Ontario Real Estate Salesperson Licensing Exam (OREA/Humber) — Questions and Answers

Question 1: In Ontario's Land Titles system, what is the 'Land Titles Assurance Fund'?

A deposit protection fund managed by RECO
A government fund that compensates persons who suffer loss due to errors or omissions in the Land Titles register (Correct answer)
An insurance fund for real estate agents
A fund for first-time homebuyers

Correct answer: A government fund that compensates persons who suffer loss due to errors or omissions in the Land Titles register

The Land Titles Assurance Fund provides compensation to persons who suffer financial loss because of an error, omission, or misdescription in the Land Titles register. It supports the government's guarantee of title accuracy.

Question 2: What is an 'encumbrance' in the context of Ontario land registration?

A structural problem with the building
A government subsidy for property development
A type of property insurance
Any claim, lien, charge, or liability attached to and binding on the property, such as a mortgage, easement, or restrictive covenant (Correct answer)

Correct answer: Any claim, lien, charge, or liability attached to and binding on the property, such as a mortgage, easement, or restrictive covenant

An encumbrance is any right or interest held by someone other than the property owner that affects the title or use of the property. Common encumbrances include mortgages, easements, liens, restrictive covenants, and leases.

Question 3: What is the 'final walkthrough' or 'pre-closing visit' in an Ontario residential transaction?

A mandatory government inspection
An inspection required by the insurance company
An opportunity for the buyer to visit the property before closing to verify it is in the agreed-upon condition, that included chattels and fixtures are present, and that the property is vacant (Correct answer)
A tour organized by the listing agent for potential future buyers

Correct answer: An opportunity for the buyer to visit the property before closing to verify it is in the agreed-upon condition, that included chattels and fixtures are present, and that the property is vacant

The pre-closing visit allows the buyer to confirm that the property is in substantially the same condition as when the offer was made, that all agreed-upon chattels and fixtures are present, and that the seller has vacated. It is not a second inspection but a verification visit.

Question 4: What is the 'nemo dat' rule and how does it relate to land registration in Ontario?

A rule about construction permits
A rule about property taxation
A rule about mortgage interest rates
The principle that no one can give what they do not have — a person cannot transfer better title than they possess (Correct answer)

Correct answer: The principle that no one can give what they do not have — a person cannot transfer better title than they possess

The 'nemo dat quod non habet' rule means that a person cannot transfer a greater interest in property than they themselves hold. However, the Land Titles system modifies this principle through the concept of guaranteed title, which can override certain defects.

Question 5: What happens to deposits received by a brokerage under REBBA 2002?

They can be held in any account at the broker's discretion
They must be forwarded directly to the seller immediately
They must be placed into a trust account within 5 business days (Correct answer)
They must be deposited into the brokerage's general operating account

Correct answer: They must be placed into a trust account within 5 business days

REBBA 2002 requires that all deposits received in connection with a trade must be deposited into the brokerage's real estate trust account within 5 business days of receipt.

Question 6: In Ontario, what is a 'severance' under the Planning Act?

The division of a parcel of land into two or more parts, requiring approval from the Committee of Adjustment or Land Division Committee (Correct answer)
The removal of a lien from property
The separation of a partnership between real estate agents
The termination of a real estate contract

Correct answer: The division of a parcel of land into two or more parts, requiring approval from the Committee of Adjustment or Land Division Committee

A severance (also called consent) under the Planning Act allows the division of a parcel of land into smaller lots. It requires approval from the local Committee of Adjustment or Land Division Committee to ensure compliance with planning policies.

Question 7: Which of the following best describes a vendor take-back (VTB) mortgage?

The buyer assumes the seller's existing mortgage
A government agency provides subsidized mortgage financing to the buyer
The buyer obtains financing from a third-party chartered bank
The seller provides financing directly to the buyer as part of the property transaction (Correct answer)

Correct answer: The seller provides financing directly to the buyer as part of the property transaction

In a vendor take-back mortgage, the seller acts as the lender, providing some or all of the financing to the buyer, which is recorded as a mortgage on the property.

Question 8: What is the standard form 'Agreement of Purchase and Sale' used in Ontario residential transactions?

A form created by each individual brokerage
A form issued by the Canadian Real Estate Association
A government-issued contract form
The OREA Form 100, a standardized form used by real estate registrants for residential resale transactions (Correct answer)

Correct answer: The OREA Form 100, a standardized form used by real estate registrants for residential resale transactions

The OREA (Ontario Real Estate Association) Form 100 is the standardized Agreement of Purchase and Sale used for residential resale transactions in Ontario. It includes standard clauses and space for additional terms and conditions.

Question 9: What is 'quantum meruit' and when does it apply in Ontario real estate?

A type of mortgage calculation
A method of calculating property taxes
A claim for the reasonable value of services rendered when there is no valid contract, preventing unjust enrichment (Correct answer)
A type of construction estimate

Correct answer: A claim for the reasonable value of services rendered when there is no valid contract, preventing unjust enrichment

Quantum meruit ('as much as deserved') allows a person to claim the reasonable value of services or work performed when no valid contract exists or the contract is unenforceable. In real estate, it may apply when a registrant provides services but the listing agreement is invalid.

Question 10: What is the standard maximum GDS ratio accepted by most institutional lenders in Canada?

44%
40%
32% (Correct answer)
28%

Correct answer: 32%

Most institutional lenders in Canada apply a maximum GDS ratio of 32%, meaning housing costs should not exceed 32% of gross monthly income.

Question 11: In Ontario, what is a 'title search period' in a residential real estate transaction?

The time required to register a new title
The time it takes to find a property to buy
The time between the acceptance of the offer and the requisition date, during which the buyer's lawyer investigates the title and raises any concerns (Correct answer)
The time to process a mortgage application

Correct answer: The time between the acceptance of the offer and the requisition date, during which the buyer's lawyer investigates the title and raises any concerns

The title search period is the window between acceptance of the agreement and the requisition date during which the buyer's lawyer examines title, conducts off-title searches, and raises any objections or concerns about the property's title or status.

Question 12: What is the 'requisition date' in an Ontario residential transaction?

The date the property is listed for sale
The deadline by which the buyer's lawyer must raise any title concerns or defects with the seller's lawyer (Correct answer)
The date the mortgage is approved
The date the buyer takes possession

Correct answer: The deadline by which the buyer's lawyer must raise any title concerns or defects with the seller's lawyer

The requisition date is the deadline specified in the agreement by which the buyer's lawyer must submit written objections (title requisitions) regarding any defects or concerns with the property's title. The seller then has a specified time to resolve them.

Question 13: What is the role of a 'lawyer's undertaking' in an Ontario real estate closing?

A marketing strategy for law firms
A guarantee of the property's condition
A lawyer's opinion on the property's value
A personal promise by a lawyer to perform a specific act, breach of which can result in professional discipline (Correct answer)

Correct answer: A personal promise by a lawyer to perform a specific act, breach of which can result in professional discipline

A lawyer's undertaking is a solemn professional promise to perform a specific act (such as registering a discharge of mortgage after closing). It is personally binding on the lawyer, and failure to fulfill an undertaking can result in professional discipline by the Law Society.

Question 14: In Ontario, what is the 'Clean Water Act' and its impact on real estate?

It protects drinking water sources and may impose restrictions on land use in designated vulnerable areas (Correct answer)
It regulates swimming pool water quality
It requires all properties to have water filtration systems
It only applies to waterfront properties

Correct answer: It protects drinking water sources and may impose restrictions on land use in designated vulnerable areas

The Clean Water Act protects municipal drinking water sources by establishing source protection plans. Properties within designated vulnerable areas may face land use restrictions that affect development potential and property value.

Question 15: A mortgage commitment letter from a lender typically includes:

The mortgage default insurance premium calculation only
The legal title search results for the subject property
Only the maximum purchase price the buyer can afford
The approved loan amount, interest rate, term, amortization, and any conditions (Correct answer)

Correct answer: The approved loan amount, interest rate, term, amortization, and any conditions

A mortgage commitment letter outlines the key terms of the approved mortgage, including loan amount, interest rate, term, amortization period, and any conditions that must be met before funding.

Question 16: Under REBBA 2002, how are proceeds of disposition handled when a property is sold under power of sale?

Proceeds must be distributed according to priority of claims as established by law (Correct answer)
All proceeds go directly to the brokerage
Proceeds are held by RECO for 90 days
The seller keeps all proceeds regardless of debts

Correct answer: Proceeds must be distributed according to priority of claims as established by law

When a property is sold under power of sale, the proceeds must be distributed according to the legally established priority of claims, including mortgage arrears, legal costs, and any surplus to the borrower.

Question 17: In Ontario, what is a 'Property Identification Number' (PIN)?

A unique number assigned to each property parcel in the electronic land registration system for identification purposes (Correct answer)
A personal identification number for property owners
A tax identification number
A postal code for properties

Correct answer: A unique number assigned to each property parcel in the electronic land registration system for identification purposes

A PIN is a unique identifier assigned to each property parcel in Ontario's electronic land registration system. It replaces the traditional lot and plan descriptions and is used for searching title and registering documents.

Question 18: In Ontario, what is a 'condition subsequent' in a real estate contract?

A condition that must be met before the offer is made
A condition that, if it occurs after the contract is formed, terminates the contract or an obligation under it (Correct answer)
The same as a condition precedent
A post-closing inspection requirement

Correct answer: A condition that, if it occurs after the contract is formed, terminates the contract or an obligation under it

A condition subsequent is an event that, if it occurs after the contract has become binding, terminates a party's obligations. Unlike a condition precedent (which must be met before the contract is binding), a condition subsequent dissolves an already-binding contract.

Question 19: Under Canada's mortgage stress test (OSFI B-20 guidelines), uninsured mortgage applicants must qualify at:

Exactly the contract rate negotiated with the lender
The Bank of Canada overnight lending rate
The higher of the contract rate plus 2% or the OSFI minimum qualifying rate (Correct answer)
The prime rate plus 0.5%

Correct answer: The higher of the contract rate plus 2% or the OSFI minimum qualifying rate

The B-20 stress test requires uninsured mortgage applicants to qualify at the higher of their contract rate plus 2% or OSFI's minimum qualifying rate, ensuring borrowers can handle rate increases.

Question 20: Under REBBA 2002, what are the requirements for a brokerage's trust account?

Trust accounts are only required for transactions over $100,000
The trust account can be located in any Canadian province
Any bank account can serve as a trust account
The trust account must be maintained at a recognized financial institution in Ontario, clearly designated as a trust account (Correct answer)

Correct answer: The trust account must be maintained at a recognized financial institution in Ontario, clearly designated as a trust account

A brokerage's trust account must be maintained at a recognized financial institution in Ontario, clearly designated as a trust account, and separate from the brokerage's operating funds.

Question 21: In Ontario, what does 'registration' of a document on title accomplish?

It makes the document legally valid between the parties
It guarantees the document is accurate
It provides notice to the world of the interest claimed and establishes priority over subsequent registrations (Correct answer)
It replaces the need for a lawyer to review the document

Correct answer: It provides notice to the world of the interest claimed and establishes priority over subsequent registrations

Registration gives constructive notice to the world that the interest exists. In both the Registry and Land Titles systems, registered interests generally take priority over unregistered interests, and earlier registrations take priority over later ones.

Question 22: The Gross Debt Service (GDS) ratio measures:

The loan-to-value ratio of the mortgage
The spread between the mortgage rate and the prime rate
Total monthly debt obligations as a percentage of net income
Monthly housing costs as a percentage of gross monthly income (Correct answer)

Correct answer: Monthly housing costs as a percentage of gross monthly income

The GDS ratio measures housing costs—principal, interest, property taxes, and heating—as a percentage of gross monthly income, with most lenders capping it at 32%.

Question 23: A mortgage that allows the borrower to repay the full balance at any time without penalty is called:

A variable-rate mortgage
A closed mortgage
A convertible mortgage
An open mortgage (Correct answer)

Correct answer: An open mortgage

An open mortgage allows the borrower to make additional payments or repay the full mortgage balance at any time without incurring prepayment penalties.

Question 24: What is a 'discharge' of a mortgage/charge in Ontario's registration system?

A notification of property tax arrears
The termination of the real estate agent's contract
A construction permit completion certificate
A registered document that releases the property from the security of the mortgage/charge after the debt has been paid (Correct answer)

Correct answer: A registered document that releases the property from the security of the mortgage/charge after the debt has been paid

A discharge is a document registered on title that removes the mortgage (charge) from the property's title, confirming that the secured debt has been fully paid and the lender no longer has a claim against the property.

Question 25: In Ontario, who is legally authorized to prepare and register mortgage documents?

A licensed lawyer (Correct answer)
A licensed real estate salesperson
A registered mortgage broker
A certified title insurance agent

Correct answer: A licensed lawyer

In Ontario, preparing and registering mortgage documents constitutes the practice of law and must be performed by a licensed lawyer, not a mortgage broker or real estate salesperson.

Question 26: What is 'novation' in Ontario real estate contract law?

A new type of mortgage product
The substitution of a new contract for an existing one, or the substitution of a new party for an original party, with the consent of all parties (Correct answer)
A type of property renovation
A minor amendment to the contract terms

Correct answer: The substitution of a new contract for an existing one, or the substitution of a new party for an original party, with the consent of all parties

Novation is the creation of a new contract that replaces an existing one, or the substitution of one party with another. Unlike assignment, novation requires the consent of all parties and completely extinguishes the old contract.

Question 27: What is a 'listing agreement' in Ontario residential real estate?

An agreement between the seller and the buyer
A written contract between the seller and a brokerage authorizing the brokerage to market and sell the property under specified terms, including the listing price and commission (Correct answer)
An agreement between two brokerages to share a listing
A rental listing contract

Correct answer: A written contract between the seller and a brokerage authorizing the brokerage to market and sell the property under specified terms, including the listing price and commission

A listing agreement authorizes the brokerage to act as the seller's agent in marketing and selling the property. It specifies the listing price, commission rate, term of the agreement, duties of the brokerage, and obligations of the seller.

Question 28: What is the 'curtain principle' in Ontario's Land Titles system?

A privacy rule for property owners
The principle that the register is the definitive record and buyers need not look behind it to investigate historical dealings or trust arrangements (Correct answer)
A staging requirement for home sales
A rule about window coverings in condominiums

Correct answer: The principle that the register is the definitive record and buyers need not look behind it to investigate historical dealings or trust arrangements

The curtain principle means that the Land Titles register provides all the information needed about ownership and interests. A purchaser does not need to investigate behind the register — historical dealings and trust arrangements are 'behind the curtain' and do not affect the purchaser.

Question 29: What happens if a brokerage closes or is terminated under REBBA 2002?

All ongoing transactions are automatically cancelled
Clients must find new representation on their own
The Broker of Record must ensure all trust funds are properly disbursed and records are transferred or retained (Correct answer)
RECO takes over all active listings automatically

Correct answer: The Broker of Record must ensure all trust funds are properly disbursed and records are transferred or retained

When a brokerage closes, the Broker of Record has a continuing obligation to ensure all trust funds are properly disbursed, all parties to pending transactions are notified, and records are retained for the required period.

Question 30: In Ontario, what is an 'application for absolute title' in the Land Titles system?

An application for property tax exemption
An application to register a new property
An application for a building permit
An application to upgrade a qualified or possessory title to absolute title, providing the highest level of title guarantee (Correct answer)

Correct answer: An application to upgrade a qualified or possessory title to absolute title, providing the highest level of title guarantee

An application for absolute title is the process by which a property with possessory or qualified title can be upgraded to absolute title, which provides the highest level of government guarantee. This typically requires evidence that the title is free from adverse claims.

Question 31: What are 'chattels' versus 'fixtures' in an Ontario residential purchase agreement?

They are the same thing
Chattels are movable items not permanently attached (e.g., curtains, portable appliances); fixtures are permanently attached items included with the property (e.g., light fixtures, built-in shelving) (Correct answer)
Chattels are always included in the sale; fixtures never are
The terms have no legal significance

Correct answer: Chattels are movable items not permanently attached (e.g., curtains, portable appliances); fixtures are permanently attached items included with the property (e.g., light fixtures, built-in shelving)

Chattels are movable personal property items not permanently attached to the property (curtains, freestanding appliances, furniture). Fixtures are items permanently attached that become part of the property (built-in cabinets, light fixtures, furnaces). The agreement should clearly specify which chattels are included.

Ontario Real Estate Salesperson Licensing Exam (OREA/Humber)

The Ontario real estate salesperson licensing exam tests knowledge of real estate law, land registration, mortgage financing, contract law, and regulatory frameworks (TRESA/REBBA) required to practice as a licensed real estate salesperson in Ontario.

Questions

40 min

Time Limit

75%

To Pass

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