Can I include an escalation clause in my offer in Ontario?
An escalation clause is a provision in an offer that automatically increases your purchase price by a set amount above any competing offer, up to a maximum cap you specify. For example, your offer might state you will pay $5,000 more than the highest competing offer, up to a ceiling price.
Escalation clauses are not prohibited in Ontario, but they are relatively uncommon and can be controversial. Some sellers and listing agents decline to entertain them because they require disclosure of the competing offer price to trigger the clause, which raises confidentiality concerns under Ontario's offer disclosure rules.
Before including an escalation clause, understand that many sellers will simply ignore it and ask for your best offer. The clause also requires careful drafting so that the triggering mechanism, the increment, and the cap are unambiguous. If the language is vague, disputes can arise about whether and how the clause was triggered. A real estate lawyer should review any offer containing an escalation clause before you submit it.
Key takeaways
- Escalation clauses automatically raise your bid above competing offers up to a set cap.
- They are legal in Ontario but not always accepted by sellers.
- Confidentiality rules around competing offers can complicate how they work.
- Have a lawyer review the clause carefully before submitting.