Waiving Conditions in an Ontario Agreement of Purchase and Sale

You have made or accepted an offer with conditions, such as financing, a home inspection or the sale of the buyer's current home. Now someone is asking you to sign a waiver, or a notice has arrived with a clock running. It is a stressful moment, because the paper you sign can change what you are committed to.

This article explains in plain terms what waiving a condition does, how an escape clause works, what happens to the deposit if the deal ends, and what to do before you sign anything.

What a condition and a waiver actually do

A condition is a term that must be satisfied before the deal becomes firm. A conditional offer does not bind the seller and the buyer until every condition has been fulfilled or waived. That is why a seller can keep marketing the property while conditions are still open.

To fulfil a condition means it has been met, for example the buyer has the financing in place. To waive a condition means giving it up so that it no longer protects you. Either way, the practical result is that the condition stops being a way out. Once every condition is dealt with, the agreement is generally binding on both sides.

How an escape clause works

An escape clause is written into a first, conditional Agreement of Purchase and Sale. It requires the seller to notify the first buyer if the seller accepts another offer. The first buyer then has a short window to waive or fulfil their conditions, or the deal ends.

The length of that window is whatever your agreement says, so read the clause itself rather than relying on a number you have heard. Do not assume a particular number of hours applies to every deal.

For that last reason, the second agreement should be conditional on the first agreement falling through.

Can a waiver be withdrawn?

People often ask whether they can change their mind after signing a waiver. The answer depends on the exact wording of the documents, what was signed and when, and whether the other side has already relied on it. It is not safe to assume you can take a waiver back.

Treat a waiver as final. If you are already worried that you signed too quickly, speak to a real estate lawyer straight away, because delay can make options narrower.

Competing offers and what you can be told

Escape clauses often arise when several buyers are interested. In a competing-offer situation, the seller's agent must tell every buyer who has submitted a written offer how many competing offers there are. The agent may not share what the offers contain unless the seller directs them to. Even then, personal or identifying information in the offers cannot be shared.

If the deal ends: the deposit

A deposit received by the brokerage that is to hold it under the Agreement must be put into that brokerage's real estate trust account within five business days of receipt. When a deal fails, the brokerage should release the deposit only under a release or direction signed by all parties to the Agreement, or under a court direction.

RECO's consumer deposit insurance covers deposits held in a brokerage's trust account against events such as brokerage theft, fraud, insolvency or misappropriation. It does not apply where a deal has failed and the buyer and seller simply cannot agree on who gets the deposit. Whether a deposit is returned usually turns on how the condition was worded and whether it was properly dealt with, which is worth confirming with a lawyer.

What to do next

• Read each condition and note its exact deadline and how notice must be given.
• Do not sign a waiver or notice of fulfilment until you understand what you give up.
• Ask your agent for copies of everything sent and received, and keep dated records.
• If you are the seller, confirm that any second agreement is conditional on the first falling through.
• Have a real estate lawyer review the documents before a deadline, not after it.

Frequently asked questions