Marcus Oyelaran is a salesperson with Granite Ridge Commercial Inc. in Kitchener, a brokerage that uses brokerage representation agreements. The brokerage represents Dunmore Properties Ltd., owner of a vacant 20,000 square foot single storey flex building on Shirley Avenue, under a written listing agreement for lease or sale. Sable Analytics Corp., through its own brokerage, has submitted a written offer to lease the whole building for five years at base rent of $16.00 per square foot per year net, payable monthly, with the first six months of base rent free and a tenant improvement allowance of $10.00 per square foot payable on completion of the tenant's work. Dunmore's accountant projects stabilized net operating income, once the lease is in place, of $304,000 a year after a non-recoverable allowance of $16,000 for management and reserves. A local investor says he would buy a leased building of this kind at a capitalization rate of 8.0 per cent. Dunmore's owner, Helen Dunmore, measures a lease by its 'effective rent', meaning the average annual base rent per square foot actually received over the term after deducting the free rent and the allowance, without discounting for time. She asks Marcus whether Sable will still pay additional rent during the free months, what the building would be worth to the investor once leased, and whether she could put the building on the market at that value as soon as the lease is signed. Using the accountant's stabilized figure and the investor's capitalization rate, what is the indicated value of the leased building?

$3,800,000, since the stabilized net operating income of $304,000 is divided by the capitalization rate of 8.0 per cent to arrive at the value.

$2,432,000, since the stabilized net operating income of $304,000 is multiplied by the capitalization rate expressed as 8 to arrive at the value.

$4,000,000, since the gross base rent of $320,000 is divided by the capitalization rate of 8.0 per cent, the non-recoverable allowance being a financing item rather than an operating cost.

$3,600,000, since the stabilized net operating income is reduced by the $16,000 allowance a second time to $288,000 before being divided by 8.0 per cent.

Marcus Oyelaran is a salesperson with Granite Ridge Commercial Inc. in Kitchener, a brokerage that uses brokerage representation agreements. The brokerage represents Dunmore Properties Ltd., owner of a vacant 20,000 square foot single storey flex building on Shirley Avenue, under a written listing agreement for lease or sale. Sable Analytics Corp., through its own brokerage, has submitted a written offer to lease the whole building for five years at base rent of $16.00 per square foot per year net, payable monthly, with the first six months of base rent free and a tenant improvement allowance of $10.00 per square foot payable on completion of the tenant's work. Dunmore's accountant projects stabilized net operating income, once the lease is in place, of $304,000 a year after a non-recoverable allowance of $16,000 for management and reserves. A local investor says he would buy a leased building of this kind at a capitalization rate of 8.0 per cent. Dunmore's owner, Helen Dunmore, measures a lease by its 'effective rent', meaning the average annual base rent per square foot actually received over the term after deducting the free rent and the allowance, without discounting for time. She asks Marcus whether Sable will still pay additional rent during the free months, what the building would be worth to the investor once leased, and whether she could put the building on the market at that value as soon as the lease is signed. What is the landlord's effective rent per square foot per year on Sable's offer, as Helen defines it?

$12.40, since the 54 months of base rent actually paid total $1,440,000, the allowance of $200,000 is deducted to leave $1,240,000, and that sum is spread over the 60 month term and the 20,000 square feet.

$14.40, since the 54 months of base rent actually paid total $1,440,000 and that sum is spread over the 60 month term and the 20,000 square feet, the allowance being a capital cost outside the rent calculation.

$16.00, since the base rent reserved by the lease is the landlord's rent and both the free months and the allowance are inducements accounted for separately rather than deducted from the rent.

$14.00, since the allowance of $200,000 is deducted from the $1,600,000 of base rent reserved over the full term and the remainder is spread over 60 months and 20,000 square feet, the free rent being a matter of timing only rather than a reduction.

Marcus Oyelaran is a salesperson with Granite Ridge Commercial Inc. in Kitchener, a brokerage that uses brokerage representation agreements. The brokerage represents Dunmore Properties Ltd., owner of a vacant 20,000 square foot single storey flex building on Shirley Avenue, under a written listing agreement for lease or sale. Sable Analytics Corp., through its own brokerage, has submitted a written offer to lease the whole building for five years at base rent of $16.00 per square foot per year net, payable monthly, with the first six months of base rent free and a tenant improvement allowance of $10.00 per square foot payable on completion of the tenant's work. Dunmore's accountant projects stabilized net operating income, once the lease is in place, of $304,000 a year after a non-recoverable allowance of $16,000 for management and reserves. A local investor says he would buy a leased building of this kind at a capitalization rate of 8.0 per cent. Dunmore's owner, Helen Dunmore, measures a lease by its 'effective rent', meaning the average annual base rent per square foot actually received over the term after deducting the free rent and the allowance, without discounting for time. She asks Marcus whether Sable will still pay additional rent during the free months, what the building would be worth to the investor once leased, and whether she could put the building on the market at that value as soon as the lease is signed. Helen asks whether Sable will still pay additional rent during the six free months. What should Marcus do?

Read the offer's wording with her, point out that it abates base rent only and is silent on additional rent, and have the agreement to lease state expressly which rent is abated, since the lawyer should not be left to argue the point after the lease is signed.

Tell her the question is only for the lawyer and decline to look at the offer wording, since a salesperson who comments on what rent is abated gives a legal opinion outside the scope of the listing agreement.

Confirm that no rent of any kind is payable during a free rent period, since a tenant who is excused from base rent is excused from every other charge until the abatement ends, so Dunmore should budget accordingly.

Confirm that additional rent is always payable during a free rent period, since realty taxes and operating costs accrue to the landlord whatever the lease says, so no change to the offer is needed.

Marcus Oyelaran is a salesperson with Granite Ridge Commercial Inc. in Kitchener, a brokerage that uses brokerage representation agreements. The brokerage represents Dunmore Properties Ltd., owner of a vacant 20,000 square foot single storey flex building on Shirley Avenue, under a written listing agreement for lease or sale. Sable Analytics Corp., through its own brokerage, has submitted a written offer to lease the whole building for five years at base rent of $16.00 per square foot per year net, payable monthly, with the first six months of base rent free and a tenant improvement allowance of $10.00 per square foot payable on completion of the tenant's work. Dunmore's accountant projects stabilized net operating income, once the lease is in place, of $304,000 a year after a non-recoverable allowance of $16,000 for management and reserves. A local investor says he would buy a leased building of this kind at a capitalization rate of 8.0 per cent. Dunmore's owner, Helen Dunmore, measures a lease by its 'effective rent', meaning the average annual base rent per square foot actually received over the term after deducting the free rent and the allowance, without discounting for time. She asks Marcus whether Sable will still pay additional rent during the free months, what the building would be worth to the investor once leased, and whether she could put the building on the market at that value as soon as the lease is signed. Marcus tells Helen that she can put the building on the market at $3,800,000 the day the lease is signed, since that is its value to the investor from that day. What is wrong with that advice?

The $3,800,000 is a stabilized value; a buyer during the free months would expect a credit for the $160,000 of base rent not yet received and the $200,000 allowance still owed.

A leased building cannot be valued by direct capitalization until the tenant has paid rent for a full year, so no price should be suggested until $320,000 of base rent has actually been received.

The $200,000 allowance improves the building and should be added to the $3,800,000, so the asking price should be $4,000,000 from the day the lease is signed and the tenant's work begins.

The investor's 8.0 per cent rate should be applied to the effective rent of $248,000 a year rather than to net operating income, which gives a value of $3,100,000 for as long as the lease runs.

Nadia Kowalczyk is a salesperson with Ambassador Commercial Realty Inc. in Windsor, which uses brokerage representation agreements. The brokerage represents Essex Coatings Inc. under a written buyer representation agreement. Essex wants 4100 Rhodes Drive, a 31,000 square foot industrial building built in 1974 that housed a metal plating operation until 2019 and has floor drains in the production area. The seller, Rhodes Industrial Holdings Inc., is listed with Riverside Realty Corp. at $3,900,000. The seller's salesperson has provided a phase one environmental site assessment prepared in 2019 for the seller by its own consultant and says the property is 'clean, nothing to worry about, you can put that in the agreement'. The seller is reluctant to allow any drilling or sampling. Essex's lender requires a current phase one assessment and, if the consultant recommends it, a phase two, addressed to the lender. Essex's president asks Nadia to write an environmental indemnity from the seller and a $300,000 holdback into the offer, and to 'make the seller warrant there is no contamination'. Nadia proposes a 60 day environmental condition. The offer will be at $3,750,000 with a $150,000 deposit, and Essex intends to run a powder coating line that would increase the electrical load and continue the industrial use. Nadia drafts the environmental condition. Which structure best serves Essex?

A condition giving Essex 60 days to obtain, at its own cost, a phase one assessment and, if recommended, a phase two by a qualified consultant, addressed to Essex and its lender, with the seller granting access for sampling, the 2019 report provided for review only, and Essex entitled to terminate with its deposit returned or to waive by written notice within the time.

A condition giving Essex 60 days to review the 2019 phase one assessment the seller provided and to have its lender confirm acceptance of that report in writing, with sampling only if the seller consents at the time it is requested, and Essex entitled to terminate with its deposit returned or to waive by written notice within the time.

A condition giving Essex 60 days to obtain a phase one assessment at the seller's cost, with the seller to commission any phase two from its own consultant and deliver a clean report addressed to Essex, and Essex entitled to terminate with its deposit returned or to waive by written notice within the time.

A condition giving Essex 60 days to obtain a phase one assessment and a seller's warranty that the property is free of contamination, with the warranty replacing any phase two since the seller bears the risk, and Essex entitled to terminate with its deposit returned or to waive by written notice within the time.

Nadia Kowalczyk is a salesperson with Ambassador Commercial Realty Inc. in Windsor, which uses brokerage representation agreements. The brokerage represents Essex Coatings Inc. under a written buyer representation agreement. Essex wants 4100 Rhodes Drive, a 31,000 square foot industrial building built in 1974 that housed a metal plating operation until 2019 and has floor drains in the production area. The seller, Rhodes Industrial Holdings Inc., is listed with Riverside Realty Corp. at $3,900,000. The seller's salesperson has provided a phase one environmental site assessment prepared in 2019 for the seller by its own consultant and says the property is 'clean, nothing to worry about, you can put that in the agreement'. The seller is reluctant to allow any drilling or sampling. Essex's lender requires a current phase one assessment and, if the consultant recommends it, a phase two, addressed to the lender. Essex's president asks Nadia to write an environmental indemnity from the seller and a $300,000 holdback into the offer, and to 'make the seller warrant there is no contamination'. Nadia proposes a 60 day environmental condition. The offer will be at $3,750,000 with a $150,000 deposit, and Essex intends to run a powder coating line that would increase the electrical load and continue the industrial use. Essex's president asks Nadia to write the environmental indemnity and the $300,000 holdback into the offer. What should she recognize?

She should identify the business terms Essex wants, such as the amount, the trigger and the duration, and have Essex's lawyer draft the indemnity and holdback clauses, since drafting them is legal work she cannot provide competently.

She may draft the indemnity and holdback clauses herself, since they are standard commercial clauses and a salesperson in commercial practice is expected to be familiar with them and with the triggers and amounts that are usual in a sale of this kind.

She may draft the indemnity and holdback clauses provided her broker of record reviews them, since the brokerage's supervision supplies the competence the salesperson lacks.

She should refuse to include any indemnity or holdback in the offer, since such clauses are outside a registrant's authority and the buyer's protection is the environmental condition alone, together with the deposit.

Nadia Kowalczyk is a salesperson with Ambassador Commercial Realty Inc. in Windsor, which uses brokerage representation agreements. The brokerage represents Essex Coatings Inc. under a written buyer representation agreement. Essex wants 4100 Rhodes Drive, a 31,000 square foot industrial building built in 1974 that housed a metal plating operation until 2019 and has floor drains in the production area. The seller, Rhodes Industrial Holdings Inc., is listed with Riverside Realty Corp. at $3,900,000. The seller's salesperson has provided a phase one environmental site assessment prepared in 2019 for the seller by its own consultant and says the property is 'clean, nothing to worry about, you can put that in the agreement'. The seller is reluctant to allow any drilling or sampling. Essex's lender requires a current phase one assessment and, if the consultant recommends it, a phase two, addressed to the lender. Essex's president asks Nadia to write an environmental indemnity from the seller and a $300,000 holdback into the offer, and to 'make the seller warrant there is no contamination'. Nadia proposes a 60 day environmental condition. The offer will be at $3,750,000 with a $150,000 deposit, and Essex intends to run a powder coating line that would increase the electrical load and continue the industrial use. Essex will run a powder coating line in a building last used for metal plating. Which of the following statements about Essex's due diligence for that line is NOT accurate?

The building's past plating use means a powder coating process is permitted there as well, so the electrical load is the remaining item to check before Essex waives its conditions.

The floor drains should be traced to see where they discharge, since a drain to the sewer or to the ground affects both contamination risk and what Essex may discharge.

The consultant should advise whether the coating line needs an environmental approval for its air emissions, since that affects the cost and timing of starting operations.

The electrical utility must confirm, through Essex's electrician, that capacity for the added load is available and at what cost and timing, before Essex is committed to the building.

Olivia Brandt is a salesperson with Grandview Commercial Realty Inc. in Barrie, working for Simcoe Physio Group Inc., a physiotherapy practice whose owner is Nadia Rostami. The practice wants to buy Unit 7 at 320 Bayfield Street, a 2,150 square foot ground floor unit in a twelve unit commercial condominium built in 2007, listed at $895,000 by Kempenfelt Realty Inc. for the seller, an accountant who has used the unit as an office. The listing states 'monthly fees $812, exclusive use of two parking spaces, medical use permitted'. The seller tells Olivia that the declaration 'allows professional offices of every kind' and that the parking spaces 'go with the unit'. Olivia has seen the listing, the seller's last fee statement and a photocopy of a status certificate dated eleven months ago that another prospective buyer obtained. She has not seen the declaration, by-laws or rules, the current budget or the reserve fund study. Nadia plans to install treatment rooms, a small hydrotherapy tub and exterior signage, and asks whether she should ask the seller to 'get the condo papers' or simply rely on the eleven month old certificate to save the fee. The offer is to go in Thursday with a ten day condition. What should Olivia advise about the condominium documents before the offer?

Request a current status certificate, which brings the declaration, rules and other prescribed material for a fee capped at $100 inclusive of taxes, and have the lawyer review it inside the condition, since it binds the corporation as of its date.

Order a copy of the current declaration alone from the land registry office, since the corporation has 30 days to issue a status certificate and the certificate adds nothing for a commercial unit beyond the fee statement the seller already supplied.

Rely on the eleven month old certificate inside the condition, since a status certificate remains binding on the corporation for 12 months from its date and a fresh one would cost the client $250 plus taxes for nothing new.

Ask the seller to warrant in the agreement that the current fees are $812 and the parking is exclusive, since a seller's warranty is the standard substitute for a status certificate in a commercial condominium.

Olivia Brandt is a salesperson with Grandview Commercial Realty Inc. in Barrie, working for Simcoe Physio Group Inc., a physiotherapy practice whose owner is Nadia Rostami. The practice wants to buy Unit 7 at 320 Bayfield Street, a 2,150 square foot ground floor unit in a twelve unit commercial condominium built in 2007, listed at $895,000 by Kempenfelt Realty Inc. for the seller, an accountant who has used the unit as an office. The listing states 'monthly fees $812, exclusive use of two parking spaces, medical use permitted'. The seller tells Olivia that the declaration 'allows professional offices of every kind' and that the parking spaces 'go with the unit'. Olivia has seen the listing, the seller's last fee statement and a photocopy of a status certificate dated eleven months ago that another prospective buyer obtained. She has not seen the declaration, by-laws or rules, the current budget or the reserve fund study. Nadia plans to install treatment rooms, a small hydrotherapy tub and exterior signage, and asks whether she should ask the seller to 'get the condo papers' or simply rely on the eleven month old certificate to save the fee. The offer is to go in Thursday with a ten day condition. Why should Olivia refer the question of whether a physiotherapy clinic with a hydrotherapy tub is permitted in Unit 7 to the client's lawyer rather than answer it from the seller's description?

Because the unit's permitted uses are set by the declaration and rules, interpreting those against a specific intended use is legal advice, and the seller's description is only an interested party's summary.

Because the listing brokerage is the only party permitted to interpret a declaration for buyers, and Olivia would be interfering with Kempenfelt's role by offering any view of her own.

Because the municipality's zoning confirmation governs what a unit owner can do inside a condominium, and the declaration is relevant only to common element matters such as parking, signage and exterior alterations.

Because the condominium corporation must approve each new owner's use in writing before closing, and the lawyer is the one who files that application on the client's behalf.

Olivia Brandt is a salesperson with Grandview Commercial Realty Inc. in Barrie, working for Simcoe Physio Group Inc., a physiotherapy practice whose owner is Nadia Rostami. The practice wants to buy Unit 7 at 320 Bayfield Street, a 2,150 square foot ground floor unit in a twelve unit commercial condominium built in 2007, listed at $895,000 by Kempenfelt Realty Inc. for the seller, an accountant who has used the unit as an office. The listing states 'monthly fees $812, exclusive use of two parking spaces, medical use permitted'. The seller tells Olivia that the declaration 'allows professional offices of every kind' and that the parking spaces 'go with the unit'. Olivia has seen the listing, the seller's last fee statement and a photocopy of a status certificate dated eleven months ago that another prospective buyer obtained. She has not seen the declaration, by-laws or rules, the current budget or the reserve fund study. Nadia plans to install treatment rooms, a small hydrotherapy tub and exterior signage, and asks whether she should ask the seller to 'get the condo papers' or simply rely on the eleven month old certificate to save the fee. The offer is to go in Thursday with a ten day condition. Which of the following statements about the status certificate is NOT accurate?

The corporation has thirty days after the request and payment to deliver the certificate, so a ten day condition cannot accommodate a fresh certificate and the client should use the older one.

The certificate includes a copy of the current declaration, by-laws and rules, so the lawyer reviewing it sees the use and parking provisions in the corporation's own documents.

The certificate binds the corporation, as of the date it is given, with respect to the information it contains as against a purchaser who relies on it, so the client's protection runs from a current certificate rather than one that describes the unit as it stood eleven months ago.

The certificate states the common expenses for the unit and any default in payment, so the fee figure in the listing is checked against the corporation's own statement rather than the seller's.

Free Simulation 2 Practice Questions (Ontario Real Estate)

Simulation 2 tests whether you can apply the commercial rules to a real file: learning what a business client needs, verifying a property's income, area, zoning and environmental history, choosing and drafting conditions, valuing income property, and leasing for a landlord or a tenant. These 10 questions are original scenario questions written for the Ontario program. They come from three cases, each with linked parts, including the calculations you need for cap rates and effective rent. Every option is explained, the right one and the three wrong ones. Try each question before you look at the answer.

How to use these questions

Read the case once, then answer each part before you open the explanation. For the calculation parts, work the numbers yourself first. Read every explanation, including the ones for questions you got right, because the wrong options are built on the mistakes students most often make. When you are done, try the same set in the app, which keeps track of your answers.

What the full Simulation 2 practice includes

The full Simulation 2 practice has hundreds of scenario questions across commercial sales, leasing, due diligence, valuation, and farm, land and business transactions. You also get study notes for each part, a Mock Exam, Drill Wrong Answers to bring back the questions you missed, and an AI Tutor that explains a rule or a calculation in plain words when you are stuck. Access lasts two months for a one-time price of $31.99.

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Topics in Simulation 2

Commercial Basics: what changes when the buyer is a company and the building earns rent, including how HST is handled on a commercial sale.
Know the Client and the Property: the client's real need, and checking every fact (income, area, zoning, taxes, environmental history) at a source that can confirm it.
Choosing the Clauses: which conditions and terms each commercial buyer needs before it is bound.
Custom Conditions, Written and Explained: drafting conditions the standard forms do not cover, and making sure the client understands them.
Valuing the Property: net operating income, normalizing a seller's statement, and the capitalization rate. See cap rate in Ontario commercial real estate.
Hidden Risks: Contamination and Condominium Rules: environmental site assessments, records of site condition, and the commercial condominium status certificate. See the status certificate.
After Acceptance: Amend, Waive or Fulfil: extensions, amendments, waivers and notices of fulfilment on a commercial deal.
Leasing for the Landlord: lease types, recoverable costs, tenant covenant and the landlord's leasing clauses. See net versus gross leases.
Leasing for the Tenant: occupancy cost, renewal options, inducements and reading the landlord's offer from the tenant's side.
Farms, Land and Businesses: farm property tax class, development land and the sale of a business.
Conduct on a Commercial File: conflicts, trust money, advertising and the other conduct standards under TRESA. See TRESA exam prep and how to prepare for Simulation 2.

Frequently asked questions

Are these real exam questions? No. They are original questions written for the Ontario real estate program. ExamPass is not affiliated with RECO, Meazure Learning or any course provider. The case format and the judgment style mirror what you will face, so the practice transfers.

Which provider is this for? All of them. The four approved providers teach the same program and students write the same standardized exam, so these questions fit whichever provider you study with.

How many free questions are there? The 10 on this page, which you can also answer interactively in the app.

What happens when I unlock? You get the full Simulation 2 practice, study notes, Mock Exam, Drill Wrong Answers and AI Tutor for two months. Any answers you gave to these free questions in the app stay in your progress.