Humber/Ontario Real Estate Course 4 Exam Practice

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For what purpose is the right of first refusal in tenancy agreements used in leasehold communities?

To ensure tenants must sell to the landlord if they decide to leave.
To allow landlords to match third-party purchase offers on tenant homes.
To guarantee landlords have the first option to buy any property in the community.
To enable landlords to independently negotiate new rental contracts.

The correct answer is: To allow landlords to match third-party purchase offers on tenant homes.

The right of first refusal in tenancy agreements is primarily used to allow landlords the opportunity to match third-party purchase offers on tenant homes. This provision is beneficial for landlords as it protects their investment by giving them the chance to purchase a property before it is sold to an outside buyer. In leasehold communities, where tenants may wish to sell or vacate their homes, this arrangement helps maintain stability and continuity within the community by potentially keeping ownership within the landlord's control. While options addressing the obligation to sell to the landlord or the ability of landlords to negotiate new rental contracts do exist, they do not accurately represent the intent or function of the right of first refusal. This right specifically pertains to purchase offers rather than rental agreements or mandatory sale conditions, making the ability to match third-party offers the most relevant aspect in the context of leasehold communities.