DISCLAIMER Copyright: 2015

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1 DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate and current information, UBC, their affiliates, authors, editors and aff (collectively, the "UBC Group") makes no claims, representations, or warranties as to accuracy, completeness, usefulness or adequacy of any of the information contained herein. Under no circumances shall the UBC Group be liable for any losses or damages whatsoever, whether in contract, tort or otherwise, from the use of, or reliance on, the information contained herein. Further, the general principles and conclusions presented in this text are subject to local, provincial, and federal laws and regulations, court cases, and any revisions of the same. This publication is sold for educational purposes only and is not intended to provide, and does not conitute, legal, accounting, or other professional advice. Professional advice should be consulted regarding every specific circumance before acting on the information presented in these materials. Copyright: 2015 by the UBC Real Eate Division, Sauder School of Business, The University of British Columbia. Printed in Canada. ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced, transcribed, modified, diributed, republished, or used in any form or by any means graphic, electronic, or mechanical, including photocopying, recording, taping, web diribution, or used in any information orage and retrieval syem without the prior written permission of the publisher.

2 2015 Exam Study Guide Detailed Solutions to Select Law Queions The law solutions for the Examination Study Guide (ESG) have been published in order to assi candidates in preparing for the Real Eate Trading Services Licensing examination. However, no attempt should be made to memorize each solution. The Real Eate Division at the University of British Columbia has made every attempt to ensure the accuracy of the solutions, as of the date of publication. However, there may be typographical errors and errors contained in the solutions will not form the basis of a successful appeal of your examination grade. Therefore, if for any reason you doubt the accuracy of the answer to any queions, you should either consult your course materials or contact the Real Eate Division udent tutorial line to confirm the current answer. Please note that solutions are not provided to every law queions. Should you require assiance on any queions that are not lied here please contact a tutor. The solutions in this guide are lied numerically. To find a specific solution in this guide you can scroll through the pages or use the Find function (Ctrl F) and typing in queion XXX. For example if you wanted to go to queion 620 you would open the search function and type in "Queion 620" and then hit find next. This will take you directly to queion 620.

3 Queion 5 Answer: 2 A real eate agency relationship depends on mutual consent, and therefore either party can terminate the relationship at will. An agent's authority can be revoked orally or by conduct, and an act of the principal that is inconsient with the continuation of authority will terminate the relationship. Answers 1 and 4 are in relation to the duty of the principal to pay real eate commission to the agent, and Answer 3 relates to the duty of disclosure by the agent to the principal. Queion 14 The expression "common law" can have several meanings. It refers to the law created by the courts, (based in either common-law or equitable principles), as opposed to atute law, (which refers to the body of law made by the federal or provincial legislatures). Answer 2 is another possible definition of "common law" as it could refer to the original set of court-developed principles that evolved separately from equitable principles. Answer 4 refers to an important concept in the common law syem, the doctrine of are decisis (which underlies the binding nature of precedent within the common law). Answer 3 does not describe a meaning of the term "common law". Queion 51 The fir regiered mortgage is a legal mortgage, while any subsequently regiered mortgage will be an equitable mortgage charging the borrower's equity of redemption. An assignment of a fir mortgage is done by the lender to a third party, who then is entitled to enforce the lender's rights directly again the borrower. Queion 96 Answer: 4 When taxes are previously paid by the seller, the buyer should reimburse the seller for the portion of the year from the adjument date onward. The reimbursement will appear as a credit on the seller s atement and a debit on the buyer s atement. Patty s share of the year s property taxes (Nov. 14 Dec. 31 = 48 days) is calculated in the following manner: 48/365 x $896 = $ Queion 97 When a new loan is received by the buyer from a mortgage company or third party, the amount appears only as a credit on the buyer s atement of adjuments, as a new loan does not affect the seller s cash proceeds of sale. The $65,000 loan will only appear on Pedro s atement, as a credit.

4 Queion 98 Buyer's Statement of Adjuments (Pamela) Purchase Price 75,900 Deposit to Lawyer * 2,000 Ring 7,500 1 Mortgage 65,000 Buyer's Share of Taxes ** Lawyer's Fee 600 Property Transfer Tax 759 *** Balance Due to Complete 2, , , * Since the deposit is being paid to the lawyer in tru, the amount will not appear on the Seller's atement of adjuments. ** (Nov Dec. 31 = 48 days) 48/365 $896 = $ *** Because the total Debits and Credits mu balance, in order to find the Balance Due to Complete, you mu fir calculate the total Debits ($77,376.83) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction. Queion 99 Answer: 2 The real eate commission is payable by Valerie and would appear as a debit only on her atement, as it does not affect Phil s balance due to complete. Queion 106 The principle of indefeasibility holds that a fee simple purchaser can rely on the title as being conclusive proof of ownership. Therefore, a fee simple purchaser can rely completely on what is shown on the regier of titles and is not required to inveigate how the owner got the title.

5 Queion 143 Seller's Statement of Adjuments (Vanessa) Purchase Price 150,000 Assumed 1 Mortgage 71,000 Unpaid and Overdue Taxes + Penalty 1,200 Buyer's Share of Taxes * 369 Commission 9,000 ** Cash Proceeds of Sale 69, , , * (Aug Dec. 31 = 123 days) 123/365 $1,095 = $369 ** Because the total Debits and Credits mu balance, in order to find the Proceeds of Sale, you mu fir calculate the total Credits ($150,369.00) and then subtract the known Debits. The result is the balance of cash that the seller can expect to receive after all outanding expenses relating to the property have been paid. Queion 144 Buyer's Statement of Adjuments (Parker) Purchase Price 150,000 Deposit to Agent 15,000 Assumed 1 Mortgage nd 2 Mortgage 71,000 34,000 Buyer's Share of Taxes * 369 Conveyancing Fees 600 Property Transfer Tax 1,500 ** Balance Due to Complete 32, , , * (Aug Dec. 31 = 123 days) 123/365 $1,095 = $369 ** Because the total Debits and Credits mu balance, in order to find the Balance Due to Complete, you mu fir calculate the total Debits ($152,469.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction.

6 Queion 242 Answer: 2 When taxes are previously paid by the seller, the buyer should reimburse the seller for the portion of the year from the adjument date onward. The reimbursement will appear as a credit on the seller s atement and a debit on the buyer s atement. Queion 243 Answer: 4 Buyer's Statement of Adjuments Purchase Price 175,000 Deposit 20,000 Legal Fees for Conveyance 384 Buyer's Share of Taxes * Property Transfer Tax 1,750 Balance Due to Complete 157, , , * (July 28 - Dec. 31 = 157 days) 157/365 $516 = $ Queion 244 When taxes are previously paid by the seller, the buyer should reimburse the seller for the portion of the year from the adjument date onward. The buyer s share of the year s property taxes (Jul. 28 Dec. 31 = 157 days) is calculated in the following manner: 157/365 x $516 = $ This amount will appear as a credit on the seller s atement and a debit on the buyer s atement of adjuments.

7 Queion 249 Answer: 4 Seller's Statement of Adjuments Purchase Price 120,000 Commission 6,000 Buyer's Share of Taxes * 372 Cash Proceeds of Sale 114, , , * (Aug Dec. 31 = 124 days) 124/365 $1,095 = $372 Queion 343 Seller's Statement of Adjuments Purchase Price 195,000 1 Mortgage 71,000 Seller's Share of Taxes * Commission 11,700 Cash Proceeds of Sale 111, , , * (Jan. 1 - June 29 = 180 days) 180/365 $1,500 = $ Queion 385 Answer: 2 Answer 1 is true, as the principle of indefeasibility protects an innocent fee simple purchaser who deals with the regiered owner. Answer 3 is true since the rightful owner may lose the land to an innocent purchaser who dealt with the regiered (forged) owner. Answer 4 is true as one of the exceptions to the principle of indefeasibility applies to leases under three years. Answer 2 is false, as regiered charges are not indefeasible.

8 Queion 507 Answer: 4 Buyer's Statement of Adjuments (Mr. Jones) Purchase Price 200,000 Deposit 15,000 Legal Fees 350 Buyer's Share of Taxes 800 Property Transfer Tax 2,000 * Balance Due to Complete 188, , , * Because the total Debits and Credits mu balance, in order to find the Balance Due to Complete, you mu fir calculate the total Debits ($203,150.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction. Queion 520 This falls under Disclosure of Defects in Chapter 10. Since this defect was discoverable using ordinary diligence, it is a patent defect and not a latent defect. As a patent defect, the rule is that in mo cases the buyer assumes the risk (caveat emptor - "let the buyer beware"). Therefore, neither Garfield nor Madison are liable for failing to bring the defect to Tyler's attention. Queion 575 Answer: 2 Charlotte made an offer and Denis made a counter-offer. A counter-offer does terminate the original contract, however Charlotte replied, "cannot reduce price", which amounts to a renewal of her original offer. Charlotte did have two other options; she could have accepted the counter-offer or rejected the counter-offer and ended the dealings. However, Charlotte inead decided to reject the counter-offer and renew her original offer in ating, "cannot reduce price". Therefore, Denis was entitled to accept her renewed original offer. This queion is drawn from the example of the Livingone v. Evans case.

9 Queion 577 This queion requires knowledge of the rules regarding the disclosure of defects. The connection of the house to a septic tank is a fact which is relevant to the buyer in determining whether to enter the contract, and it cannot be discovered upon reasonable inspection of the property. This is a latent defect and mu be disclosed to the buyer. Had this been a patent defect and visible upon careful inspection, the buyer would assume the risk and the principle of caveat emptor ("let the buyer beware") would apply. The Hedley Byrne principle refers to negligent misrepresentation, and only applies when a false atement has been made to the buyer. Queion 580 One of the undesirable aspects of the common law pertaining to contracts is that when no mention of the ate of title is made in the contract beneficial ownership, and therefore risk of loss or damage, passes to the buyer at the time the contract is signed. As explained under "Contract of Purchase and Sale" in Chapter 11 of the Course Manual, the andard form Contract of Purchase and Sale in BC expressly alters this common law presumption. Queion 620 When taxes are previously paid by the seller, the buyer should reimburse the seller for that portion of the year from the adjument date onward. Penny s share of the year s property taxes (Dec. 28 Dec. 31 = 4 days) is calculated in the following manner: 4/365 x $2,300 = $ This amount will appear as a debit on Penny s atement of adjuments. Late payment penalties are not reflected on the buyer s atement of adjuments because only the seller was liable to pay the property taxes and failed to do so in a timely manner.

10 Queion 621 Seller's Statement of Adjuments (Vivian) Purchase Price 140,000 Commission 8,400 Take Back Mortgage 8,000 Outanding Mortgage 12,000 Buyer's Share of Taxes * Penalty 85 ** Cash Proceeds of Sale 111, , , * (Dec Dec. 31 = 4 days) 4/365 $2,300 = $25.21 ** Because the total Debits and Credits mu balance, in order to find the Proceeds of Sale, you mu fir calculate the total Credits ($140,025.21) and then subtract the known Debits. The result is the balance of cash that the seller can expect to receive after all outanding expenses relating to the property have been paid. Queion 622 Answer: 2 When a deposit is paid to a real eate brokerage, the amount of the deposit will be reflected on the buyer s atement of adjuments as a credit. It will not appear on the seller s atement of adjuments. Queion 675 Since the life tenancy did not expressly refer to liability for wae, one mu examine the common law to determine the applicable categories of wae. Under the section "Rights and Obligations of a Life Tenant", in Chapter 3 of the Course Manual, we find that the life tenant may be liable for voluntary, amelioration, and equitable wae. However, a life tenant is generally under no obligation to repair or compensate for permissive wae. Therefore, Ruel will not be liable for permissive wae.

11 Queion 696 Seller's Statement of Adjuments Purchase Price 155,000 Assumption of 1 Mortgage 71,000 Unpaid and Overdue Taxes + Penalty 1,200 Buyer's Share of Taxes * 369 Commission 9,300 ** Cash Proceeds of Sale 73, , , * (Aug Dec. 31 = 123 days) 123/365 $1,095 = $369 ** Because the total Debits and Credits mu balance, in order to find the Proceeds of Sale, you mu fir calculate the total Credits ($155,369.00) and then subtract the known Debits. The result is the balance of cash that the seller can expect to receive after all outanding expenses relating to the property have been paid. Queion 697 Answer: 4 Buyer's Statement of Adjuments Purchase Price 155,000 Deposit 5,000 1 Mortgage 71,000 nd 2 Mortgage 34,000 Buyer's Share of Taxes * 369 Legal Fees 600 Property Transfer Tax 1,550 ** Balance Due to Complete 47, , , * (Aug Dec. 31 = 123 days) 123/365 $1,095 = $369 ** Because the total Debits and Credits mu balance, in order to find the Balance Due to Complete, you mu fir calculate the total Debits ($157,519.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction.

12 Queion 731 The buyer assumes the taxes from the adjument date on. The buyer also accepts responsibility for the date of adjument. Since the date of adjument is January 1, the buyer will assume the taxes for the year and therefore no adjument is necessary. Part 2 is incorrect because risk passes to the purchaser as of the day of completion. The day of completion is Augu 1, 1999 and if Pat were to insure the property as of May 1, 2000, this would obviously be too late. The optimal time is to have the risk pass the day prior to completion, or in this case, Augu 30. Queion 805 This queion requires a diinction be made between equity (equitable jurisdiction and remedies) and the common law. Statement A is true, as the rules of equity were a response to rigid rules and the frequently inequitable results that occurred. Statement B is false, since the court will usually apply equitable principles when a conflict exis with the common law. However, Statement C is also false, since parties to an action cannot demand an equitable remedy as a "right", as equitable remedies are awarded at the court's discretion. Finally, examples of equitable remedies include specific performance and injunctions, but damages are a legal remedy and are awarded solely under the common law. Queion 818 Answer: 4 When taxes are not due by the date of adjument, the seller s share from Jan. 1 to the adjument date, but not including the adjument date day, will appear as a debit on the seller s atement, and the same amount will be credited to the purchaser, because he or she will be liable to pay the whole amount when the taxes are due. When the amount of tax is not yet known, it mu be eimated. Fir, calculate the eimated amount of tax payable for the current year: $1,324 X 1.10 = $1, Second, use the eimated amount of tax payable to calculate the seller s share of eimated taxes from Jan. 1 to the adjument date: 48/365 x $1, = $

13 Queion 819 Answer: 2 Seller's Statement of Adjuments (Anya) Purchase Price 448,000 Commission 10,220 Seller's Share of Taxes * Assumption of 1 Mortgage 123,544 nd Discharge of 2 Mortgage 23,000 nd Legal Fees (discharge of 2 75 ** Cash Proceeds of Sale 290, , , * $1, = $1, (Jan. 1 - Feb. 17 = 48 days) 48/365 $1, = $ ** Because the total Debits and Credits mu balance, in order to find the Proceeds of Sale, you mu fir calculate the total Credits ($448,000.00) and then subtract the known Debits. The result is the balance of cash that the seller can expect to receive after all outanding expenses relating to the property have been paid.

14 Queion 820 Buyer's Statement of Adjuments (Kenny) Purchase Price 448,000 Deposit to Notary 25,000 Seller's Share of Taxes * Assumed (1 ) Mortgage 123,544 nd 2 Mortgage 98,000 Conveyancing Fee 700 Mortgage Preparation 250 Property Transfer Tax 6,960 ** Balance Due to Complete 209, , , * $1, = $1, (Jan. 1 - Feb. 17 = 48 days) 48/365 $1, = $ ** Because the total Debits and Credits mu balance, in order to find the Balance Due to Complete, you mu fir calculate the total Debits ($455,910.00) and then subtract the known Credits. The result is the balance due from the buyer to complete the transaction. Queion 861 This atement is an agreement for sale. The usual form is that the buyer agrees to pay monthly payments of principal and intere, and in exchange for the promise of payments, the seller grants possession of the property to the buyer, with title transferring upon final payment. An equitable mortgage generally refers to a subsequently regiered mortgage, after the fir legal mortgage, charging the borrower's equity of redemption. Under an agreement for sale, the seller remains on title as regiered owner, whereas with an equitable mortgage, the borrower remains on title and the mortgage is regiered as a charge. An agreement of purchase and sale is generally regarded as the contract (usually andard form) between the buyer and seller. A disguised form of mortgage is usually found when the main purpose of a "sale" of land was to offer land as security for a loan. Queion 972 Statement A is incorrect since it is the land which mu benefit from an easement and not merely the landowner. Statement B is false since the granting of an easement does not convey ownership, it merely conveys a privilege or right of use. Statement D is false because while a tenant with a leasehold intere may grant an easement, the tenant may only grant the easement for the term of the lease.

15 Queion 985 Statement 1 is false since a rerictive covenant mu be a negative obligation; however, it does not matter whether the wording is positive or negative. The other three options are true.