Humber/Ontario Real Estate Course 4 Exam Practice

If Salesperson Brown drafts an offer for a buyer to assume an existing mortgage, which is then accepted, and includes a waiver provision for the buyer if the mortgagee does not agree, what is correct?

1. The waiver is the best approach as it allows the buyer to obtain the property regardless of the mortgagee's agreement.

2. The mortgagee must agree to the assumption; the waiver has no legal effect.

3. Brown cannot include a waiver; the mortgage clause cannot be waived at the buyer's discretion.

4. Including the waiver protects the buyer's interest if the mortgage clause is not fulfilled.

The correct answer is: Brown cannot include a waiver; the mortgage clause cannot be waived at the buyer's discretion.

When a buyer assumes an existing mortgage, the original lender, or mortgagee, must typically agree to the assumption for it to be legally binding. This is because the mortgage agreement contains specific conditions and obligations that the buyer will be taking on. By including a waiver provision in the offer, it suggests that the buyer can proceed with the transaction without the necessity of obtaining the mortgagee's consent, which is not normally permitted. Essentially, a waiver related to the mortgage assumption would negate the need for buyer protections typically available in these transactions, putting them at risk if the mortgagee ultimately refuses the assumption. Thus, including such a waiver could mislead the buyer into thinking they could bypass a necessary requirement, which could lead to complications down the line. The mortgage clause, which involves the mortgagee's agreement, is a crucial element of the transaction that cannot simply be waived at the buyer's discretion. This ensures that all parties are held accountable to the legal requirements surrounding the mortgage agreement, reinforcing the integrity of the transaction and protecting the interests of both the buyer and the lender.