Common Conditions in an Ontario Offer to Buy a House

A condition is a term that must be dealt with before your offer becomes a firm deal. Buyers often use them to protect themselves while they arrange a mortgage or have the home inspected.

This article walks through the conditions people commonly use in Ontario, how deadlines and waivers work, and how a seller's escape clause can affect you. Your actual wording matters a great deal, so treat this as a guide to the questions to ask.

What a condition does

Conditions such as a satisfactory home inspection must be waived or performed by the agreed time before the deal becomes binding, and they must be used in good faith. Depending on how the condition is worded, if it is not met the buyer may terminate or the contract may end automatically, with the deposit returned.

A conditional agreement is not final and binding until all its conditions are met or waived. Once all conditions are waived, the agreement is firm and binding.

Conditions buyers commonly use

• Financing: the deal depends on you getting a mortgage on acceptable terms. Your lender's approval and any mortgage insurance requirements can take time to confirm.
• Home inspection: the deal depends on a satisfactory inspection report.
• Document review: for a condominium, this often means reviewing the status certificate and related documents. Your lawyer can explain what to look for.
• Insurance: the deal depends on you being able to get home insurance at a reasonable cost.
• Sale of your current home: the deal depends on selling your existing property. Sellers often view this one with caution.

Which conditions make sense depends on the property and your finances. Each one should be written clearly, with what must happen, by when and who can waive it.

Permits and other things to check during the condition period

Use the condition period to look into the property, not just the building. A building permit is required before most construction, additions, renovations and changes of use, and the municipal building department can confirm what permits exist for a property. Finding out whether proper permits were obtained for any renovations is part of a sensible buyer's checklist.

If the home is rented, special rules apply to whether the tenant can be asked to leave. A seller may give an N12 notice only for a residential complex of no more than 3 units or a condominium unit, and the purchaser must in good faith need the unit for their own use or that of certain family members or a caregiver. Ask a lawyer before relying on a vacant-possession promise.

Deadlines, waivers and extensions

Every condition has a deadline in the agreement. If you do nothing, what happens next depends on the exact wording: you may be able to terminate, or the agreement may end automatically. If you are satisfied, you can waive the condition before the deadline, and once all conditions are waived the agreement is firm and binding.

Be careful with waivers. Once all conditions are waived, you are bound. If you need more time, for example because the lender or inspector is delayed, raise it early. Whether that is possible depends on the seller's agreement and the wording, so speak to your lawyer or agent before the deadline, not after.

Withholding your deposit while you wait for a condition can itself breach the agreement. In one RECO example, a buyer who held back a deposit due on acceptance until after an inspection may have given the seller grounds to terminate and seek damages.

How a seller's escape clause affects you

A seller who has accepted a conditional offer may still consider other offers. The seller protects itself with an escape clause that requires notice to the first buyer and gives that buyer a set time, for example 48 hours, to waive or satisfy its conditions.

If the first buyer waives or fulfils its conditions within the deadline, the seller must sell to that buyer on the original terms. A backup offer should therefore be made conditional on the first deal ending.

With competing offers, the seller may negotiate with one buyer while setting others aside and does not have to take the highest price. A buyer with a written offer is entitled to know the number of competing offers, but not their amounts or conditions.

What to do before you submit your offer

• List the conditions you truly need and the time each realistically takes.
• Talk to your lender before offering, so the financing timeline is realistic.
• Book an inspector who can attend within your deadline.
• Have a lawyer review the wording, especially what happens if a condition is not met.
• Know how you would respond if you received an escape-clause notice, including how fast you could act.
• Keep your deposit on time even while conditions are outstanding.

Frequently asked questions