What must I do before I remove conditions (also called “subjects”) on a contract, and what is the result of removing conditions?

Common conditions in favour of the buyer relate to financing, title review, review of strata documentation, or sale of an existing property. A buyer is required to act in good faith when attempting to meet the obligations or when conducting a review of the property information prior to removing subjects. A buyer should ensure that the issue relating to that condition is resolved prior to removing that protective provision. Oncea buyer removes the condition, the buyer cannot reinstate it or rely on that further. Once all the buyer conditions are removed, the Buyer will not have a way to get out of the contract and can be forced to complete.

There can be conditions in favour of the seller, or conditions which assist both the buyer and seller. The buyer has no ability to remove these types of conditions and a purchase agreement will not be binding on all involved until all conditions are removed by the party benefitting from the condition removes such. A contract can be frustrated in the instance that a condition outside of the control of both the buyer and seller is not met.

Condition clauses should be carefully drafted by a real estate professional. Poorly or vaguely drafted clauses can result in uncertainty should the matter behind the clause result in the parties disputing such matters. For example, a condition related to financing should simply state ‘Subject to financing’ or ‘subject to the buyer getting financing’. A properly drafted subject to financing clause should state the amount the buyer requires, a threshold interest rate, and any other key terms like monthly payment amount or amortization period. However, many times we see clauses drafted without such details, and these favour the buyer as the vagueness of the clause allows them an out should they not get financing, or should any other matter arise for which the contract does not have a condition. As a general rule, the more vague the buyer’s conditions are drafted, the more likely they have an easy way out of a contract should it be needed. The more precise the clause, the easier it will be for a seller to try to hold the buyer to it should the seller find that the buyer may not be using his/her best efforts to meet the obligations stated in the condition. Still, most buyers are looking for certainty so in most cases, precise, well-drafted condition clauses make it very clear for all parties involved what must be done before the condition can be removed.

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