraisal, or a blanket waiver in the service agreement does not substitute for proper disclosure and consent.

Question 20Professional Conduct, Ethics and Regulatory Obligations

A consumer asks a salesperson whether they should sign a service agreement that includes a holdover clause. What does competent, ethical practice require?

  1. Sign the agreement on the consumer's behalf to save time
  2. Explain the clause and its effect in plain language so the consumer can make an informed decision Correct answer.
  3. Refuse to discuss the clause because it is a legal matter
  4. Tell the consumer the clause is standard and not to worry about it

Explanation

Registrants must explain the nature of the services and the terms of the agreement so the consumer can give informed consent, including holdover provisions. Dismissing the clause, refusing to explain it, or signing for the consumer undermines informed decision-making.

Question 21Legislation Governing Residential Transactions

Under the legislation governing residential transactions, when must a seller of a residential property in Ontario disclose to a buyer that the property has been used to grow or manufacture a controlled substance?

  1. Only after the agreement of purchase and sale has been signed by both parties
  2. Before the buyer submits an offer, using a standardized government disclosure form
  3. Only if the buyer specifically asks about drug activity in writing
  4. There is no statutory duty to disclose; disclosure arises from common law and the duty of good faith Correct answer.

Explanation

Ontario's residential transaction legislation does not impose a specific statutory duty to disclose former drug operations; the obligation flows from common law and the duty of honest performance. A seller who knows of a latent defect or stigma that makes the property dangerous or unfit may face liability for failing to disclose. There is no prescribed government form or timing rule in the legislation.

Question 22Legislation Governing Residential Transactions

Which statute primarily governs the formation and enforceability of agreements of purchase and sale for residential real property in Ontario?

  1. The Residential Tenancies Act, 2006
  2. The Condominium Act, 1998
  3. The Statute of Frauds, R.S.O. 1990, c. S.19 Correct answer.
  4. The Planning Act, R.S.O. 1990, c. P.13

Explanation

The Statute of Frauds requires that contracts for the sale of land be evidenced in writing and signed by the party to be charged. An oral agreement to sell residential property is generally unenforceable unless a written memorandum satisfies the statute. The other statutes address tenancies, condominiums, and land use planning rather than contract formation.

Question 23Legislation Governing Residential Transactions

A buyer and seller sign an Agreement of Purchase and Sale using the standard OREA form. The buyer later learns the seller accepted a higher offer from another party before the buyer's acceptance was communicated. Which principle determines whether a binding contract exists?

  1. The seller's acceptance is effective only when registered on title
  2. The listing brokerage must hold all offers until a stated presentation date
  3. The offer becomes irrevocable once the buyer signs the document
  4. The offeror may revoke at any time before acceptance is communicated to the offeror Correct answer.

Explanation

Under contract law principles applied to real estate transactions, an offer may be revoked at any time before acceptance is communicated to the offeror. Signing by the buyer does not by itself create a contract; communication of acceptance to the seller or the seller's agent is required. The other options misstate the rules on irrevocability, offer presentation, and registration.

Question 24Legislation Governing Residential Transactions

Under the Real Estate and Business Brokers Act, 2002, which statement best describes a brokerage's obligation when representing a buyer in a residential transaction?

  1. The brokerage must disclose the relationship only if the buyer requests it
  2. The brokerage may act for both buyer and seller without any written disclosure
  3. The brokerage may keep the nature of the relationship confidential until closing
  4. The brokerage must disclose in writing the nature of the relationship and obtain the client's acknowledgement Correct answer.

Explanation

REBBA, 2002 and its regulations require brokerages to disclose the nature of the relationship to clients and to obtain written acknowledgement of that disclosure. This ensures consumers understand whom the brokerage represents. Confidentiality does not extend to the fact or nature of the representation itself.

Question 25Legislation Governing Residential Transactions

A seller lists a home and the buyer submits an offer conditional on financing. Before the condition is waived, the seller receives a firm offer from another buyer. What is the legal position of the first buyer under the Agreement of Purchase and Sale?

  1. The first buyer holds only a conditional contract, and the seller may be free to accept the second offer depending on the terms of the first agreement Correct answer.
  2. The first buyer automatically loses any deposit paid to the seller
  3. The first buyer has an unconditional interest in the property and can prevent the sale
  4. The seller must obtain court approval before accepting the second offer

Explanation

A conditional agreement creates only a conditional interest until the condition is satisfied or waived. Whether the seller may accept another offer depends on the terms of the first agreement, including any escape clause or time limits. The first buyer does not hold an unconditional interest, and deposits are governed by the agreement and trust rules, not automatic forfeiture.

Question 26Legislation Governing Residential Transactions

Which piece of legislation sets out the disclosure obligations for a seller of a newly built residential condominium in Ontario?

  1. The Real Estate and Business Brokers Act, 2002
  2. The Mortgages Act, R.S.O. 1990, c. M.40
  3. The Condominium Act, 1998 Correct answer.
  4. The Residential Tenancies Act, 2006

Explanation

The Condominium Act, 1998 requires developers to provide a disclosure statement and a purchaser may rescind within a specified cooling-off period. It also governs status certificates and other condominium-specific disclosures. The other statutes address tenancies, brokerage conduct, and mortgages.

Question 27Legislation Governing Residential Transactions

A buyer of a resale home discovers after closing that the basement was finished without a building permit. Which legislative framework is most relevant to whether the seller had a duty to disclose this?

  1. The Building Code Act, 1992 and the common law duty of disclosure for latent defects Correct answer.
  2. The Land Titles Act, R.S.O. 1990, c. L.5 only
  3. The Residential Tenancies Act, 2006
  4. The Consumer Protection Act, 2002 only

Explanation

The Building Code Act, 1992 governs permits and compliance, while the common law determines whether an unpermitted renovation is a latent defect requiring disclosure. A seller who knows of a material latent defect that renders the property dangerous or unfit may be liable for non-disclosure. The other statutes do not directly address this disclosure question.

Question 28Legislation Governing Residential Transactions

Under the Real Estate and Business Brokers Act, 2002, how must a brokerage handle a deposit received from a buyer on a residential resale transaction?

  1. The brokerage must hold it in a trust account and account for it in accordance with the regulations Correct answer.
  2. The brokerage may deposit it into its general operating account
  3. The brokerage may release it to the seller immediately upon receipt
  4. The brokerage may use it to pay its commission before closing

Explanation

REBBA, 2002 and its regulations require brokerages to hold deposits in trust and to account for trust funds in the prescribed manner. Commingling with operating funds or early release is prohibited. The deposit remains subject to the terms of the agreement and trust rules until closing or other lawful disposition.

Question 29Legislation Governing Residential Transactions

Which statement accurately describes the effect of the Planning Act on a residential subdivision of a single lot into two lots?

  1. The seller may complete the subdivision by registering a transfer without any approval
  2. Approval is required only if the lot is within a condominium corporation
  3. Consent from the local land division committee or approval of a plan of subdivision is generally required Correct answer.
  4. A subdivision is permitted as of right if both lots meet the local zoning minimum

Explanation

The Planning Act requires consent from the appropriate land division authority or approval of a plan of subdivision before land can be divided. Zoning compliance alone does not authorize a subdivision. Registration of a transfer without the required consent may render the conveyance invalid.

Question 30Legislation Governing Residential Transactions

A buyer signs an Agreement of Purchase and Sale that includes a clause stating the buyer has inspected the property and accepts it "as is." Which statement best reflects the legal effect of this clause?

  1. It transfers responsibility for zoning compliance to the buyer permanently
  2. It may limit the seller's liability but does not protect against fraud or undisclosed known latent defects that render the property dangerous Correct answer.
  3. It eliminates all seller liability, including for fraud or known latent defects
  4. It automatically voids the seller's obligation to provide good title

Explanation

An "as is" clause can limit a seller's liability for patent defects and visible conditions, but it does not shield a seller from fraud or from non-disclosure of known latent defects that make the property dangerous or unfit. It also does not affect the seller's obligation to convey good title.

Question 31Legislation Governing Residential Transactions

Under the Residential Tenancies Act, 2006, what happens to a residential tenancy when the landlord sells the property to a new owner?

  1. The tenancy terminates on the sale date
  2. The tenancy converts to a monthly tenancy automatically on sale
  3. The tenant must sign a new lease with the new owner within 30 days
  4. The tenancy continues and the new owner becomes the landlord Correct answer.

Explanation

The Residential Tenancies Act, 2006 provides that a sale of the property does not terminate the tenancy; the new owner steps into the landlord's position. The tenant's rights and obligations continue under the existing lease. A new lease or automatic conversion is not required by the sale alone.

Question 32Legislation Governing Residential Transactions

A salesperson representing a buyer in a residential transaction learns that the seller's property has a history of flooding that the seller has not disclosed. What is the salesperson's most appropriate course of action under the legislation and regulations governing brokerage conduct?

  1. Disclose the information to other brokerages to protect the public
  2. Ignore the information because the salesperson represents the buyer, not the seller
  3. Advise the buyer of the known material fact and recommend further investigation, while respecting the limits of the salesperson's knowledge Correct answer.
  4. Keep the information confidential because it belongs to the seller

Explanation

A salesperson must act with honesty and good faith and must not conceal material facts from their client. Advising the buyer of the known flooding history and recommending inspections or professional advice protects the buyer's interests. The salesperson should not disclose the information indiscriminately to third parties.

Question 33Legislation Governing Residential Transactions

Which of the following is required for a valid conveyance of residential land under the Land Titles Act in Ontario?

  1. A written transfer in the prescribed form, properly executed and registered Correct answer.
  2. Payment of the purchase price in cash
  3. A verbal agreement witnessed by two people
  4. Delivery of the keys to the buyer

Explanation

Under the Land Titles Act, title passes upon registration of a properly executed transfer in the prescribed form. A verbal agreement cannot convey an interest in land. Delivery of keys or the form of payment does not determine the validity of the conveyance.

Question 34Legislation Governing Residential Transactions

A buyer purchases a home relying on a seller's statement in the listing that the roof was replaced in 2022. After closing, the buyer learns the roof is 20 years old. Which legal concept is most directly engaged?

  1. Unjust enrichment
  2. Easement by prescription
  3. Adverse possession
  4. Misrepresentation in the inducement of the contract Correct answer.

Explanation

A false statement of fact that induces a buyer to enter the contract may constitute misrepresentation, giving rise to remedies such as rescission or damages depending on whether it was fraudulent, negligent, or innocent. Unjust enrichment, easements, and adverse possession concern different areas of law and do not address pre-contractual statements.

Question 35Legislation Governing Residential Transactions

Under the Real Estate and Business Brokers Act, 2002, which conduct by a salesperson is prohibited?

  1. Referring a client to a lawyer for independent legal advice
  2. Making a false or misleading statement about a property in a listing Correct answer.
  3. Recommending that a buyer obtain an independent home inspection
  4. Disclosing the nature of the representation to the client in writing

Explanation

REBBA, 2002 prohibits making false or misleading statements in the course of trading in real estate. Recommending inspections, disclosing representation, and referring clients to lawyers are appropriate and often required practices. The prohibition targets deception, not professional recommendations.

Question 36Legislation Governing Residential Transactions

A seller of a residential property signs a listing agreement with a brokerage. The agreement includes a holdover clause. What is the purpose of a holdover clause?

  1. To prevent the seller from listing with another brokerage after expiry
  2. To require the seller to accept the first offer received
  3. To allow the seller to cancel the listing at any time without penalty
  4. To entitle the brokerage to commission if the property sells to a buyer introduced during the listing period within a specified time after expiry Correct answer.

Explanation

A holdover clause protects the brokerage's commission if the property is sold after the listing expires to a buyer who was introduced during the listing period. It is subject to the terms and time limits in the agreement. It does not give the seller a free cancellation right or require acceptance of any offer.

Question 37Legislation Governing Residential Transactions

Which statute governs the rights of a borrower and lender when a residential mortgage is in default and the lender seeks power of sale?

  1. The Condominium Act, 1998
  2. The Residential Tenancies Act, 2006
  3. The Real Estate and Business Brokers Act, 2002
  4. The Mortgages Act, R.S.O. 1990, c. M.40 Correct answer.

Explanation

The Mortgages Act sets out the procedures and notice requirements for a lender exercising a power of sale or other remedies on default. It balances the lender's enforcement rights with the borrower's opportunity to redeem. The other statutes address tenancies, condominiums, and brokerage regulation.

Question 38Legislation Governing Residential Transactions

A buyer submits an offer on a residential property with a condition that the buyer obtain financing by a specified date. The buyer does not waive or satisfy the condition by the deadline. What is the likely status of the agreement?

  1. The agreement becomes firm automatically at midnight on the deadline
  2. The agreement may be at an end because the condition was not fulfilled within the time specified Correct answer.
  3. The seller must extend the deadline indefinitely
  4. The buyer forfeits the deposit to the brokerage as a penalty

Explanation

Where a condition precedent is not satisfied or waived within the stipulated time, the agreement may terminate according to its terms. The parties may agree to extend, but there is no automatic extension. The deposit is dealt with under the agreement and trust rules, not automatically forfeited as a penalty.

Question 39Legislation Governing Residential Transactions

Under the Ontario Human Rights Code, which statement best describes a seller's obligation when advertising a residential property for sale?

  1. The seller may refuse to sell to a buyer with a disability if the home is not accessible
  2. The seller may restrict showings to a particular religious group
  3. The seller may state a preference based on race if it reflects the neighbourhood
  4. The seller must not publish advertisements that indicate discrimination based on a prohibited ground Correct answer.

Explanation

The Human Rights Code prohibits discriminatory practices in the sale of accommodation, including advertisements that indicate discrimination based on prohibited grounds. Preferences based on race, religion, or disability are not permitted in housing transactions. Accessibility concerns do not justify refusing a buyer.

Question 40Legislation Governing Residential Transactions

A buyer and seller agree to a closing date. The buyer's lender fails to advance funds on the closing date, and the buyer cannot complete. What is the seller's primary contractual remedy?

  1. The seller may terminate the agreement and retain the deposit subject to the terms of the agreement and any legal requirement to account for it Correct answer.
  2. The seller must wait indefinitely for the buyer to obtain financing
  3. The seller may keep the property and also sue for the full purchase price immediately
  4. The seller must return the deposit and pay the buyer's costs

Explanation

Where the buyer fails to complete, the seller may treat the agreement as terminated and deal with the deposit according to the agreement and applicable law, subject to any duty to account. The seller is not required to wait indefinitely. Suing for the full purchase price and retaining the property simultaneously would be inconsistent remedies.

Question 41Legislation Governing Residential Transactions

Which of the following best describes the role of the Agreement of Purchase and Sale in a residential transaction?

  1. It is the binding contract that sets out the parties, property, price, and terms of the transaction Correct answer.
  2. It is a marketing document prepared by the listing brokerage
  3. It is a non-binding letter of intent
  4. It is a government-issued title certificate

Explanation

The Agreement of Purchase and Sale is the contract that records the essential terms of the transaction, including parties, property, price, closing date, and conditions. Once accepted and any conditions satisfied, it is binding. It is not a letter of intent, a marketing document, or a title certificate.

Question 42Legislation Governing Residential Transactions

A condominium buyer receives a status certificate before closing. Under the Condominium Act, 1998, what is the significance of the status certificate?

  1. It transfers ownership of the unit to the buyer
  2. It provides information about the corporation's financial and legal status, including common expenses and any legal proceedings Correct answer.
  3. It guarantees the unit will not require repairs
  4. It replaces the need for title insurance

Explanation

A status certificate discloses key information about the condominium corporation, such as common expense levels, reserve fund status, and pending legal actions. The buyer relies on it to assess the risks of ownership. It does not guarantee the condition of the unit, transfer title, or substitute for title insurance.

Question 43Legislation Governing Residential Transactions

A seller accepts an offer that is conditional on the buyer's solicitor reviewing the status certificate of a condominium. The buyer's solicitor finds a special assessment pending. What is the buyer's position?

  1. The buyer loses the deposit automatically
  2. The buyer must pay the special assessment before closing
  3. The buyer may decline to waive the condition if the review reveals a material issue, allowing the agreement to terminate in accordance with its terms Correct answer.
  4. The buyer must complete because the condition is for the seller's benefit

Explanation

A condition in favour of the buyer allows the buyer to decide whether to waive it after review. If the review reveals a material issue such as a pending special assessment, the buyer may decline to waive, and the agreement may terminate under its terms. The buyer is not obliged to complete or to pay the assessment before closing.

Question 44Legislation Governing Residential Transactions

Under the Real Estate and Business Brokers Act, 2002, what must a brokerage do before entering into a representation agreement with a buyer or seller?

  1. Obtain the consent of the other party to the transaction
  2. Register the agreement with the local real estate board
  3. Obtain a credit report on the client
  4. Provide the client with the prescribed information about the relationship and obtain written acknowledgement Correct answer.

Explanation

REBBA, 2002 and its regulations require the brokerage to provide prescribed information about the nature of the relationship and to obtain the client's written acknowledgement. This supports informed consent and consumer protection. Credit reports, board registration, and third-party consent are not prerequisites to the representation agreement.

Question 45Agency, Representation and Client Relationships

A salesperson who signs a listing agreement on behalf of a brokerage is best described as holding which type of authority?

  1. Apparent authority arising from the multiple listing service
  2. Implied authority created by the seller's conduct
  3. Ostensible authority held by every licensee in the state
  4. Actual authority expressly granted by the brokerage Correct answer.

Explanation

Authority flows from the principal (the brokerage) to the agent (the salesperson) through the employment relationship. Express actual authority is created when the brokerage specifically authorizes the salesperson to act, such as by permitting the salesperson to sign listing agreements. The seller's conduct and MLS participation affect the brokerage's authority, not the internal delegation to the salesperson.

Question 46Agency, Representation and Client Relationships

A seller tells a licensee, 'You have my permission to advertise my home and hold it open, but you may not sign any contract for me.' The licensee's authority to advertise is best classified as:

  1. Express actual authority limited in scope Correct answer.
  2. Apparent authority created by the seller's silence
  3. General power of attorney for the transaction
  4. Implied authority that includes signing contracts

Explanation

The seller expressly granted advertising and open-house authority but expressly withheld contract-signing power. Express actual authority is defined and limited by the principal's specific instructions, so the scope of the grant controls. The licensee cannot rely on implication to expand authority the seller expressly restricted.

Question 47Agency, Representation and Client Relationships

Under a typical state agency statute, when does the agency relationship between a brokerage and a buyer client generally begin?

  1. When the buyer first tours a property with a licensee
  2. When the closing statement is signed by all parties
  3. When the seller accepts the buyer's offer
  4. When the buyer and brokerage enter into a written buyer representation agreement Correct answer.

Explanation

Agency is a consensual relationship, and most states require a written buyer representation agreement to create it and to define its terms. The relationship generally arises at the time the parties agree to it, not at a later transactional milestone. Touring a home or reaching contract acceptance does not by itself create the agency.

Question 48Agency, Representation and Client Relationships

A licensee working with a buyer signs a representation agreement, but the buyer later tells the licensee, 'I never agreed to pay you a commission.' Which document most directly resolves whether the buyer owes compensation?

  1. The title commitment
  2. The MLS listing sheet for the property
  3. The written buyer representation agreement Correct answer.
  4. The seller's disclosure statement

Explanation

Compensation obligations between a client and a brokerage are governed by their representation agreement. The listing sheet addresses the offer of compensation to cooperating brokers, not the buyer's personal contractual promise. Disclosures and title documents do not create a commission obligation.

Question 49Agency, Representation and Client Relationships

A licensee is showing homes to a prospective buyer who has not signed any representation agreement. In most states, the licensee owes this person which level of duty?

  1. The same duties owed to the seller client
  2. No duties of any kind until a contract is signed
  3. Honest and fair dealing without fiduciary duties Correct answer.
  4. Full fiduciary duties of loyalty and confidentiality

Explanation

Before an agency relationship is formed, a licensee generally owes honesty and fair dealing but not the fiduciary duties that arise from agency. Fiduciary duties such as loyalty and confidentiality attach once representation is established. Treating a customer as a client would misstate the relationship.

Question 50Agency, Representation and Client Relationships

A brokerage designates one licensee to represent the seller and a different licensee to represent the buyer in the same transaction. This arrangement is best described as:

  1. Subagency of the buyer's broker
  2. Dual agency by a single licensee
  3. Transaction brokerage for both parties
  4. Designated agency within a single brokerage Correct answer.

Explanation

Designated agency allows one brokerage to represent both sides while assigning separate licensees to each party, so no individual licensee represents both. Dual agency occurs when the same licensee represents both parties. Transaction brokerage involves assisting parties without representing either.