Escape Clause Triggered: What a Buyer Must Do in Ontario

You made an offer that depends on something, such as selling your own home, financing or an inspection. Then you receive notice that the seller has another offer and that you have a short time to respond. The time you have depends on the wording of your agreement, which is why this moment can feel so stressful.

This article explains what an escape clause generally is, what to check in your own agreement, and how to prepare so you can decide in time. The exact deadline and steps come from the wording of your agreement, so read it closely and have a lawyer review it if you can.

What an escape clause is

An escape clause is a term written into your agreement of purchase and sale. How it works in your deal depends on the wording of your agreement, so it is worth confirming with a lawyer.

The mechanics are not set out as a single rule you can look up. They come from the agreement itself and the forms used with it. That is why two buyers can have different deadlines, different delivery requirements and different wording.

Read your agreement first

Find the escape clause and read it slowly. A lawyer reviewing your agreement can quickly confirm the points that decide your next move.

Deciding whether to waive the condition

Under buyer beware, the buyer is expected to do their own inspections and due diligence before waiving conditions. If you remove a condition and the facts later turn out badly, it may be hard to walk away. So the question is not only whether you want to keep the deal, but whether you can safely commit to it.

• If the condition is financing, check with your lender whether approval is complete and whether it can be confirmed in time.
• If the condition is a home inspection, confirm whether the inspection is done and whether you have read the report.
• If the condition is the sale of your own home, consider whether you could close even if that sale falls through, and what the consequences would be.
• If the condition is a lawyer's review, make sure it has been completed before you waive it.
• Consider what you may lose by letting the deal go, compared with the risk of firming up.

On disclosure, RECO says sellers must disclose latent defects, meaning defects that make a property unfit for habitation, dangerous or potentially dangerous, and must not conceal visible ones. That is not a substitute for your own inspection.

Your deposit

A brokerage must deposit a deposit it is to hold into its real estate trust account within five business days, and may pay it out only in accordance with the terms of the trust. If you and the seller disagree about who gets it, the brokerage can release it only under a mutual release signed by both, or under a court order.

RECO's consumer deposit insurance responds to brokerage theft, fraud, insolvency or misappropriation of funds, but does not resolve a disagreement between buyer and seller about who is entitled to the deposit. If the deal ends, make sure the release of your deposit is dealt with in writing.

What to do next

• Note the exact date and time the notice reached you, and how it was delivered.
• Find the escape clause and highlight the deadline and response requirements.
• Contact your lawyer and your agent right away; do not wait until the last hours.
• Confirm the status of financing, inspection or home-sale conditions.
• Decide whether you can safely waive the condition, and if so, sign exactly as the agreement requires.
• Keep copies and proof of delivery of everything you send.

Frequently asked questions