PREX-1060A Exam 4: Invigilated Theory Exam Questions and Answers

A consultant in a financial institution

A zoning specialist in the city's planning department

An appraiser with Accredited Appraiser Canadian Institute (AACI) designation

A legal consultant who specializes in evicting residential tenants

Bay depth is an important consideration when determining the layout of an industrial process.

Loading docks are only used to off-load products or raw materials.

Flat roofs are designed to be flat to hold water.

Floor load refers to the weight of the building during construction.

A clause for the buyer to review the leases only after all conditions have been waived and accepted

A clause to confirm the remuneration payable to the brokerages will be as stated in the seller representation agreement

A clause for the seller to disclose all information verbally without providing supporting documents to verify that information; documents to be provided on closing

A clause for the buyer to have the right to negotiate for specialized restaurant equipment that is not included in the property purchase price

Use the R/U factor to calculate the figures

Use a laser measuring tool to take the measurements and use the R/U factor to calculate the figures

Recommend that the landlord obtain the professional services of a measuring company to obtain the figures

Use a laser measuring tool to take the measurements

An ESA is intended to determine if a property has been contaminated or is facing any environmental threats.

Every new commercial property must undergo an ESA prior to construction.

ESAs are regulated under the Canadian Environmental Protection Act.

Local building departments use ESAs as the basis for changes to municipal zoning bylaws.

Energy efficiency

Innovative elements

Sustainability

Vacancy rate

Businesses need to transport materials to and from the site.

Outgoing trucks could have difficulty if there is a lack of on-site trailer storage.

Some trucks may need to park on the property overnight.

Incoming trucks could have difficulty if there is a lack of on-site trailer storage.

The types of buildings that are permitted in a location, their height, and how they may be used

Lot dimensions and parking requirements

The amount of rent a building may generate

Where buildings and other structures may be located

Gantry crane

Jib crane

Bridge crane

Overhead crane

The salesperson should clearly list all rental items and service contracts, as these will not be included in the purchase price of the real property being purchased.

The salesperson should specifically exclude all fixtures that are not a part of the transaction since fixtures are considered a part of the property and are normally included in the purchase price.

The salesperson should clearly describe and list the fixtures and chattels in the Agreement of Purchase and Sale and mark each item as an exclusion or inclusion.

The salesperson should specifically exclude all chattels that are not a part of the transaction since chattels are considered a part of the property and are normally included in the purchase price.

Use a laser measuring device to take the measurements.

Recommend the services of third-party professionals to measure it.

Tell the seller the usable size is 80 percent of the rentable size.

Add a disclaimer to protect the seller from any discrepancy.

Create a business plan

Gather, organize, and verify all pertinent information

Identify third-party professionals

Estimate time frames required for due diligence and other offer conditions

The buyer can use the same amendment to ask for a change of the closing date.

The buyer can still waive the condition before the expiry date if the seller refuses to sign the amendment, provided there is a waiver provision in the condition.

The salesperson should prepare the amendment with midnight, May 17 as the irrevocable time.

To play it safe, the salesperson should amend the condition with May 18 as the expiry date.

Quick turnaround time to free up capital when needed is an advantage of owning commercial real estate.

Limited equity investment while gaining leverage through financing is an advantage of owning commercial real estate.

Potential to recover capital through refinancing is an advantage of owning commercial real estate.

Potential for tax sheltering possibilities for the investor is an advantage of owning commercial real estate.

The salesperson should explain that to achieve capital growth, the client should be a long-term investor.

The salesperson should explain that a better return on investment will be achieved with rising interest rates.

The salesperson should explain that making a commercial property investment is an easy and smooth process that provides good short-term gains.

The salesperson should explain that the client should always consider being a short-term investor.

They carry on a farming business generating a net profit of $100,000.

They have a valid harmonized sales tax (HST) registration number under the Excise Tax Act.

They are Canadian citizens or permanent residents of Canada.

They submit the appropriate application semi-annually.

The relative lack of liquidity

The relative lack of capital growth during the holdover period

The fact that rent, leased space, and building size are fixed

The insufficiency of cash flow during the holding period

Every commercial property, whether an office building, an industrial property, a retail property, or land, has a single source of revenue, which is the base rent.

Shopping centres with more than 150 stores typically have only two types of rental revenues to cover all the operating expenses of the property: base rent and additional rent.

Retail commercial property owners have three types of potential rental income: base rent, additional rent, and percentage rent.

Commercial office owners have only one type of potential rental income, which is percentage rent, as the owner themselves pay for the operating expenses of the property.

The salesperson should explain that clear span refers to the amount of floor area that is clear of interference from columns and walls.

The salesperson should explain that clear span refers to the unobstructed vertical distance from the floor to the bottom of the lowest ceiling or roof component.

The salesperson should explain that clear span refers to the unobstructed vertical distance from the floor to the bottom of the highest point of the ceiling or roof component.

The salesperson should explain that clear span refers to the total amount of floor area in the space, including the space that is occupied between columns and walls.

The cost of relocating is low.

A similar building can be bought at a low price.

The existing building no longer provides the highest and best use of the site.

A redevelopment will seriously disrupt the current operation.

The Board can order farmers to cease practices that cause disturbances if they are not considered to be normal farm practices.

The Board can conduct hearings that are heard by a minimum of five board members.

The Board can order farmers to modify practices for consistency with normal farm practices.

The Board can dismiss complaints if the disturbances are the result of normal farm practices.

The types of buildings that are permitted in a location, their height, and how they may be used

Lot dimensions and parking requirements

The amount of rent a building may generate

Where buildings and other structures may be located

Unaudited financial statements are prepared by Chartered Professional Accountants; audited financial statements are prepared by senior Chartered Professional Accountants.

Audited financial statements provide an accurate picture of the financial status of a business; unaudited financial statements may only contain partially reviewed information.

Unaudited financial statements are prepared by accounting students; audited financial statements are completed by accountants who have received their professional designation.

Audited financial statements comply with Generally Accepted Accounting Principles (GAAP); unaudited financial statements do not comply with GAAP.

Power stations

Petroleum storage and distribution sites

Chemical manufacturers

Computer training institute

There may be minimum width and depth requirements for parking spaces.

Parking may be impacted by zoning requirements.

Parking may be impacted by the municipality’s parking bylaw.

Required parking for persons with disabilities is usually fixed as a ratio based on the number of disabled persons in the community.

Ensuring inspections are being carried out as required

Contacting contractors for quotes for repairing or replacing equipment

Reviewing whether the technical components have been recently replaced or upgraded

Learning what types of equipment are in the building and having a general understanding of theirage and condition

The retail tenant's rentable area would be 3,482 sq. ft.

The retail tenant's rentable area would be 3,073 sq.ft.

The retail tenant's rentable area would be 3,912 sq.ft.

The retail tenant's rentable area would be 3,605 sq. ft.

Yes, the property will be suitable if the client states they will change the zoning to allow their type and classification of business to operate at this location.

Yes, the property is suitable since the client is already in the metal fabrication business, and does not need to get any permits from the municipality prior to moving in and using the property.

Yes, the property is suitable, as the listing says the property is light industrial and multi-uses are permitted.

No, the property is not suitable, as the client's business type and classification require heavy industrial zoning.

Use the R/U factor to calculate the figures

Use a laser measuring tool to take the measurements and use the R/U factor to calculate the figures

Recommend that the landlord obtain the professional services of a measuring company to obtain the figures

Use a laser measuring tool to take the measurements

The salesperson should tell their client that higher management fees charged for a building always indicates that the tenant is getting superior service and value.

The salesperson should explain that a tenant occupying a smaller rentable area in a building pays higher management fees per square foot compared to a tenant with an average or larger rentable area.

The salesperson should identify the reasons for high management fees charged for a building and determine the relative value it provides.

The salesperson should tell the tenant that the Condominium Authority of Ontario regulates management fees charged by buildings as per their size.

Architectural drawings are source documents.

A photocopy of a source document can be used to verify information.

If changes are made to source documents, they are still valid if you have the original document.

Other types of source documents include surveys and tax records.

The date of the agreement of purchase and sale

The balance due clause

The irrevocability clause

The purchase price

Specifies the terms of a business partnership agreement.

Regulates matters involving ownership of a business.

Regulates trade names.

Protects the rights of workers of a business that is being sold.