Humber/Ontario Real Estate Course 3 Exam Practice

In regard to the use of a home for the production of illegal substances and the agreement of purchase and sale, which statement is correct?

1. The agreement includes a pre-printed clause stating that the seller represents and warrants that the home has not been used for illegal substance production during occupancy.

2. The agreement includes a pre-printed clause stating that the property either was or was not used for the production of illegal substances. The buyer and seller have to initial as applicable.

3. A clause can be inserted stating that if the property was used for illegal substance production, the seller makes no representations regarding repairs and sells the property as-is.

4. If the house has been used for illegal substance production, a written disclosure in the Title Search clause is required.

5. The agreement requires the seller to disclose any history of illegal substance production upon listing the property.

6. Any property that has been used for illegal substance production must undergo a government-approved inspection before sale.

The correct answer is: A clause can be inserted stating that if the property was used for illegal substance production, the seller makes no representations regarding repairs and sells the property as-is.

The statement regarding the insertion of a clause that specifies if the property was used for illegal substance production and clarifies that the seller makes no representations regarding repairs while selling the property as-is accurately reflects the practices typically advisable in real estate transactions involving properties with a questionable history. In situations where a home has been involved in illegal activities, the seller's ability to provide warranties about the condition of the property can become problematic. Hence, an as-is sale protects the seller from liabilities related to potential issues that could arise from prior use, as they are not making any guarantees. Buyers should be made aware of such conditions so they can make informed decisions based on their own assessments and due diligence. Other choices present different scenarios that may not adhere to the legal framework under which real estate transactions operate. For instance, many agreements do not universally include clauses that automatically represent the history of property usage without specific acknowledgment or disclosure from the seller. There’s also no standard requirement that necessitates government inspection solely due to past illegal activities before sale. Instead, the onus may be on the buyer to conduct inspections to ascertain the current state of the property independently.