Humber/Ontario Real Estate Course 3 Exam Practice

What happens when an accepted offer contains a clause conditional on severance approval under the Planning Act?

1. The accepted agreement is invalid as the property does not have a formal legal description.

2. Marketing of the lot should have waited until severance was approved.

3. The accepted offer is valid, as the sale cannot occur until severance approval is obtained.

4. The salesperson should have included a guarantee of severance in the agreement.

5. The conditional clause must be removed for the sale to proceed.

6. The transaction can proceed only if the buyer waives all conditions.

The correct answer is: The accepted offer is valid, as the sale cannot occur until severance approval is obtained.

When an accepted offer includes a clause that is conditional on severance approval under the Planning Act, the correct understanding is that the accepted offer remains valid, but the sale cannot be finalized until severance approval is secured. This means that the transaction is contingent on the necessary approvals being granted, and it acknowledges the legal requirements associated with subdividing property or making changes to its legal description. This conditional clause is typical in real estate transactions where property intended for sale may need to undergo a formal severance process before the sale can take effect. As such, while the contract is in place, its fulfillment hinges on the approval, offering protection to both the buyer and the seller by ensuring that all legalities are satisfied before closing the deal. This adheres to the principles of conditional agreements in real estate, which allow contracts to remain valid while certain prerequisites are still pending.