Humber/Ontario Real Estate Course 3 Exam Practice

A salesperson drafted a clause for buyer concerns about water damage stating: "The Seller represents and warrants that on completion there is no water seepage or damage to the basement areas. The Parties agree that these representations and warranties shall survive and not merge on completion of this transaction." What is correct about this clause?

1. This clause is correctly worded.

2. The clause incorrectly implies warranty beyond the closing date.

3. A disclosure clause would be more appropriate.

4. Seller warranties should be limited to contractual obligations only.

5. A clause backed by a third-party inspection is required.

6. A checkbox-based clause in the agreement is recommended.

The correct answer is: The clause incorrectly implies warranty beyond the closing date.

The clause drafted by the salesperson incorrectly implies a warranty that extends beyond the closing date. In real estate transactions, warranties or representations made by the seller typically merge at closing, meaning that after the transaction is completed, the seller is generally no longer liable for any representations made during negotiations. This is rooted in the principle that upon closing, the buyer accepts the property “as is” and assumes responsibility for any issues that may arise post-closing. While it is possible to craft terms in a real estate agreement that would allow certain representations to survive closing, the language provided suggests an unconditional warranty that may lead to ongoing liability for the seller, which is not standard practice. Thus, this clause raises concerns about its enforceability and clarity regarding the duration of the warranty. In terms of other options, while a disclosure clause could be relevant, and limitations on seller warranties often exist, the core issue here lies in the potential for misleading implications about post-closing liability. Therefore, the observation about the incorrect implication of warranty beyond the closing date accurately pinpoints the problem with the clause as it is currently constructed.