Contingency in real estate usually means a condition in an Agreement of Purchase and Sale (APS) that must be dealt with before the deal becomes firm. Real Estate Contingencies in Canada are handled differently by province; in Ontario, the exact wording of the condition determines whether, when and how a buyer or seller may end the deal.
What does contingency mean in Ontario real estate?
In Ontario, a “contingency” is usually called a condition in the APS. It is commonly a condition precedent: an event or approval that must occur, or be waived or fulfilled in the required way, before the agreement becomes firm.
Ontario buyers and sellers often use OREA form agreements, but an APS can contain negotiated schedules that change the standard terms. A condition is not simply a general right to change one’s mind. It should identify the risk being investigated, who receives the benefit of the condition, the deadline, and what notice must be given.
For example, a buyer may make an offer on a $925,000 freehold home conditional on obtaining financing satisfactory to the buyer by a stated date. If the condition is for the buyer’s sole benefit and the APS permits the buyer to give written notice of waiver or fulfillment, the buyer must follow that process exactly.
How an Ontario condition works from offer to firm deal
A conditional APS is binding, but completion remains subject to the stated condition being fulfilled or waived as the agreement permits. The deal becomes firm only when the condition has been properly dealt with, or when the APS otherwise says it becomes firm.
First, read who benefits from the condition. A financing condition may be for the buyer’s benefit alone, while another condition may benefit both buyer and seller and require both parties’ agreement to waive it. Second, calendar the precise deadline and the APS’s notice-delivery rules, which may specify delivery to the parties, their representatives, or another stated recipient.
Notice is often delivered as a written Notice of Fulfillment or waiver, but the document and delivery method must match the APS. Missing a deadline, sending notice to the wrong person, or using unclear wording can have serious consequences. Before sending or responding to notice, have a real estate contract lawyer review the signed APS and all schedules.
Ontario courts have considered disputes about conditions, waiver and notice, including Ontario Court of Appeal decisions referred to as VanderMolen Homes Inc. v. Mani, High Tower Homes Corporation v. Stevens, and Grayson v. Creasy. Their application depends on the actual contract language and facts, rather than a general rule that applies to every conditional offer.
Conditions to consider in a home purchase offer
The conditions to include in a home purchase offer are the ones needed to investigate real, material risks before you commit to closing. They should be tailored to the property, financing and buyer’s circumstances, not copied blindly from another transaction.
- Financing: time to obtain mortgage financing satisfactory to the buyer.
- Home inspection: time to arrange and assess a professional inspection.
- Condominium documents: time to review a status certificate and relevant condominium-corporation records for a condo purchase.
- Insurance availability: time to confirm that appropriate property insurance is available on acceptable terms.
- Sale of the buyer’s property: time to sell the buyer’s current home where its proceeds are needed.
- Assignment rights: an express term addressing whether the buyer may assign the APS.
A condition should be specific enough to be enforceable while preserving the protection actually negotiated. It should not promise a result that a third party cannot guarantee.
Financing and home inspection conditions
A financing condition lets a buyer investigate whether mortgage financing is satisfactory, and a home inspection contingency lets a buyer investigate the home’s condition. Neither should be treated as an unlimited right to reopen the bargain after acceptance.
A mortgage pre-approval is useful, but it is not necessarily final approval for a particular property. The lender may still review the appraisal, the buyer’s income and debts, the property type, condominium information, and outstanding document requirements. A buyer should provide requested documents promptly, avoid major credit or employment changes, and ask the lender what remains outstanding.
A home inspection condition gives the buyer an opportunity to obtain professional advice about observable concerns such as the roof, foundation, electrical system, heating, plumbing and drainage. It does not automatically require the seller to complete repairs or grant a price reduction. If the inspection identifies concerns, the parties may negotiate an amendment, the buyer may satisfy or waive the condition if permitted, or the buyer may rely on the condition according to its wording.
For example, a buyer of a $740,000 detached house could arrange an inspection immediately after acceptance and discover evidence of a costly roof issue. Before the condition deadline, the buyer might negotiate a price adjustment, obtain further contractor information, or deliver a notice that accords with the APS. The buyer should not assume that an informal text message or an oral discussion extends the deadline.
The lawyer reviews the APS, schedules, notices and proposed amendments, while the buyer remains responsible for completing the agreed due diligence.
Buying a condo with few conditions
Buying into a condo with low contingency, or with no conditions, increases the risk because the buyer may be committed before reviewing key financial and governance information. A buyer should review available condominium documents before waiving a condition or making a firm offer wherever possible.
A status certificate can disclose information about the unit’s common expenses, arrears, legal proceedings, reserve fund and special assessments, while the attached documents may include the declaration, by-laws, rules and budget information. The condominium corporation’s records can also help a buyer understand restrictions on pets, parking, leasing, renovations and use of common elements.
For example, a buyer considering a $610,000 Toronto condominium may learn from the status certificate that a special assessment has been approved but not fully collected. That information can affect the buyer’s budget and the APS negotiations. The buyer should also confirm what is included, such as a parking space or locker, and whether those interests are properly described.
Home insurance, appraisal and title concerns
Insurance availability should be checked early because a lender commonly requires proof of adequate property insurance before closing. This is particularly important for homes with older electrical systems, oil heating, prior claims, rural features, vacancy concerns or other underwriting issues.
A home insurance contingency clause can give a buyer time to determine whether suitable coverage can be obtained, but its effectiveness depends on its exact language. Buyers should ask an insurer or broker about coverage as soon as the APS is accepted rather than waiting until the closing date.
Appraisal concerns commonly arise through the financing process, not through a separate standard Ontario appraisal condition. If a lender’s valuation is lower than the purchase price, the buyer may need additional funds, a different loan arrangement or a negotiated amendment; see this explanation of the real estate sales agreement and its clauses.
Ontario practice also differs from a US-style “title contingency.” The real estate lawyer searches title, reviews registered instruments and raises appropriate closing requisitions. The lawyer also examines matters such as execution requirements, outstanding mortgages to be discharged, easements, restrictive covenants and other title issues that may affect the property.
Home sale conditions and escape clauses
A home sale contingency, also called a sale-of-property condition, protects a buyer who needs to sell an existing property before being able or willing to complete the new purchase. It must clearly state what constitutes a satisfactory sale and when the condition expires.
Consider a buyer who agrees to purchase a $1,150,000 family home but needs the net sale proceeds from a current condominium to fund the down payment. The buyer’s condition might give time to sell that condominium on terms satisfactory to the buyer. If the current property does not sell by the stated deadline, the APS wording governs whether the buyer can end the deal and how notice must be delivered.
For a fuller look at coordinating the two transactions, read about real estate transaction lawyer support when real estate lawyers etobicoke clients are buying and selling at the same time. A seller may be concerned that a sale condition leaves the property tied up while the buyer’s own sale remains uncertain.
An escape clause is a negotiated APS mechanism that may allow the seller to continue marketing the property and, after receiving another acceptable offer, give the first buyer a notice requiring a decision within the period set by the APS. What is an escape clause in real estate? It is not a statutory Ontario right and its notice procedure, response period and consequences must be written into the agreement.
The first buyer may need to waive or fulfill the sale condition, amend the deal, or allow the seller to proceed with the later offer, depending on the clause. Sellers and buyers should not act on an escape-clause notice without reviewing it carefully; negotiation after an inspection has its own considerations, including the appropriate post-inspection response.
Right to assign a purchase agreement
A right to assign a purchase agreement should be expressly addressed in the APS because a buyer does not have an unrestricted right to transfer contractual rights and obligations to another person. An assignment clause should say whether seller consent is required and whether the original buyer remains liable.
Assignment is not a substitute for satisfying financing, inspection or other conditions. For example, an investor buying a $680,000 pre-construction unit should not assume that finding another purchaser removes obligations under the original APS. The developer’s agreement may restrict assignments, require approval and charge an administrative fee, so legal advice is important before relying on a right to assign contingency clause.
What happens if a condition is not met or is waived?
What happens if a condition is not met depends on the APS wording, deadline, beneficiary and notice provisions. An unfulfilled condition is different from a buyer or seller simply refusing to close after the agreement has become firm.
If a condition is properly not fulfilled by its deadline, the APS may terminate or permit a party to terminate, but the result is contract-specific. If the beneficiary properly waives a condition, the transaction can become firm despite that unresolved risk. Conditions need to have deadlines in practical terms because an APS needs a clear point at which the parties know whether they are proceeding, but the deadline is negotiated rather than fixed by a universal Ontario rule.
Do not assume the deposit is automatically returned or automatically forfeited. The deposit is normally held in trust, and entitlement can depend on the APS, the parties’ conduct, any release signed, and the legal issues in dispute. A party facing a missed deadline, disputed waiver or closing refusal should obtain advice before directing the deposit holder to release funds.
Ontario contingency clause checklist before you sign
A sound Ontario contingency clause identifies the risk and provides a workable, documented path to a firm deal or a proper end to the APS. Review the following points before signing.
- Define the condition and state whether it benefits the buyer, seller or both parties.
- Set a precise deadline, including the time if needed, and verify the APS language on whether time is of the essence.
- State how fulfillment or waiver must be made and how notice must be delivered.
- Start financing, inspection, insurance and condo-document work immediately after acceptance.
- Check whether an amendment, extension or escape clause requires signatures from all necessary parties.
- Have a lawyer review non-standard schedules, assignment language and implications for closing.
The consequences of late action can be significant; learn why time is of the essence real estate language deserves careful attention.
FAQ about real estate contingencies in Ontario
What is an example of a contingency contract?
An example is an APS for a $800,000 home that is conditional on the buyer obtaining financing satisfactory to the buyer by a specified date and giving written notice as required by the APS. It remains a binding agreement, but whether it becomes firm or ends depends on the condition and proper notice.
Do sellers dislike contingent offers?
Sellers may prefer a firm offer because conditions can create uncertainty, but a conditional offer can still be acceptable when its risks, deadlines and notice terms are clear. Price, closing date, deposit, the type of condition and the buyer’s overall ability to close can all affect the seller’s decision.
How do I get out of a contingency contract?
You can only rely on a condition in the way the APS permits. Read the signed agreement, meet the deadline, preserve written evidence of your due diligence, and obtain legal advice before delivering any waiver, fulfillment or termination notice.
Can a seller refuse an asking-price offer?
Yes. Unless and until the seller accepts an offer, the seller can decide whether to accept, reject or make a counteroffer, even where an offer matches the asking price. Once an APS is accepted, its exact terms control; start with what is aps in real estate if you need the basic framework.
Speak with a Toronto real estate lawyer
Advice before you waive, fulfill or respond to a real estate condition can help you understand the APS deadlines, notice requirements and closing risks involved.
Call 416-321-8766 or request a quote to discuss your matter with Zinati Kay.