Assignment 7 (Chapter 10)

Question 1

Legal Capacity

Answer 1

The ability of a person to enter into a legally binding contract, typically requiring that the person is of sound mind and of legal age.

Question 2

Consideration

Answer 2

Something of value exchanged between parties in a contract that is necessary for the contract to be enforceable.

Question 3

Past Consideration

Answer 3

A promise made in return for actions or events that have already taken place, which does not constitute valid consideration for a new contract.

Question 4

Binding Contract

Answer 4

An agreement between parties that is enforceable by law, requiring offer, acceptance, consideration, and mutual intent to be bound.

Question 5

Ethical Principles

Answer 5

The foundational guidelines that inform and shape ethical behavior, such as honesty, integrity, and fairness.

Question 6

Trust in Profession

Answer 6

The confidence placed by the public in professionals, based on their adherence to ethical principles and standards.

Question 7

Headline Test

Answer 7

A self-evaluation method where one considers how their decision or action would look if it were reported as a headline in a newspaper.

Question 8

Ethical Decision Making

Answer 8

The process of evaluating and choosing among alternatives in a manner consistent with ethical principles.

Question 9

Net Income

Answer 9

The total profit of a company after all expenses, including taxes and costs, have been deducted from total revenue.

Question 10

Depreciation Expense

Answer 10

The allocation of the cost of a tangible asset over its useful life, representing the wear and tear on the asset.

Question 11

Legal Non-Conforming Use

Answer 11

A use of land that was lawful prior to the implementation of a new zoning bylaw but does not conform to the new bylaw. This use may continue but cannot be expanded or changed.

Question 12

Depreciation Report

Answer 12

A report required for strata corporations outlining the anticipated maintenance, repair, and replacement costs over time.

Question 13

Fiduciary Duty

Answer 13

The obligation of a real estate licensee to act in the best interest of their client, putting the client’s interests ahead of their own.

Question 14

Duty of Care

Answer 14

The obligation to act with the level of care, diligence, and skill expected of a reasonably prudent person in similar circumstances.

Question 15

Gross Lease

Answer 15

A lease agreement where the tenant pays a fixed amount of rent and the landlord covers all property expenses, such as maintenance, insurance, and taxes.

Question 16

Net Lease

Answer 16

A lease where the tenant pays a base rent plus a portion of the property’s operating expenses, such as taxes, insurance, and maintenance.

Question 17

Real Estate Investment Trust (REIT)

Answer 17

A company that owns, operates, or finances income-producing real estate, allowing investors to pool their capital to buy shares in a portfolio of properties.

Question 18

Equity REIT

Answer 18

A type of REIT that owns and operates income-generating real estate, deriving revenue primarily from rental income.

Question 19

Interest Act (Canada)

Answer 19

Legislation that governs the calculation and disclosure of interest rates in Canada, including provisions for prepayment of mortgages.

Question 20

Prepayment Privilege

Answer 20

The ability of a borrower to pay off a mortgage in full or in part before the maturity date without penalty, as allowed under certain conditions in the Interest Act.

Question 21

Leasehold Estate

Answer 21

An interest in real property that grants the lessee (tenant) the right to use and occupy the property for a specific period, as stipulated in the lease agreement.

Question 22

Freehold Estate

Answer 22

An estate in land in which ownership is for an indefinite period, and the owner has full control over the property, subject to any restrictions or liens.

Question 23

Amortization

Answer 23

The process of gradually paying off a debt over a period of time through regular payments that cover both principal and interest.

Question 24

Balloon Payment

Answer 24

A large payment due at the end of a loan term, representing the remaining balance of the loan that was not amortized over the loan period.

Question 25

Easement

Answer 25

A non-possessory right to use or enter someone else’s land for a specific purpose, such as utilities or access. Easements can affect property value and use.

Question 26

Encroachment

Answer 26

An intrusion onto another person’s property, such as a fence or building that extends beyond the property line. Encroachments can lead to legal disputes and affect property rights.

Question 27

Vendor Take-Back Mortgage

Answer 27

A type of mortgage where the seller of a property provides financing to the buyer. This is often used when the buyer cannot obtain a loan from a bank.

Question 28

Mortgage Assumption

Answer 28

The process where a new buyer takes over the mortgage obligations of the existing borrower.

Question 29

Collateral Advantage

Answer 29

A benefit or advantage that a lender requires in addition to the repayment of the loan, which must be connected to the loan and not extend beyond the term of the loan to be enforceable.

Question 30

Restraint of Trade

Answer 30

A clause in a contract that restricts a party’s ability to engage in business or trade, often found unenforceable if it is too restrictive.

Question 31

Duty to Act Honestly

Answer 31

The obligation of a licensee to be honest in all their dealings with clients, customers, and other parties. This duty extends to both clients and non-clients.

Question 32

Reasonable Care and Skill

Answer 32

The standard of care that a licensee is expected to provide, which must match that of a competent and prudent professional.

Question 33

Sales Clause

Answer 33

A clause in a mortgage agreement that gives the lender discretion to approve or deny the assumption of the mortgage by a new buyer.

Question 34

Assumable Mortgage

Answer 34

A mortgage that can be transferred from the current owner to a buyer, typically with the lender’s approval.

Question 35

Reasonable Grounds to Suspect

Answer 35

The standard for forming a suspicion based on factual context and indicators, used in identifying potential money laundering activities.

Question 36

Money Laundering Indicators

Answer 36

Red flags or warning signs that suggest potential money laundering activities, such as unusual transaction patterns or client behavior.

Question 37

Due Diligence

Answer 37

The reasonable steps taken by a person to avoid committing a tort or offense, including the investigation and verification of information before entering into an agreement or transaction.

Question 38

Ethical Responsibilities

Answer 38

The moral obligations that real estate professionals have to act with integrity, honesty, and fairness in their dealings with clients, customers, and other parties.

Question 39

Agency Relationship

Answer 39

The relationship between a principal and an agent, in which the agent is authorized to act on behalf of the principal in business transactions.

Question 40

Principal-Agent Relationship

Answer 40

The legal relationship in which one party (the agent) is authorized to act on behalf of another party (the principal) in business matters.