Test 2

Question 1

Where a landlord refuses to allow a commercial tenant to take possession of the demised premises, the tenant may:

1. get an order for specific performance.
2. maintain an action for breach of the
   covenant of quiet enjoyment.
3. sue the landlord for damages.
4. do none of the above.

Answer 1

Option (3) is correct because there is an implied covenant on the part of a commercial landlord to let the tenant into possession of the leased premises and, if they do not do so, they will be liable for damages.

Option (1) is incorrect because a commercial tenant cannot get an order for specific performance in these circumstances due to the common law doctrine of interesse termini, which provides that no estate in land passes until the tenant takes possession.

Option (2) is incorrect because quiet enjoyment relates to the tenant’s ability to use and enjoy the premises for all usual purposes without interference or unreasonable disturbance from the landlord, which would apply once the tenant is already in possession of the premises.

Option (4) is incorrect because the tenant would be entitled to sue the landlord for damages. [Chapter 6]

Question 2

Which one of the following is FALSE with respect to the estimate of vacancy rates in the appraisal of income-producing properties?

1. Vacancy rates are expressed as a percentage of gross potential revenue.
2. Vacancy rates must be those existing at the time of the appraisal for the subject property.
3. Vacancy rates are needed because the 100% occupancy assumption of gross potential revenue is unrealistic for most properties.
4. Vacancy rates must be deducted from gross potential revenue.

Answer 2

Option (2) is correct (false) because the vacancy allowance should be determined by the long-term vacancy rates in the area; that is, the vacancies in comparable buildings modified, if necessary, by expected future trends.

Options (1), (3), and (4) are incorrect because they are true. [Chapter 23]

Question 3

When a judge in the British Columbia Supreme Court exercises equitable jurisdiction:

1. they may refuse to apply any law that is unfair.
2. they may grant such remedies as specific performance or an injunction.
3. they may refer to a code to ascertain the law on a particular matter.
4. they may do all of the above.

Answer 3

Option (2) is correct because specific performance and injunctions are equitable remedies available at the discretion of the court.

Option (1) is incorrect because a judge cannot refuse to apply a law which is unfair.

Option (3) is incorrect because in the common law system of British Columbia, judges may refer to common law and statute law, but not to a code to ascertain the law.

Option (4) is incorrect because a judge cannot refuse to apply any law which is unfair, and cannot refer to a code to ascertain the law. [Chapter 1]

Question 4

Which of the following statements is TRUE regarding GST in a transaction for the sale of real estate?

1. GST generally does not apply to the amount of the deposit until the closing date.
2. GST will always apply to reimbursements for prepayments.
3. Under the Excise Tax Act, the seller is the party who is required to pay the GST.
4. All amounts found on the statements of adjustments are subject to GST.

Answer 4

Option (1) is correct because payment of the deposit is generally not subject to GST until closing occurs, at which time the full amount of the sale price (including the deposit) becomes taxable.

Option (2) is incorrect because no GST applies to reimbursements for prepayments.

Option (3) is incorrect because under section 165(1) of the Excise Tax Act, the buyer (the “recipient”) has the obligation to pay the GST.

Option (4) is incorrect because only amounts on the statements of adjustments that are legally components of the purchase price are subject to GST. [Chapter 19]

Question 5

Which of the following correctly lists goods from the LEAST amount of shopping effort required to the MOST amount of shopping effort required?

1. Convenience goods, shopping goods, specialty goods, unsought goods
2. Shopping goods, convenience goods, unsought goods, specialty goods
3. Unsought goods, convenience goods, shopping goods, specialty goods
4. Convenience goods, unsought goods, specialty goods, shopping goods

Answer 5

Option (3) is correct because the shopping behaviour model classifies products and services based on the amount of effort that a consumer is willing to go through to obtain that product or service. In order of the amount of effort required by the consumer, from the least effort to the most effort, the goods are unsought goods, convenience goods, shopping goods, and specialty goods.

Options (1), (2), and (4) are incorrect for this reason. [Chapter 25]

Question 6

Conditions precedent are usually included in contracts of purchase and sale to protect the buyer. However, since conditions precedent can also be abused by buyers, a seller must be protected when a condition precedent is being included in a contract of purchase and sale. Which of the following additions to the contract of purchase and sale is NOT a valid method of protecting a seller’s interests?

1. A specific time within which the condition must be removed can be included in the contract of purchase and sale.
2. A clause requiring a Property Disclosure Statement to be filled out can be included in the contract of purchase and sale.
3. A covenant can be inserted stating that the buyer will use their best efforts to satisfy the specific condition.
4. A time clause can be included, which gives the seller the right to demand that the buyer remove the condition precedent within 72 hours.

Answer 6

Option (2) is correct because it is in the buyer’s (not the seller’s) best interests to incorporate a Property Disclosure Statement (PDS) into the contract of purchase and sale. Doing so incorporates the warranties made by the seller in the PDS into the contract of purchase and sale, which allows the buyer to sue the seller for breach of contract if such warranties are breached.

Option (1) is incorrect because it allows the seller to review the buyer’s progress with regards to the fulfilment of the condition and decide whether or not to extend the time limit or to terminate the agreement.

Option (3) is incorrect because if such a covenant is inserted into the contract of purchase and sale, and the buyer does not use his or her best efforts to satisfy the specific condition, the seller can sue the buyer for breach of contract.

Option (4) is incorrect because a including a 72-hour “time clause” allows the seller to demand that the buyer remove the condition precedent within 72 hours in the event that the seller receives another offer. If the buyer fails to do so, then the seller can accept the other offer.

[Chapter 11]

Question 7

Which of the following statements about periodic tenancies is TRUE?

1. Where a periodic tenancy is created as a result of a tenant overholding a fixed term commercial lease, the resulting periodic tenancy will be on all the same terms as the fixed term lease except the rent will be increased by ten percent.
2. Where a periodic tenancy is created at the end of a fixed term commercial lease of five years, the new periodic tenancy will always be for a term of five years.
3. Where a periodic commercial tenancy is created, it cannot be terminated by either party for at least one year.
4. Where a fixed-term residential tenancy expires, it will automatically convert to a month-to-month periodic tenancy unless the parties have agreed in writing that it will not do so, at the time they entered into a fixed term tenancy agreement.

Answer 7

Option (4) is correct because fixed-term residential tenancies automatically convert to a month-to-month periodic tenancy unless the parties have agreed in writing otherwise.

Option (1) is incorrect because the resulting periodic tenancy does not include a rent increase of ten percent.

Option (2) is incorrect because if the rent was expressed yearly, the new implied tenancy would be from year-to-year.

Option (3) is incorrect because a periodic commercial tenancy can be terminated by either party by giving “reasonable” notice to the other.

[Chapter 6]

Question 8

Which of the following statements regarding the income approach of appraisal is TRUE?

1. Net operating income is a measure of return on the equity portion of a property’s value.
2. Items specific to an owner or investor are included in the calculation of net operating income.
3. Net operating income does not consider depreciation, income tax, or debt service.
4. The income approach is only used for apartment buildings.

Answer 8

Option (3) is correct because it is true.

Option (1) is incorrect because the net operating income represents a return on the entire value of the property; it is not a return only on the equity portion of the property’s value.

Option (2) is incorrect because items specific to an owner or investor are NOT included in the calculation of net operating income.

Option (4) is incorrect because the income approach can be used in appraising most types of property, although it is more appropriate for properties that produce rental income, e.g., apartment buildings, office buildings, industrial space.

[Chapter 23]

Question 9

Which of the following is an example of an action that a criminal may take during the placement stage of the money-laundering process?

1. Arranging for multiple people to deposit small amounts of cash at different financial institutions
2. Transferring money through a succession of bank accounts in different jurisdictions
3. Selling real estate that was originally purchased using illicit cash to an unsuspecting buyer
4. Frequently transferring ownership of a particular property between multiple acquaintances

Answer 9

Option (1) is correct because it is an action taken during the placement stage, meant to avoid drawing the attention of financial institutions which would take note of unusually large cash deposits.

Options (2) and (4) are incorrect because they are actions taken during the layering stage of the money-laundering process, meant to increase complexity and conceal the criminal origins of the proceeds.

Option (3) is incorrect because it is an action taken during the integration stage. The sale of real estate will provide proceeds which appear to have been legally earned from investment. [Chapter 5]

Question 10

Helen is the owner and occupier of a detached 2-bedroom house in Vancouver. Which of the following statements regarding property taxes on Helen’s property is FALSE?

1. The Assessment Act is the sole source of statute law governing taxation of real property in British Columbia.
2. If Helen moves to Toronto but keeps her home in Vancouver for her mother to live in, Helen may have higher annual net property tax liability.
3. The municipality can appeal the assessment on Helen’s home if they believe the original assessed value is too low.
4. Helen has lived in her home for the last 11 years and in that time her neighbourhood has been rezoned to multi-family strata buildings. Each strata lot has a higher assessment value than Helen’s current detached home. Helen may apply for a special assessment for her home to be assessed based on its current residential use.

Answer 10

Option (1) is correct (false) because there is no single statute law governing the real property tax system in BC. The Assessment Act is one of the sources of property law, but not the only source.

Option (2) is incorrect (true) since Helen, as the registered owner, is no longer living in the Vancouver property, she is not eligible for the basic home owner grant, even though she might have been eligible for the home owner grant when she did live in her Vancouver home.

Option (3) is incorrect (true); if a property has been incorrectly assessed, anyone, including a municipal council, can file an appeal to the Property Assessment Review Panels under the Assessment Act.

Option (4) is incorrect (true); Helen is qualified for a special assessment on her property because she has lived continuously in that home for more than 10 years, and the property was zoned for a higher use.

[Chapter 19]

Question 11

A property recently sold for $378,500. The stabilized net operating income for the property was estimated to be $75,700 per annum. The estimated yield to the buyer is:

1. 20%
2. 11%
3. 5%
4. 3%

Answer 11

Find the yield to the purchaser given the stabilized net operating income and the sale price of the property.

yield-3.JPG
= $75,700 ÷ $378,500
= 0.20

The yield to the purchaser is 20%. [Chapter 23]

Question 12

Which of the following statements regarding manufactured home registration is FALSE?

1. Except as between the parties to the transfer, the transfer is not effective unless both the home itself and the transfer are registered.
2. A person must not import a manufactured home into British Columbia unless ownership of that home has been registered.
3. Upon completion of the initial registration of a manufactured home, the registrar will assign it a registration number and issue two decals bearing that number.
4. If an owner discovers that their manufactured home is not registered, they must register the home within 30 days of that discovery.

Answer 12

Option (4) is correct because a manufactured home is not required to be registered. Option (1) is incorrect because under section 7 of the Manufactured Home Act, the transfer is not effective, except between the parties to the transfer, unless both the home and the transfer are registered.

Option (2) is incorrect because the Manufactured Home Act prohibits any person from importing into British Columbia unless ownership is registered.

Option (3) is incorrect because the registrar will assign a manufactured home a registration number upon satisfactory completion of the initial registration, and issue two decals bearing that number.

[Chapter 4]

Question 13

The “subject of an appraisal” is:

1. the market value of the physical property.
2. a fee simple estate on a cash or cash-to-first-mortgage basis.
3. a subjective measure of value by an experienced appraiser.
4. the value of the legal rights of ownership vested in a particular piece of real estate.

Answer 13

Option (4) is correct because an appraisal values the legal rights of ownership vested in a particular piece of real estate.

Options (1), (2), and (3) are incorrect as they do not describe the subject of an appraisal.

[Chapter 21]

Question 14

Which of the following is NOT a significant characteristic of improved land?

1. Immobility
2. Durability of improvements
3. Indivisibility of ownership
4. Uniqueness of each parcel

Answer 14

Option (3) is correct because ownership can be divided. Options (1), (2), and (4) are significant characteristics of improved land. [Chapter 21]

Question 15

Jacob hires Choo Choo Contracting (“Choo Choo”), a general contractor, to renovate his living room to better display his model train collection. Choo Choo subcontracts Jennifer, an electrician, to install the specialized electrical connections. After Jennifer completes the work, but before she has been paid, Choo Choo suddenly goes out of business. Which of the following statements is TRUE?

1. Jennifer can file a builders lien against Jacob’s property by submitting a Claim of Lien to the Land Title Office within the lien filing period.
2. If Jacob sells his property before Jennifer files a builders lien, then any lien she files will affect Jacob, but will not affect the interests of the purchaser.
3. Jennifer cannot file a builders lien because subcontractors who were not hired directly by the owner of a property cannot file builders liens, and can only pursue the general contractor directly.
4. If Jennifer files a builders lien against Jacob’s property, she must begin a lawsuit and file a Certificate of Pending Litigation against title to the property within 21 months from the date she registered the lien in order to enforce it.

Answer 15

Option (1) is correct because a builders lien must be filed at the Land Title Office within the lien filing period, which is 45 days after certain “trigger dates” specified in the Builders Lien Act (the “BLA”).

Option (2) is incorrect because liens may still be filed after ownership of a property is transferred, as long as the lien filing deadline has not passed. The buyer may potentially be liable for any builders liens that are filed even after the completion of their purchase.

Option (3) is incorrect because subcontractors engaged by a general contractor may file builders liens.

Option (4) is incorrect because the BLA requires lien claimants to begin a lawsuit and file a CPL within one year, unless the owner serves a Form 6, in which case the lien claimant must begin a lawsuit and file a CPL within 21 days. [Chapter 4]

Question 16

The obligation to identify a client under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is triggered when:

1. a licensee receives $10,000 or more in a single cash transaction.
2. an individual purchases real estate, but not when an entity does.
3. a licensee receives funds from a bank or public body.
4. a licensee has a simple suspicion that the financial transaction is related to money laundering or a terrorist financing offence.

Answer 16

Answer explanation: Option (1) is correct because the “Know Your Client” obligation to identify a party in a real estate transaction is triggered by a large cash transaction. A large cash transaction is defined as a transaction in which a licensee receives $10,000 or more in cash in a single transaction, or multiple payments of cash that add up to $10,000 or more in a 24-hour period.

Option (2) is incorrect because licensees must identify the individual or entity when a purchase and sale of real estate occurs.

Option (3) is incorrect because while licensees who receive funds from any person in any form must identify the party, an exception exists when funds are received from a financial entity or a public body.

Option (4) is incorrect because the licensee must have reasonable grounds to suspect that the financial transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence. [Chapter 5]

Question 17

Where a deposit is paid directly to a seller on account of the purchase price:

1. the amount of the deposit will appear only on the buyer’s statement of adjustments.
2. the amount of the deposit will appear as a debit on the buyer’s statement and a credit on the seller’s statement of adjustments.
3. the amount of the deposit will appear only on the seller’s statement of adjustment.
4. the amount of the deposit will appear as a credit on the buyer’s statement and a debit on the seller’s statement of adjustments.

Answer 17

Option (4) is correct because the deposit paid directly to the seller will reduce the cash proceeds to be received by the seller upon completion, which is reflected as a debit, and will reduce the balance due from the buyer to complete, which is reflected as a credit.

Options (1) and (3) are incorrect because the amount of the deposit will appear both on the buyer’s and seller’s statements of adjustments.

Option (2) is incorrect because the amount will appear as a credit on the buyer’s statement and a debit on the seller’s statement.

[Chapter 24]

Question 18

Martha, who has been George’s landlord for the past three months, has seized George’s furniture from his rented premises and threatens to sell the furniture in order to pay George’s arrears of rent. Which one of the following statements is FALSE?

1. Martha has chosen an illegal remedy against George if the rented premises is George’s personal residence.
2. Martha has chosen a remedy called “distress” or “distraint”.
3. Martha has chosen the most effective remedy against George if the rented premises is a warehouse.
4. Martha has taken an action that can be described as a classic example of a private nuisance.

Answer 18

Option (4) is correct because private nuisance typically occurs where an owner or occupier of land unreasonably and substantially interferes with the reasonable use and enjoyment of a neighbouring property.

Option (1) is incorrect because section 26(3) of the Residential Tenancy Act abolishes the remedy of distress in residential tenancies.

Option (2) is incorrect because “distraint” or “distress” means a seizure and sale of the tenant’s personal property to recover arrears of rent.

Option (3) is incorrect because a commercial landlord can exercise the remedy of distress, which is often the most effective remedy available to the landlord. [Chapter 6]

Question 19

ABC Loan Co. (ABC) has agreed to lend $2 million dollars to Devco Ltd. in exchange for a registered first mortgage against Devco’s current residential construction project. The loan is to be paid out in four equal instalments over a five month period, but all payments are at the discretion of ABC under the “advances” clause in the mortgage. The first instalment has been paid and it is now time to pay out the second instalment. ABC has discovered that a builder’s lien has been filed against Devco’s property. You correctly advise ABC that:

1. it is obligated to pay out the second instalment to Devco; to refuse to do so would be a breach of the mortgage contract.
2. if the second instalment is advanced to Devco, the lien claimant will have priority over this and any other advances made under the mortgage after the date of registration of the lien.
3. The lien cannot take priority over ABC’s mortgage because the lien was registered after the mortgage.
4. None of the above statements is correct.

Answer 19

Option (2) is correct because the Builders Lien Act (the “BLA”) gives priority to the lien over a mortgage as of the date the lien is filed in the Land Title Office. Therefore, the lien claimant has priority over any advances made by a registered mortgage lender after the lien registration date.

Option (1) is incorrect because the advances clause states that all payments are made at the discretion of ABC, so it would not be a breach of the mortgage contract to refuse to pay the second installment.

Option (3) is incorrect because the lien takes priority over all subsequent advancements of funds due to the operation of the BLA. Option (4) is incorrect because Option (2) is correct. [Chapter 15]

Question 20

At the end of a profitable year, a business’s ownership has decided to leave all these profits in the business. Which one of the following BEST describes the effect that profitable operations have on the balance sheet of a business?

1. Owner’s equity is increased
2. Assets are increased
3. Cash is increased
4. Liabilities are decreased

Answer 20

Option (1) is correct because When a company generates a profit (positive net income), the result is an increase in the owner’s or shareholder’s equity. Option (2) is incorrect because assets may increase or decrease depending on the company’s cash flow and asset purchase/sale activity.

Option (3) is incorrect because cash may increase or decrease depending on the company’s cash flow activities.

Option (4) is incorrect because liabilities may increase or decrease depending on the company’s borrowing and repayment activities. [Chapter 8]

Question 21

Consider a building for which a strata plan was filed in August of 2011. In the event that the building is destroyed and the strata corporation passes a resolution not to rebuild, how will the proceeds of any insurance policy be distributed?

1. Equally between all owners
2. According to the unit entitlement of the individual strata lot owners
3. According to the value each strata lot bears to the total value of all lots (values determined at the inception of the project)
4. According to a conversion schedule based upon the most recent assessed values of the strata lots

Answer 21

Option (4) is correct because the Strata Property Act applies to strata plans deposited on or after July 1, 2000, replacing the Schedule of Interest on Destruction which was used under previous legislation. Section 273 and 278 of the Act provide for a “conversion schedule” or “interest schedule” that will be employed to determine the distribution of the proceeds in the event that a strata complex is destroyed and the owners decide to take the insurance money instead of rebuilding.

Option (1) is incorrect because the value of each strata lot is different and therefore it would be unfair to distribute insurance policy proceeds equally between all owners.

Options (2) and (3) are incorrect because they are based on unit entitlement, which is similar to the Schedule of Interest on Destruction, which is only used for strata plans deposited prior to July 1, 2000. [Chapter 7]

Question 22

Which of the following would NOT be included in a statement of profit and loss?

1. Depreciation
2. Rental revenue
3. Current liabilities
4. Interest on mortgage

Answer 22

Option (3) is correct because current liabilities are only listed on the balance sheet. They would not show up on the statement of profit and loss, which is also known as the income statement.

Options (1), (2), and (4) are incorrect because the income statement shows revenues and expenses, such as depreciation, rental revenue, and interest expense on a mortgage. [Chapter 8]

Question 23

RE/LAX Realty Inc. has ended the current year with a net income of $234,000. During the year, RE/LAX issued $14,000 in dividends, incurred $112,000 of operating expenses, and paid $15,000 in taxes. Which of the following MOST likely occurred on RE/LAX’s balance sheet?

1. Owners’ equity increased by $234,000.
2. Revenue decreased by $14,000.
3. Net income increased by $234,000.
4. Retained earnings increased by $220,000.

Answer 23

Retained Earnings = NOI - DIVIDENDS

Option (4) is correct because changes to retained earnings are calculated by taking the amount of net income less any dividends paid to shareholders. RE/LAX earned a net income of $234,000 and paid $14,000 in dividends; therefore, the retained earnings account on their balance sheet should increase by $220,000.

Option (1) is therefore incorrect.

Options (2) and (3) are also incorrect because net income and revenue comes from the income statement rather than the balance sheet. [Chapter 8]

Question 24

Under which one of the following conditions is the comparative approach of appraisal MOST applicable?

1. Where the volume of sales transactions is very low
2. Where buyers and sellers are well informed about current sales transactions
3. Where the property has redevelopment potential
4. Where the property is unique

Answer 24

Option (2) is correct because the comparative approach of appraisal is most appropriate where buyers and sellers are well informed about current sales transactions.

Options (1) and (3) are incorrect because the comparative approach of appraisal is applicable when there is sufficient recent sales data of similar properties, and the property does not have redevelopment potential.

Option (4) is incorrect because under the comparative approach, a property’s value should not exceed the cost of purchasing an alternative property that can provide similar utility. Therefore, it may not be appropriate if a property is unique.

[Chapter 21]

Question 25

When determining the rights of a tenant of residential premises, which of the following sources of law must the parties look to?

1. The Commercial Tenancy Act
2. The common law
3. The Rent Distress Act
4. None of the above

Answer 25

Option (2) is correct because the common law provides tenants with various rights such the right to quiet enjoyment and the right to derogation from grant.

Options (1) and (3) are incorrect because the Commercial Tenancy Act and Rent Distress Act apply to commercial, not residential, tenancies. [Chapter 6]

Question 26

Cornelius gave a life tenancy to Ruel, which did not expressly state anything about Ruel’s liability for waste. Ruel will NOT be liable to the remainderman for:

1. permissive waste.
2. voluntary waste.
3. ameliorating waste.
4. equitable waste.

Answer 26

Option (1) is correct because, at common law, a life tenant is generally under no obligation to repair or compensate for waste that occurs as a result of allowing the property to deteriorate without any positive acts (permissive waste).

Option (2) is incorrect because life tenants are liable to the remainderman for direct, positive acts that result in damage to the property beyond the use to which the life tenant is entitled (voluntary waste).

Option (3) is incorrect because a life tenant is liable for direct, positive acts which improve rather than destroy the property (ameliorating waste) – but, usually no damages can be awarded, as the property has been improved.

Option (4) is incorrect because a life tenant is liable for waste that he or she causes by flagrantly or maliciously damaging or destroying the property (equitable waste). [Chapter 3]

Question 27

Anna is interested in purchasing Elizabeth’s house. In an attempt to save money, instead of hiring a licensed home inspector, Anna thoroughly inspects Elizabeth’s house herself and does not find any defects or deficiencies. After the sale completes, Anna discovers a major issue with the foundation of the house that will cost $55,000 to fix. As a result, Anna sues Elizabeth for failing to disclose the issue with the foundation. Which of the following is TRUE?

1. Because the deficiency in the foundation is a major issue, Elizabeth is liable to Anna, even if she did not know about the defect.
2. Elizabeth would only be required to disclose this defect if Anna specifically asked about the foundation.
3. Anna’s claim against Elizabeth for failing to disclose the foundation issue will likely fail if it can be shown that any qualified home inspector would have identified the issue.
4. The foundation issue is known as a property stigma.

Answer 27

Option (3) is correct because if a qualified home inspector would have identified the issue, it would likely be classified as a patent defect, which sellers do not have an obligation to disclose. As a buyer, Anna has a duty to conduct a reasonable inspection and make reasonable inquiries to ensure that there are no patent defects, which typically involves consulting a licensed home inspector.

Option (1) is incorrect because, even for major issues, the seller is only required to disclose latent defects that he or she knows or should have reasonably known.

Option (2) is incorrect because sellers are required to disclose known latent defects that render the property dangerous or unfit for habitation, even if the buyer did not specifically ask about that defect.

Option (4) is incorrect because the defect’s impact on the property can be objectively determined at a value of $55,000 and therefore cannot be classified as a stigma.

[Chapter 10]

Question 28

ABC Loan Co. (ABC) has agreed to lend $2 million dollars to Devco Ltd. in exchange for a registered first mortgage against Devco’s current residential construction project. The loan is to be paid out in four equal instalments over a five month period, but all payments are at the discretion of ABC under the “advances” clause in the mortgage. The first instalment has been paid and it is now time to pay out the second instalment. ABC has discovered that a builder’s lien has been filed against Devco’s property. You correctly advise ABC that:

1. it is obligated to pay out the second instalment to Devco; to refuse to do so would be a breach of the mortgage contract.
2. if the second instalment is advanced to Devco, the lien claimant will have priority over this and any other advances made under the mortgage after the date of registration of the lien.
3. the lien cannot take priority over ABC’s mortgage because the lien was registered after the mortgage.
4. None of the above statements is correct.

Answer 28

Option (2) is correct because the Builders Lien Act (the “BLA”) gives priority to the lien over a mortgage as of the date the lien is filed in the Land Title Office. Therefore, the lien claimant has priority over any advances made by a registered mortgage lender after the lien registration date.

Option (1) is incorrect because the advances clause states that all payments are made at the discretion of ABC, so it would not be a breach of the mortgage contract to refuse to pay the second installment.

Option (3) is incorrect because the lien takes priority over all subsequent advancements of funds due to the operation of the BLA.

Option (4) is incorrect because Option (2) is correct. [Chapter 15]

Question 29

An appraiser is looking for comparables to use in valuing a single-family residence. Which of the following sales could provide good evidence of market value to the appraiser?

1. An identical house in the same neighbourhood as the subject property is listed at $210,000 but has not yet sold.
2. A similar house in the neighbourhood sold last month, after having been listed for two months.
3. A similar house in a similar neighbourhood was purchased by a developer who was assembling land to build a neighbourhood plaza.
4. Three weeks ago, the owner of the house next to the subject property was notified that she had been transferred to Winnipeg and was to start this week. She has now sold her home and left for Winnipeg.

Answer 29

Option (2) is the best evidence of market value due to the similarity and recency of the sale.

Option (1) is incorrect because the list price of the property is a subjective value, and appraisers are interested in the objective value that arises from a sale.

Option (3) is incorrect because it appears that the property was not at its highest and best use, and that it was purchased by a special purchaser.

Option (4) is incorrect as the rushed motivation to sell may have an unpredictable influence on the sale price. [Chapter 21]

Question 30

Adel is a trading services licensee acting for a developer who is purchasing large blocks of land in Vancouver for a large development. Adel purchases some lots in the area for himself and discloses his identity to the sellers as required by the Real Estate Services Act on those purchases. He does not mention the purchases to his principal, the developer. Shortly thereafter, Adel makes a profit on the resale of his lots due to the effects of his principal’s development on the real estate market. What is this an example of?

1. A good business deal that is perfectly acceptable at law
2. A use of information that will always, even with disclosure to the principal, be prohibited
3. A profit for which Adel must account to his principal
4. Adel’s activities are examples of both (2) and (3)

Answer 30

Option (3) is correct because there is a duty on the real estate licensee to tell his or her client everything relevant to the transaction within the agent’s knowledge. In this case, because the licensee has a personal interest in the transaction, he must disclose it to the client, but the transaction is not automatically prohibited.

Options (1), (2), and (4) are therefore incorrect. [Chapter 12]

Question 31

When using the cost approach of appraisal, cost of the improvements is more commonly determined by utilizing:

1. current replacement cost.
2. current reproduction cost.
3. current value based on historic cost.
4. actual cost.

Answer 31

Option (1) is correct because when using the cost approach of appraisal, cost of the improvements is normally determined by utilizing the current replacement cost.

Options (2), (3), and (4) are incorrect for this reason. [Chapter 22]

Question 32

In applying the income approach, depreciation is excluded from operating expenses in the calculation of net operating income. Which one of the following statements is an explanation for why depreciation is excluded?

1. Depreciation measures a loss in value that occurs despite regular repairs and maintenance.
2. Depreciation affects only the building component of the property.
3. Depreciation expense is excluded from calculations for income tax purposes.
4. The life of a building is primarily determined by economic factors rather than physical condition.

Answer 32

Option (4) is correct because depreciation is excluded in net operating income calculations because the life of a building depends on its economic durability, not its physical durability. The economic life of many buildings is so long that the amount of depreciation taken each year is not an important element in the estimation of value.

Option (1), (2), and (3) are incorrect because they do not describe reasons for excluding depreciation from net operating income. [Chapter 23]

Question 33

Which of the following statements is TRUE regarding GST in a transaction for the sale of real estate?

1. GST generally does not apply to the amount of the deposit until the closing date.
2. GST will always apply to reimbursements for prepayments.
3. Under the Excise Tax Act, the seller is the party who is required to pay the GST.
4. All amounts found on the statements of adjustments are subject to GST.

Answer 33

Option (1) is correct because payment of the deposit is generally not subject to GST until closing occurs, at which time the full amount of the sale price (including the deposit) becomes taxable.

Option (2) is incorrect because no GST applies to reimbursements for prepayments.

Option (3) is incorrect because under section 165(1) of the Excise Tax Act, the buyer (the “recipient”) has the obligation to pay the GST.

Option (4) is incorrect because only amounts on the statements of adjustments that are legally components of the purchase price are subject to GST.

[Chapter 19]

Question 34

Which of the following factors is generally NOT considered in determining whether or not profit realized on the sale of property is treated as business income rather than a capital gain for taxation purposes?

1. The intention of the owner at the time they purchased the property
2. The method of financing used to purchase the property
3. The nature of the buyer who purchased the property
4. The length of time the seller owned the property

Answer 34

Option (3) is correct because the type of buyer does not generally factor into the consideration of whether or not the profit realized on the sale of property was business income (i.e. money earned from an activity carried on for the purpose of making a profit). On the other hand, the seller’s actions and intentions are considered in the decision.

Options (1), (2), and (4) are incorrect because they are all factors which are generally considered in deciding when profit is considered business income rather than a capital gain. [Chapter 19]

Question 35

Which one of the following terms does NOT describe a type of structural method used in housing construction?

1. Log
2. Concrete block
3. Vaulted ceiling
4. Post, beam, and plank

Answer 35

Option (3) is correct because a vaulted ceiling is an architectural variation, not a structural method used in housing construction.

Options (1), (2), and (4) are incorrect because they describe types of structural methods used in housing construction.

[Chapter 20]

Question 36

Which of the following statements is TRUE regarding the “term” of a constant payment mortgage loan?

1. It necessitates the payment of an outstanding balance payment.
2. It specifies the duration of the contractual relationship.
3. It is equal to the amortization period.
4. It is shorter than the amortization period.

Answer 36

Option (2) is correct because the term of a mortgage is the contractual period for which a borrower will make constant payments to the lender.

Option (1) is incorrect because a partially amortized mortgage would not require payment of an outstanding balance at the end of the term. This is only required in the instance where a mortgage is fully amortized and the term length equals the amortization period.

Option (3) is incorrect because incorrect because the term length of a partially amortized mortgage would be less than the amortization period.

Option (4) is incorrect because the term length of a fully amortized mortgage would be equal to the amortization period.

[Chapter 14]

Question 37

Where a case is brought before a judge of the British Columbia Supreme Court, which of the following actions may be taken by the judge?

1. The judge may only exercise equitable jurisdiction in deciding the matter.
2. The judge may exercise both equitable and common law jurisdiction in deciding the matter.
3. Where common law and equity conflict, the judge must apply the common law rule.
4. The judge may not do any of the above.

Answer 37

Option (2) is correct because, in Canada, the courts of equity and the common law courts are combined, meaning that judges in all provinces (except Quebec) can apply both common law and equitable principles in deciding cases brought before them.

Option (1) is incorrect for the same reason.

Option (3) is incorrect because, where there is a conflict between common law and equitable principles, equitable principles take priority.

Option (4) is incorrect because Option (2) is true. [Chapter 1]

Question 38

Which of the following is an example of a legal non-conforming use?

1. A basement suite in an area near a university that has been zoned for single family dwellings for over 20 years; the suite has been in existence for 15 years and the municipality is aware of it
2. A 25-year-old corner grocery store that is located in an area where the original zoning was changed from multi-family to single family two years ago
3. A restaurant located in an area that was originally zoned for commercial use, but 5 years ago was changed to residential use; the restaurant is thriving and the owners are currently expanding the building to accommodate an additional 20 seats
4. A long-established factory in an area that has just been rezoned from industrial to residential

Answer 38

Option (4) is correct because the factory was in compliance with the industrial use permitted by the zoning bylaw when it was built, and so it will be permitted to continue as a legal non-conforming use after the area is rezoned to residential use.

Option (1) is incorrect because this is an example of an illegal secondary suite. The fact that the municipality is aware of the suite does not make the suite legal; rather, the city could elect to enforce its bylaws at any time.

Option (2) is incorrect because the grocery was non-compliant with the bylaw even before it was amended, so the use was never legal.

Option (3) is incorrect because an addition cannot be made to a building used for a non-conforming use unless it is required by law or permitted by a board of variance.

[Chapter 18]

Question 39

The Real Estate Services Act does NOT:

1. set out sales procedures that must be followed by all licensees in order to keep their licences.
2. empower the Superintendent of Real Estate to carry out key functions with respect to real estate licensing.
3. provide for subdivision regulation by requiring all developers to supply a disclosure statement.
4. require that all representatives and brokerages be licensed.

Answer 39

Option (3) is correct because the Real Estate Development Marketing Act, not the Real Estate Services Act, requires disclosure statements.

Options (1), (2), and (4) are incorrect because these are ways in which the Real Estate Services Act achieves its primary purpose. [Chapter 2]

Question 40

In British Columbia there are three basic requirements for an easement. Which one of the following is NOT a requirement?

1. There must be a dominant and servient tenement.
2. The easement must accommodate the dominant tenement.
3. The dominant and servient tenements must be owned by different parties.
4. The easement must be capable of forming the subject matter of a grant.

Answer 40

Option (3) is correct because there is no requirement for the dominant and servient tenements to be owned by different parties in order for an easement to be valid.

Options (1), (2), and (4) are incorrect because an easement requires that there be a dominant and servient tenement, that the easement accommodate the dominant tenement, and that the easement be capable of forming the subject matter of a grant in order to be valid.

[Chapter 3]

Question 41

On a straight line principal reduction loan, the monthly payment is which of the following?

1. It is a constant amount each month.
2. It pays interest only.
3. It pays principal only.
4. It declines over time.

Answer 41

Option (4) is correct because the monthly payment on a straight line principal reduction loan declines over time.

Options (2) and (3) are incorrect because each monthly payment includes a constant amount of the principal, plus the interest that has accrued for the month.

Options (1) is incorrect because as the outstanding balance declines over time, the amount of monthly interest declines; therefore, the total payment declines. [Chapter 13]

Question 42

Which of the following statements concerning government regulations of privately owned land is TRUE?

1. The provincial government and the federal government together have legislative authority over most privately owned land in Canada.
2. The provincial governments have delegated their authority over privately owned land to local governments, and at present they retain no authority for regulating uses of privately owned land within the provinces.
3. Local governments derive their powers to regulate privately owned land use from the provincial government and may only exercise the specific powers delegated to them.
4. In British Columbia, all local governments derive their authority to control privately owned land use from the Local Government Act.

Answer 42

Option (3) is correct because under the Constitution Act, 1867, the provincial governments were given jurisdiction over matters affecting private property and were also empowered to delegate some provincial powers to local governments.

Option (1) is incorrect because the Constitution Act, 1867 gave the provincial government jurisdiction over matters affecting private property, not the federal government.

Option (2) is incorrect because although the province has delegated most authority to regulate land use to local governments, the provincial government has maintained certain power such as through the Agricultural Land Commission Act.

Option (4) is incorrect because the Heritage Conservation Act also gives local governments the authority to impose restrictions on a private landowner’s use of their land.

[Chapter 18]

Question 43

A board of variance is a board established to:

1. Ensure that actions by municipalities are not at variance with the Local Government Act.
2. Settle boundary line disputes between private parties.
3. ensure that all non-conforming uses cease within six months after a change in a zoning bylaw.
4. permit a minor deviation from a zoning bylaw for an individual property owner.

Answer 43

Option (4) is correct because a board of variance must be established by every local government that has adopted a zoning bylaw to ensure that the bylaw does not cause undue hardship. A board of variance may grant minor variances from zoning bylaws where compliance would cause undue hardship provided that the variance would not conflict with the policies of the local government.

Option (1) is incorrect because boards of variance do not enforce municipality compliance with the Local Government Act.

Option (2) is incorrect because boards of variance do not settle boundary line disputes between private parties.

Option (3) is incorrect because legal non-conforming uses may be permitted to exist for more than six months.

[Chapter 18]

Question 44

Which of the following is NOT a characteristic of a corporation?

1. A corporation can be sued.
2. The shareholders of a corporation cannot be held responsible for more than their agreed share purchase.
3. The shares of a corporation must be held by more than one party.
4. A corporation is a taxable entity.

Answer 44

Option (3) is correct because a corporation is owned by one or more shareholders.

Option (1) is incorrect because a corporation is a separate legal entity, and so can be sued just as a natural person can be.

Option (2) is incorrect because shareholders are liable only for the value of the shares purchased or agreed to be purchased, and have no further responsibility for the debts of the company once the cost of their shares have been fully paid.

Option (4) is incorrect because a corporation has its own income tax status, and pays tax at a flat rate. [Chapter 8]

Question 45

Which of the following is an interest in land that can be valued?

1. An easement or right-of-way
2. Building scheme
3. Leasehold
4. All of the above

Answer 45

Option (4) is correct because an easement or right-of-way, building scheme, and leasehold are all interests in land that can be valued. An easement or right-of-way affects the value of the properties involved depending on the location of the easement. A building scheme, which is a type of restrictive covenant, must benefit or enhance the value of the covenantee’s land in some way. A leasehold estate has great economic value and grants important rights to land.

Options (1), (2), and (3) are incorrect because they are all interests in land that can be valued.

[Chapter 3]

EX

This passage explains that all of the following - easement or right-of-way, building scheme, and leasehold - are interests in land that can be valued. An easement or right-of-way can affect property value based on its location. A building scheme, a type of restrictive covenant, should enhance the value of the covenantee’s land. A leasehold estate holds economic value and provides significant rights to the land. Therefore, all of these options are interests in land that can be valued.

Question 46

Mimi was house-sitting for her friends Tom and Lizzie while they were on a three month photo-safari in Africa. The front porch was damaged in a freak storm that caused a tree to fall and smash the bottom two steps. Mimi didn’t have the money to hire a carpenter to repair the stairs, so she attached a large sign to the bottom of the steps reading, “DANGER KEEP OFF”. Dave, an out of work handyman who could not read English, was walking from house to house in the neighbourhood looking for casual work. He entered Tom and Lizzie’s property, and not understanding the sign started up the steps to the front door. Dave landed on the damaged step, and the weight of his body was more than the step could stand. He broke his leg in two places, and having no insurance, has run up $3,750 in medical bills. Dave now intends to begin a lawsuit. Which of the following statements is FALSE?

1.Under the Occupiers Liability Act, both Mimi and the absent owners qualify as “occupiers.”

2. Dave will be unsuccessful in his lawsuit because he willingly accepted the risk of injury when he walked up the broken steps.
3. The duty of care owed by an occupier under the Occupiers Liability Act applies in relation to the condition of the premises, activities on the premises, or the conduct of third parties on the premises.
4. A court will consider the reasonableness of the occupier’s actions in order to establish liability in this case.

Answer 46

Option (2) is correct because Dave is not trespassing while committing or intending to commit a criminal act (as he was merely looking for casual work). Dave also does not fall under any of the other enumerated categories of visitors who are deemed to have willingly assumed all the risks of entering on a property under section 3 of the Occupiers Liability Act.

Option (1) is incorrect because Mimi is an occupier since she is in “physical possession of the premises”, and the absent owners remain occupiers because they still have “responsibility for, and control over” the property. (There may be more than one occupier of the same premises as per section 1 of the Occupiers Liability Act.)

Option (3) is incorrect because section 3(2) of the Occupiers Liability Act states that the duty of care imposed on occupiers applies in relation to the: (a) condition of the premises; (b) activities on the premises; or (c) conduct of third parties on the premises.

Option (4) is incorrect because the duty of care imposed by the Occupiers Liability Act on an occupier is to take such care as in all the circumstances is reasonable to see that persons coming onto the property will be reasonably safe.

[Chapter 5]

EX

In this scenario, the false statement is: “Dave will be unsuccessful in his lawsuit because he willingly accepted the risk of injury when he walked up the broken steps.”

The reason this statement is false is because Dave, as described in the scenario, did not willingly accept the risk of injury. He was unaware of the danger due to not being able to read the sign, so he did not consciously assume the risk when he walked up the damaged steps.

Question 47

On June 1, Jem offered to buy Boo’s summer cottage for $230,000, and Boo accepted. Since the cottage was on a secluded island, neither party was aware that on May 30, the cottage was struck by lightning and completely destroyed by fire. Boo has no insurance and is seeking to enforce the contract.

Which of the following statements is TRUE?

1. This is an example of mutual mistake and Jem can rescind the contract.
2. The doctrine of frustration applies here and both parties are relieved of their future obligations under the contract.
3. A court will set aside the contract based on “non est factum” (it is not my deed) or unilateral mistake since Jem did not know the nature of the document he was signing and could not have known the cottage was no longer standing.
4. This is an example of common mistake and the contract is void.

Answer 47

1.) C’ommon, we didn’t know. 2.) Me, you, two different mistakes - mutual!

Option (4) is correct because a common mistake occurs when both parties to a contract make the same mistake about a fundamental term of the contract, such as the existence of what is being sold. In this case, the fact that the cottage had been destroyed prior to the formation of the contract was unknown to both parties. The existence of a common mistake such as this renders a contract void.

Option (1) is incorrect because a mutual mistake occurs when both parties make a fundamental mistake about the contract but each makes a different mistake. Here, the mistake was the same (the assumption that the cottage still existed).

Option (2) is incorrect because frustration occurs where a specific thing that is necessary for the performance of the contract is no longer in existence at the time for performance. In this case, the cottage was destroyed before the contract was entered into, meaning that frustration does not apply.

Option (3) is incorrect because (a) there is no indication that Jem did not understand the nature of the contract of sale; and (b) the mistake regarding the existence of the cottage was a common mistake, not a unilateral mistake since both Jem and Boo were mistaken.

[Chapter 10]

Question 48

In which of the following scenarios would the City of Vancouver’s Empty Homes Tax MOST likely apply?

1. The owner spends the summer (from June to August) living in the property as a principal residence. For the remainder of the year, she lists the property on Airbnb, exclusively for weekend trips. She does not have a hotel or B&B licence.
2. The owner lives abroad, but he rents the property for six 30-day terms throughout the year in order to avoid paying the Empty Homes Tax.
3. The owner uses the property as a principal residence, but spends up to six months of the year abroad on business trips.
4. The owners initially purchased the property as an investment, but now that their daughter has started attending university in Vancouver, she uses the property as a principal residence from September to April of the same year.

Answer 48

Option (1) is correct because the owner would have to live in the property as a principal residence for 6 months in order to avoid the Empty Homes Tax; 3 months is not sufficient. In addition, investors who use their property as a short term rental without a hotel or B&B license are subject to the EHT where the rental periods are shorter than 30 days.

Option (2) is incorrect because properties which are rented for at least 30 days in a row for a minimum of six months in aggregate over the course of a year are exempt from the EHT.

Options (3) and (4) are incorrect because the EHT does not apply to properties being used as a principal residence by the owner, a family member, or a friend for at least six months of the year.

[Chapter 19]

Question 49

Which of the following elements are NOT considered in determining appropriate rates of interest on mortgage loans?

1. The credit rating of the borrower
2. The type of property used for security
3. The amount of administrative attention required on the loan
4. The amount of property insurance

Answer 49

Option (4) is correct because the amount of property insurance does not affect the risk to the lender, and therefore will not be considered in determining the appropriate rate.

Options (1) and (2) are incorrect because the borrower’s credit rating and the type of property affect the risk of the loan to the lender.

Option (3) is incorrect because a lender will set an appropriate rate of return based on the risk of lending, as well as the amount of administrative work required.

EX.

Insurance does not directly impact the risk to the lender because property insurance primarily protects the borrower in case of damage or loss to the property. While having insurance may provide some level of protection to the lender in certain situations, such as in the event of a total loss where the insurance payout could cover the remaining loan balance, it is not a significant factor in determining the overall risk associated with the mortgage loan. Lenders primarily assess the borrower’s ability to repay the loan, the value and condition of the property used as security, and the borrower’s creditworthiness when setting the interest rate.

[Chapter 13]

Question 50

In the case of a proprietorship, which one of the following accounts represents the link between the income statement and the balance sheet?

1. Net income
2. Net assets
3. Depreciation expense
4. Retained earnings

Answer 50

Option (1) is correct because a proprietor’s net income on the income statement will increase the owner’s equity account on the balance sheet.

Option (2) is incorrect because net assets is found only on the balance sheet, and does not link to the income statement.

Option (3) is incorrect because depreciation expense is found only on the income statement, and does not link to the balance sheet.

Option (4) is incorrect, because retained earnings is a link between the income statement and the balance sheet for a corporation only, not a proprietorship.

[Chapter 8]

EX.

An income statement and a balance sheet are two important financial statements that provide different perspectives on a company’s financial health.

Income Statement:

The income statement, also known as the profit and loss statement, shows a company’s revenues and expenses over a specific period, typically a month, quarter, or year.
It shows how much money a company made (revenue) and how much it spent (expenses) to generate that revenue.
The bottom line of the income statement is the net income or net loss, which indicates whether the company made a profit or incurred a loss during the period.
The income statement helps stakeholders understand the company’s profitability and performance over a specific period.

Balance Sheet:

The balance sheet provides a snapshot of a company’s financial position at a specific point in time, usually at the end of a reporting period.
It presents the company’s assets (what it owns), liabilities (what it owes), and shareholders’ equity (the difference between assets and liabilities).
The balance sheet follows the accounting equation: Assets = Liabilities + Shareholders’ Equity, ensuring that the accounting equation remains balanced.
The balance sheet helps stakeholders understand the company’s financial strength, liquidity, and overall health by showing how assets are financed through liabilities and equity.
In summary, while the income statement focuses on a company’s performance over a period by showing revenues and expenses, the balance sheet provides a snapshot of the company’s financial position at a specific point in time by detailing its assets, liabilities, and shareholders’ equity.

Question 51

Which of the following would NOT be included in a statement of profit and loss?

1. Depreciation
2. Rental revenue
3. Current liabilities
4. Interest on mortgage

Answer 51

Option (3) is correct because current liabilities are only listed on the balance sheet. They would not show up on the statement of profit and loss, which is also known as the income statement.

Options (1), (2), and (4) are incorrect because the income statement shows revenues and expenses, such as depreciation, rental revenue, and interest expense on a mortgage.

[Chapter 8]

Question 51

On a straight line principal reduction loan, the monthly payment is which of the following?

1. It is a constant amount each month.
2. It pays interest only.
3. It pays principal only.
4. It declines over time.

Answer 51

Option (4) is correct because the monthly payment on a straight line principal reduction loan declines over time.

Options (2) and (3) are incorrect because each monthly payment includes a constant amount of the principal, plus the interest that has accrued for the month.

Options (1) is incorrect because as the outstanding balance declines over time, the amount of monthly interest declines; therefore, the total payment declines.

In a straight line principal reduction loan, the monthly payment decreases over time. This is because each monthly payment includes a fixed amount of the principal along with the interest accrued for that month. As the outstanding balance decreases over time, the amount of monthly interest also decreases, leading to a decline in the total payment amount. This means that the correct answer is that the monthly payment declines over time in this type of loan structure.

[Chapter 13]

Question 52

Which one of the following does NOT form part of the definition of market value?

1. Value is a price that is reasonably expected to prevail.
2. Value is based on the personal opinion of the value to the owner.
3. Value is determined at a particular point in time.
4. The buyer and seller must be bargaining at arm’s length.

Answer 52

Option (2) is the correct answer because this option represents the subjective value to the owner. Market value should be an objective value at a specific point in time.

Options (1), (3), and (4) all form part of the definition of market value.

EX.

In simpler terms, the definition of market value typically includes the following aspects:

The value is a price that is expected to be reasonable.
The value is determined objectively, not based on personal opinions of the owner.
The value is determined at a specific point in time.
The buyer and seller are negotiating fairly and independently (at arm’s length).

EX. OBJECTIVE, NOT SUBJECTIVE

[Chapter 21]

Question 53

The owner of an interest in real property that is located in British Columbia always has:
You Answered

1. a fee simple interest.
2. the right to use their property in any way they choose.
3. at least a 99-year lease from the Crown.
4. common law rights as modified by legislation.

Answer 53

Option (4) is correct because real property ownership in British Columbia is based on English common law property rights as modified by legislation such as the Property Law Act and the Land Title Act.

Option (1) is incorrect because an owner of an interest in real property in British Columbia may have a number of interests that fall short of a fee simple interest (e.g., life estate, estate pur autre vie, leasehold, etc.).

Option (2) is incorrect because the extent of the usage rights enjoyed by an owner of an interest in real property depends heavily upon the type of interest that the owner holds. Additionally, even an owner of real property in fee simple must still abide by various common law restrictions as well as legislative restrictions (e.g., municipalities have the power to regulate subdivision).

Option (3) is incorrect because an owner of an interest in real property in British Columbia can have an interest less than a 99-year lease from the Crown (e.g., a lease for a term of less than 99 years). [Chapter 3]

Question 54

Which of the following would likely NOT fall under the definition of a “residential complex” under the Excise Tax Act?

1. Land that is reasonably necessary for the use and enjoyment of the complex as a place of residence
2. A detached home in which a family resides
3. A condominium unit being rented out to a university student on a year-long lease
4. A home that is used for short-term rentals on Airbnb

Answer 54

Option (4) is correct because, although the definition of a residential complex includes most dwelling-units, a home which is used for short-term rentals would likely be considered a dwelling unit akin to a hotel, and thus would be excluded from the definition of a residential complex under the Excise Tax Act.

Option (1) is incorrect because the residential complex definition includes land that is reasonably necessary for the use and enjoyment of the complex as a place of residence.

Options (2) and (3) are incorrect because the definition of residential complex includes detached homes and condominiums used as dwelling houses which do not fall under the “hotel” exception.

[Chapter 19]

Question 55

Which of the following factors is generally NOT considered in determining whether or not profit realized on the sale of property is treated as business income rather than a capital gain for taxation purposes?

1. The intention of the owner at the time they purchased the property
2. The method of financing used to purchase the property
3. The nature of the buyer who purchased the property
4. The length of time the seller owned the property

Answer 55

Option (3) is correct because the type of buyer does not generally factor into the consideration of whether or not the profit realized on the sale of property was business income (i.e. money earned from an activity carried on for the purpose of making a profit). On the other hand, the seller’s actions and intentions are considered in the decision.

Options (1), (2), and (4) are incorrect because they are all factors which are generally considered in deciding when profit is considered business income rather than a capital gain.

[Chapter 19]

Question 56

Which one of the following statements is FALSE?

1. In an entirely residential condominium complex, a bylaw must be amended by a ¾ vote of the strata corporation.
2. If a rule conflicts with a bylaw, the bylaw prevails.
3. Strata corporations are prohibited from enacting rental restriction bylaws.
4. Assuming the standard bylaws have not been amended, the strata council may pass rules with respect to the safety and cleanliness of individually owned strata lots.

Answer 56

Option (4) is correct (false) because the standard bylaws do not allow the strata council to pass rules with respect to the safety and cleanliness of individually owned strata lots – they can only do so with respect to the common property.

Options (1), (2), and (3) are all incorrect because they are true statements.

[Chapter 7]

Question 57

Which one of the following items is NOT likely to be available to an appraiser valuing a commercial property?

1. Current lease conditions at the time of sale of the property
2. The amount of any registered mortgages
3. The buyer’s expected rent and expense forecasts
4. Physical characteristics of the building

Answer 57

Option (3) is correct because an appraiser will not be able to obtain the buyer’s expected rent and expense forecasts, as this is not publicly-accessible data.

Options (1), (2), and (4) are incorrect because an appraiser valuing a commercial property can obtain documents, filings, and market data outlining things such as current lease conditions at the time of sale of the property, the amount of any registered mortgages, and the physical characteristics of the building.

[Chapter 23]

Question 58

Which of the following BEST describes the main difference between a lease and a licence?

1. Licences are governed by the ordinary law of contract and confer no interest in land, whereas leases convey an interest in land.
2. Licences are oral contracts, whereas leases must be in writing pursuant to the Law and Equity Act.
3. The terminology used to describe the parties (i.e., landlord & tenant/licensor & licensee).
4. Licences provide exclusive possession, whereas leases only give the rights described in the lease document.

Answer 58

Option (1) is correct because a lease is an estate in land, while a license is a contractual right that contains no estate in land.

Option (2) is incorrect because a contract for a license may be in writing.

Option (3) is incorrect because the terminology is not the most significant difference between a lease and a license, since they contain different rights.

Option (4) is incorrect because leases provide exclusive possession, while licenses give the rights described in the license agreement.

[Chapter 6]

Question 59

Under the law of contract, which of the following is NOT an element of a misrepresentation by a seller that will entitle a buyer to rescind the contract of purchase and sale and claim damages?

1. The statement must be one of opinion.
2. The statement must have induced the buyer to enter the contract.
3. The statement must have been one on which a reasonable person would have relied.
4. The statement must have been made by the seller knowing it to be false, or recklessly as to its truth or falsehood.

Answer 59

Option (1) is correct because a misrepresentation is a false statement of fact, not of opinion.

Option (2) is incorrect because in order to be a misrepresentation that would entitle the buyer to rescind the contract, the statement must have induced the other party to enter into the contract.

Option (3) is incorrect because the statement must also be one which would have induced a reasonable person to enter into the contract.

Option (4) is incorrect because in order to claim damages, the seller must have known it was false, or have been reckless as to its truth or falsehood.

[Chapter 10]

Question 60

Which one of the following is TRUE where a comparable property is sold subject to a vendor supplied mortgage at an interest rate lower than the current market rate?

1. The comparable property may never be used as evidence of market value.
2. The comparable sale price must be adjusted upward.
3. The comparable sale price may only be used as evidence of market value.
4. The comparable sale price must be adjusted downward.

Answer 60

Option (4) is correct because when a comparable property is sold subject to a low interest rate, the comparable sale price must be adjusted downward.

Option (1) is false because the comparable property can be used as evidence of market value, as long as an adjustment is made for the “cheap” financing provided by the vendor.

Option (2) is false because the comparable sale price must be adjusted downward to compensate for the benefit provided by the below-market interest rate on the mortgage.

Option (3) is false because the price of the comparable property needs to be adjusted to its cash-equivalent price. [Chapter 22]

EX.
In this scenario, when a comparable property is sold with a vendor supplied mortgage at an interest rate lower than the current market rate, the correct action is to adjust the comparable sale price downward. This adjustment is necessary to account for the advantage provided by the below-market interest rate on the mortgage.

Question 61

What is this?

Answer 61

Polyethylene Vapour Barrier

Question 62

Which one of the following BEST describes shareholders’ equity?

1. Share capital plus retained earnings
2. Retained earnings plus dividends
3. Share capital plus retained earnings plus dividends
4. Net income less dividends

Answer 62

Option (1) is correct because the shareholders’ equity section on a corporation’s balance sheet is made up of two accounts: share capital and retained earnings.

Options (2) and (3) are incorrect because this section does not include dividends.

Option (4) is incorrect because net income is already accounted for within the retained earnings account.

[Chapter 8]

Question 63

Which of the following statements about duplicate certificates of title is TRUE?

1. Duplicate certificates of title cannot be issued if the property is subject to a mortgage.
2. Certain documents, including easements and builders liens, cannot be registered if a duplicate certificate of title has been taken out of the Land Title Office.
3. A duplicate certificate of title is automatically issued to each registered owner at the time when title is transferred.
4. The deposit of a duplicate title is considered to be the most preferable measure of security that a borrower can provide to a lender because it completely prevents the conveyance of a property.

Answer 63

Option (1) is correct because duplicate certificates of title cannot be issued if title is subject to a mortgage or an agreement for sale.

Option (2) is incorrect because while transfers, mortgages, and long-term leases cannot be registered if a duplicate title is out of the land title office, some specific documents, including easements and builders liens, can still be registered.

Option (3) is incorrect because a duplicate title will only be issued upon a written request of the registered owner.

Option (4) is incorrect because most lenders prefer a registered mortgage as security.

[Chapter 4]

EX.

When a property is subject to a mortgage, it means that the property has been used as collateral for a loan. The lender holds a legal interest in the property until the loan is fully paid off. In this case, issuing a duplicate certificate of title could potentially create confusion or complications regarding the ownership and rights to the property.

By restricting the issuance of duplicate certificates of title for properties subject to a mortgage, it helps maintain the clarity and integrity of property ownership records. It ensures that the lender’s interest in the property is properly documented and protected, and prevents any unauthorized transfers or conveyances of the property.

Question 64

When casual reference is made to the current mortgage lending rate, the common practice is to quote which of the following?

1. Effective annual interest rates
2. Nominal interest rates
3. Equivalent interest rates
4. Interest rates per compounding period

Answer 64

Option (2) is correct because when mortgage interest rates are casually referenced, it is typically a nominal interest rate.

Therefore, Options (1), (3), and (4) are incorrect. [Chapter 14]

EX.

In casual conversations about mortgage rates, people often simplify the discussion by referring to the nominal interest rate, which is the stated interest rate on the loan without taking into account compounding or other factors. This makes it easier for people to quickly understand and compare different mortgage rates without delving into more complex calculations. Effective annual interest rates, equivalent interest rates, and interest rates per compounding period involve more detailed calculations and are not commonly used in casual discussions about mortgage rates.

Question 65

Which one of the following is NOT a requirement to establish misrepresentation in contract law?

1. There must be an assertion of fact.
2. The assertion must be false.
3. The assertion must have been material to the formation of the contract.
4. The assertion must be in writing.

Answer 65

Option (4) is correct because a misrepresentation is not required to be in writing.

Options (1), (2), and (3) are incorrect because the requirements to establish misrepresentation in contract law are that it must be an assertion of fact, it must be false, and it must have been material to the formation of the contract (i.e., it must have reasonably induced the other party to enter into the contract).

[Chapter 10]

EX.

In contract law, to establish misrepresentation, there are certain requirements that need to be met. These include:

1. There must be an assertion of fact.
2. The assertion must be false.
3. The assertion must have been material to the formation of the contract, meaning it must have reasonably influenced the other party to enter into the contract.

One of the options mentioned in the question was that the assertion must be in writing. This is not a requirement for establishing misrepresentation in contract law. The key requirements are that the assertion must be a false statement of fact and must have been significant in the formation of the contract.

EX.

still be considered a misrepresentation in contract law. Negligent misrepresentation occurs when a party makes a false statement without exercising reasonable care or skill in ascertaining its accuracy. In such cases, the party making the statement may be held liable for the misrepresentation if it induced the other party to enter into the contract and caused them harm. Therefore, even if the false assertion is made negligently, it can still be considered a misrepresentation in contract law.

Question 66

Assets =

Answer 66

Liabilities + Owners Equity

Question 67

On a Balance Sheet, Current represents?

Answer 67

Assets or Liabilities used with 1 year.

Question 68

Shareholders Equity/Owners Equity =

Answer 68

Assets - Liabilities

Question 69

What are Dividends?

Answer 69

A dividend is a distribution of earnings, often quarterly, by a company to its shareholders in the form of cash or stock reinvestment.

Question 70

Andrew forged a mortgage and registered it against the fee simple title of Julia, without her knowledge. Andrew then went to the Handy Dandy finance company and sold the mortgage to them. Wendy, an employee of Handy Dandy, searched the title and ascertained that Andrew was the registered mortgagee, prior to buying the mortgage from Andrew. Subsequently, Julia learned of the mortgage when Handy Dandy sent notice to her instructing her to make her payments in the future to Handy Dandy. Julia told Handy Dandy that she had never granted a mortgage to anyone, and that she had no intention of paying them anything. Andrew is now living happily in Bolivia. Which of the following statements is TRUE?

1. Handy Dandy’s mortgage is protected under the Land Title Act, since they dealt with the registered holder of the mortgage, and relied on the register.
2. Julia will be obliged to repay the mortgage to Handy Dandy, but she will be entitled to recover that amount from the assurance fund.
3. Handy Dandy will not be able to recover the mortgage debt from Julia, but they will be able to recover the amount of the mortgage from the assurance fund.
4. Julia will be able to have Handy Dandy’s mortgage removed from her title, and Handy Dandy will have no recourse, except against Andrew.

Answer 70

Option (4) is correct because registered charges are not indefeasible, but rather only raise a rebuttable presumption that the charge is valid. An innocent purchaser of any interest less than a fee simple estate in land may not rely on the land title system as being conclusive proof of ownership.

Option (1) is incorrect because registered charges are not indefeasible.

Option (2) is incorrect because Julia is able to have the mortgage removed from her title, and so is not obliged to repay the mortgage or recover from the assurance fund.

Option (3) is incorrect because Handy Dandy is not entitled to recover the amount of the mortgage from the assurance fund because courts have found that the cost of fraud should not be borne by the public but should instead be the responsibility of the lenders themselves.

[Chapter 4]

Question 71

Which of the following statements about the principles that apply to all strata developments in British Columbia is TRUE?

1. The Strata Property Act generally does not apply on First Nation reserve land, subject to some exceptions.
2. The strata division of the Civil Resolution Tribunal conducts random audits to verify the compliance of strata corporations with strata legislation.
3. Residential strata developments that consist of 3 or fewer units are not required to hold annual general meetings.
4. Commercial and industrial strata developments are subject to a separate and enhanced subset of compliance requirements under the Strata Property Act.

Answer 71

Option (1) is correct because First Nation reserve land constitutes an exclusively federal undertaking under the Constitution Act, 1867, and therefore, provincial legislation such as the Strata Property Act (“SPA”) generally does not apply on such lands, subject to the leasehold landlord provisions in the SPA.

Option (2) is incorrect because while the owners may apply to the Civil Resolution Tribunal (CRT) to make binding decisions when a dispute arises, the CRT’s role does not involve proactive efforts such as random audits to ensure compliance.

Option (3) is incorrect because all strata corporations are required to hold annual general meetings to comply with the SPA, regardless of their size. There are, however, options for strata corporations to waive the requirement to hold an annual general meeting.

Option (4) is incorrect because the same fundamental legal principles apply to all strata developments, and commercial and industrial strata developments are not subject to enhanced compliance requirements under the SPA. [Chapter 4]

Question 72

With respect to the valuation of real property, value to the owner is most often required to be estimated in the context of:

1. churches and heritage buildings.
2. investment analysis.
3. a stable, unchanged market.
4. mortgage lending practice.

Answer 72

Option (2) is the correct answer because the value to owner cannot be used in appraisal, but may be used in investment analysis.

Options (1), (3), and (4) are incorrect for this reason.

[Chapter 21]

EX.

In the context of valuing real property, estimating the value to the owner is usually needed in the context of investment analysis. This means determining how valuable the property is to the owner in terms of investment potential.

This type of valuation is different from appraisal, where the focus is on determining the market value of the property. Value to the owner is not typically considered in appraisal but is relevant in investment analysis to assess the property’s worth to its owner in terms of investment opportunities.

Question 73

If a property owner considers that the actual value assessment of their property is too high, they must first submit their complaint to:

1. Property Assessment Review Panel.
2. the Board of Variance.
3. the Municipal Finance Authority.
4. the Property Assessment Appeal Board.

Answer 73

Option (1) is the correct answer. A Property Assessment Review Panel is the first level of appeal from a property assessment.

Option (2) is incorrect because the Board of Variance deals with exceptions to zoning bylaws.

Option (3) is incorrect because the Municipal Finance Authority levies property tax, but does not deal with assessments.

Option (4) is incorrect because the Property Assessment Appeal Board is the second level of appeal (i.e., it hears appeals from the Property Assessment Review Panel).

[Chapter 19]

Peanut - Property Assessment Review PANEL

Butter - Property Assessment Appeal BOARD

Sandwich - SUPREME court

Allergy - BC court of APPEAL

Question 74

Which of the following is an example of an equitable mortgage?

1. Mortgage of the equity of redemption
2. Agreement to execute a legal mortgage
3. Mortgage by way of deposit of the duplicate certificate of title
4. All of the above

Answer 74

In simpler terms, all the options provided are examples of equitable mortgages.

1. Mortgage of the equity of redemption: This refers to a situation where the borrower retains some interest in the property even after granting a legal mortgage.
2. Agreement to execute a legal mortgage: This means there is an agreement in place to create a legal mortgage in the future. This is considered a present equitable mortgage.
3. Mortgage by way of deposit of the duplicate certificate of title: In this case, the bank takes the duplicate certificate of title as collateral for a loan.

All of these examples demonstrate different ways in which equitable mortgages can be created.

Question 75

What is a truss?

Answer 75

A prefabricated frame component supporting the roof.

Ex. Think, trestle bridge.

Question 76

The term “fee simple”:

1. indicates something less than absolute ownership of land.
2. describes an unencumbered or clear title to land.
3. was abolished by the Land Title Act.
4. refers to an interest in land that does not amount to an estate.

Answer 76

Option (1) is correct because while a fee simple estate is the greatest estate in land, the owner of the estate in fee simple is not the absolute owner. This is because underlying title in all land in British Columbia is held by the Crown.

Option (2) is incorrect because a fee simple estate does not always have clear title.

Option (3) is incorrect because the term “fee simple” is still used today to describe the greatest interest in land, and has not been abolished.

Option (4) is incorrect because fee simple is a form of estate in land.

[Chapter 3]

Question 77

All other things being equal, shortening the contractual term on a constant level payment mortgage always has the effect of which of the following?

1. Increasing the size of the periodic payments required to fully amortize the loan
2. Increasing the size of the outstanding balance payment due at the end of the term
3. Increasing the interest rate
4. Increasing the payment frequency

Answer 77

In simpler terms, when you shorten the length of time you have to repay a mortgage with fixed monthly payments, the amount you owe at the end of the term increases. This happens because with fewer payments, less of each payment goes towards paying off the principal amount of the loan. The correct effect of shortening the term of a constant level payment mortgage is that the size of the periodic payments required to fully pay off the loan increases. This is because you have less time to spread out the repayment of the loan, so each payment needs to be larger to cover the same amount in a shorter period.

Question 78

The Law and Equity Act contains provisions for the unilateral waiver by a party of a condition precedent. Which one of the following is NOT one of the requirements?

1. The condition precedent has been satisfied.
2. The condition precedent benefits only that party to the contract.
3. The contract is capable of being performed without fulfillment of the condition precedent.
4. Where a time is stipulated for fulfillment of the condition precedent, the waiver is made before the time stipulated.

Answer 78

Option (1) is correct because satisfying the condition precedent is not a requirement for waiver under the Law and Equity Act.

Options (2), (3), and (4) are incorrect because section 54 of the Law and Equity Act requires that, in order to waive a condition precedent, the condition precedent must benefit only the party waiving it, the contract must be capable of being performed without fulfillment of the condition precedent, and the waiver must be made before the time stipulated for the condition’s fulfillment (or within a reasonable time if not specified).

[Chapter 11]

Ex.

In simpler terms, the Law and Equity Act allows for one party to give up a condition that needs to be met before the contract can proceed. The correct answer among the options provided is that the condition precedent does not have to be satisfied for it to be waived. The other requirements for waiving a condition precedent include: it must benefit only the party waiving it, the contract can still be carried out even if the condition is not met, and the waiver must be done before the specified time for the condition to be met.

Question 79

In relation to the notation of a trust on the title for a property, which of the following correctly describes the meaning of a trustee?

1. The trustee is the individual or entity in whose name the trust property is held.
2. The trustee is the individual or entity for whom the property is beneficially held.
3. The trustee is the financial institution hired by the executor of an estate to handle the transfer of title from the deceased to their heirs.
4. The trustee is the government agency that is appointed to administer the assets of all persons in British Columbia who become incapable of managing their own affairs.

Answer 79

Option (1) is correct because a trustee is an individual or entity in whose name a property is held, in trust for the benefit of another person, known as the beneficiary.

Option (2) is incorrect because the person who the property is held for the benefit of is known as the beneficiary.

Option (3) is incorrect because while an executor may seek assistance in handling a transfer of title from an estate, the title will normally be put into the name of the executor, rather than a financial institution.

Option (4) is incorrect because the family members or friends of an incapable person will typically be appointed to make decisions on their behalf, and the Public Guardian and Trustee is generally only appointed where none are available or willing to act.

[Chapter 4]

Ex.

The correct answer is: “The trustee is the individual or entity in whose name the trust property is held.” This means that the trustee holds the property in trust for the benefit of another person, who is known as the beneficiary. The trustee is responsible for managing the property and ensuring that it is used for the benefit of the beneficiary.

Question 80

A mortgage that is granted, but for procedural reasons is not registrable, is:

1. unenforceable until it is registered.
2. recognized as a present equitable mortgage.
3. only protected by filing a caveat.
4. still deemed a legal mortgage.

Answer 80

Option (2) is correct because a mortgage that is granted, but for procedural reasons is not registrable, is recognized as an equitable mortgage.

Option (1) is incorrect because this type of mortgage is an equitable mortgage, and is enforceable.

Option (3) is incorrect because while a lender should file a caveat to protect its position until the mortgage is in proper registrable form and registered on title, a caveat is not the only protection for an equitable mortgage. An equitable mortgage can also be protected by handing over to the lender the duplicate certificate of title as security for the loan.

Option (4) is incorrect because this is an equitable mortgage, not a legal mortgage.

[Chapter 15]

Ex.

In simpler terms, when a mortgage is granted but cannot be registered due to procedural issues, it is still considered a valid mortgage, known specifically as an equitable mortgage. This type of mortgage is enforceable, even without being registered. To protect their interest, the lender can file a caveat or take other measures such as holding the duplicate certificate of title as security for the loan. It is important to note that in this scenario, it is not classified as a legal mortgage, but rather an equitable mortgage.

Question 81

Which appraisal approach/method would be MOST suitable to appraise a new pulp mill in Squamish?

1. Market comparison
2. Residual
3. Income
4. Cost

Answer 81

Option (4) is correct because a pulp mill in Squamish is likely very unique without any comparable properties, so the cost approach must be used.

Options (1), (2), and (3) are incorrect because these are likely inappropriate methods to appraise such a property, given its unique character.

[Chapter 21]