Humber/Ontario Real Estate Course 3 Exam Practice

A clause dependent on a lender’s mortgage approval encapsulates a:

1. Conditional stipulation

2. Contingency clause

3. Precedent condition strictly to be met

4. Subsequent condition potentially altered post-agreement

5. True precedent threshold to process transactions

6. Variable term agreed upon beforehand

The correct answer is: Precedent condition strictly to be met

The correct answer pertains to the concept of a condition that must be fulfilled before the contractual obligations can be completed. In real estate transactions, a clause that hinges on a lender’s mortgage approval is a specific type of condition that must be satisfied in order for the deal to advance. This means that the purchase or sale is contingent on securing financing from the lender, and if the mortgage approval is not granted, the buyer may have the right to withdraw from the agreement without penalty. Such clauses are essential in protecting both parties involved in the transaction, as they ensure that financing is in place before finalizing the transfer of property. The other options describe various legal and contractual concepts, but they do not specifically encapsulate the nature of a clause that specifically requires lender approval as a prior condition for moving forward with a real estate transaction. Thus, understanding the specific implications and reliance on lender approval is key to recognizing why the answer chosen is correct.