Humber/Ontario Real Estate Course 4 Exam Practice

In the case of drafting an agreement of purchase and sale for a lot that is being severed, if a clause makes the agreement conditional on severance approval under the Planning Act, what is the status of the accepted offer?

1. The accepted agreement would be invalid, as the legal description for the property does not yet formally exist.

2. The lot should not have been marketed until the severance was approved.

3. The accepted offer is valid, as the Planning Act provides that offers can be made, but a sale cannot occur until such time as the severance is approved.

4. The salesperson should have drafted an agreement of purchase and sale stating that the seller guarantees that a severance can be obtained.

5. The agreement violates local zoning laws and is therefore invalid.

6. The accepted offer is subject to verification by municipal authorities.

The correct answer is: The accepted offer is valid, as the Planning Act provides that offers can be made, but a sale cannot occur until such time as the severance is approved.

The accepted offer is valid because the Planning Act allows offers to be made on properties that are contingent upon the approval of severance. This means that while the buyer can enter into an agreement and the offer can be considered accepted, the actual sale will not be finalized until the severance is granted. In this context, the condition attached to the sale protects both the buyer and seller, ensuring that once the severance is officially approved, the transaction can proceed smoothly. The other options do not correctly represent the legal framework surrounding such a condition in real estate transactions. For instance, stating that the accepted agreement would be invalid overlooks the provisions of the Planning Act, which allows for conditional agreements. Additionally, claiming the lot should not have been marketed prior to approval does not reflect the reality that marketing can often occur under such conditional agreements. Proposing that the agreement violates local zoning laws also doesn't apply in this case, as a conditional approval based on zoning regulations does not invalidate the offer itself.