Legal Brief for April, 2013

Subject To Conditions in Real Estate Purchases

Now that spring is finally starting to arrive in this part of the world the real estate market will soon be entering its busiest time of the year.  The months from May to August are the time when many people choose to buy or sell their homes, especially those with families who may be looking to move from or to a neighbhourhood in order to be near a school.  Regardless of whether a prospective purchaser uses a realtor or looks at buying privately, the issue of whether to include any "subject to conditions" in the offer to purchase is always something that is important to consider.

A "subject to condition" in an offer means that there are certain steps that the purchaser still needs to take or be satisfied before they will commit themselves irrevocably to going ahead with the purchase.  It may be for example that the purchaser still needs to arrange for mortgage financing.  It would be unwise to commit yourself to a purchase that you needed financing for when you weren't assured that in fact you would be able to obtain a loan from a bank.  Therefore you make your offer "conditional" on obtaining a loan that is satisfactory to you as the purchaser.  If you are unable to qualify for a loan or if the interest rate is not suitable for you, then you are not obliged to go ahead with the purchase, and you will be entitled to receive back whatever amount you may have paid as a deposit with the offer.

Other common items used as conditions include obtaining a property inspection (very important if you are looking at purchasing an older home that is not under new home or builder's warranty), the sale of your own residence if you are moving out of your current home and review of condominium documents if you are buying a condo.  Another item that occasionally arises, usually in commercial property transactions, is obtaining a change in the zoning applicable to the property.  This can come up where the current zoning does not allow a type of business that the potential purchaser is interested in operating from the property.

If you obtain whatever is the subject of your condition, then you will need to provide the seller with a written notice confirming that your condition has been "removed" or "waived".  It is only when the condition (or conditions, as there may be multiple conditions on a property) has been removed that you are then "locked into" the deal, and you and the seller are then both committed to proceeding with the transaction as set forth in the purchase contract document.