Humber/Ontario Real Estate Course 4 Exam Practice

What type of clause involves obtaining mortgagee approval for assuming a mortgage?

1. Condition precedent

2. Condition subsequent

3. True condition precedent

4. True condition subsequent

5. Mortgage agreement clause

6. Preemptive condition

The correct answer is: True condition precedent

The clause that entails obtaining mortgagee approval for assuming a mortgage is accurately classified as a true condition precedent. A true condition precedent refers specifically to a condition that must be satisfied before a contract goes into effect or an obligation arises. In the context of assuming a mortgage, the lender or mortgagee's approval is a prerequisite; without it, the ability to assume the mortgage does not materialize, thus validating the necessity of this type of clause. In real estate transactions, particularly those involving mortgages, it's common for sellers or buyers to need explicit consent from the lender before an assumption occurs. This ensures that the lender maintains control over who is taking over the existing mortgage obligations, which relates directly to their risk management practices. This understanding helps reinforce the unique nature of this clause in mortgage agreements, distinguishing it from other conditions tied to the performance or continuation of the contract. Conditions subsequent, for instance, might deal with situations related to maintaining obligations after a contract has been initiated, rather than as a pre-requisite for its execution.