Humber/Ontario Real Estate Course 4 Exam Practice

Which clause ensures protection against potential future financial obligations due to title issues?

1. Hold Harmless Clause

2. Indemnity Clause

3. Mortgage Clause

4. Title Insurance Clause

5. Warranty Deed Clause

6. Assignment Clause

The correct answer is: Hold Harmless Clause

The clause that ensures protection against potential future financial obligations due to title issues is known as the Title Insurance Clause. This clause typically pertains to the insurance that protects the buyer and lender from losses arising from defects in the title of the property, such as liens, encumbrances, or other issues that could arise post-purchase. Title insurance is essential because it provides coverage for legal fees, losses from disputes, and unforeseen claims against the property that may occur due to issues not discovered during the initial title search. In this way, the Title Insurance Clause plays a critical role in safeguarding the financial interests of the buyer and lender against title-related problems that might surface after the sale is finalized. The other clauses mentioned serve different purposes. For instance, an Indemnity Clause generally protects one party from losses caused by the actions of another, whereas a Hold Harmless Clause has a similar function related to liability issues. A Mortgage Clause relates to lien positions and obligations regarding the mortgaged property, while a Warranty Deed Clause provides assurances about the ownership and condition of the title at the time of transfer. Finally, an Assignment Clause deals with the rights to transfer contractual obligations rather than the title issues themselves.