Revised March 5, 2003

You have probably heard people speak of "Conditional Offers" or of agreements being "Subject to Conditions". Conditions are inserted into Agreements of Purchase and Sale so that the Agreements will not be binding on the parties unless certain events take place.

Conditions may be inserted for the benefit of the builder or of the purchaser. It is fairly common in new Home Agreements of Purchase and Sale to see builder's conditions dealing with things like the approval of subdivisions, obtaining consents to sever the land in question, and the availability of building permits. Common purchaser's conditions relate to the approval of the terms of the Agreement of Purchase and Sale by the purchaser's lawyer, obtaining financing, and selling the purchaser's present residence.

"Conditions Precedent" must be met for the transaction to proceed. A good example of a true condition precedent would be the provision of subdivision approval. If the developer is unable to register the necessary subdivision plans and agreements, the developer is legally prevented from proceeding with the transaction. There is nothing that the builder can do to get around these requirements. If they are not met, the deal cannot close.

On the other hand, there are conditions which do not necessarily have to be met in order to allow the transaction to proceed. For instance, even though the agreement is conditional on the sale of the purchaser's present home, there is nothing to prevent the purchaser from waiving that condition and proceeding with the agreement, notwithstanding that his or her own home has not been sold. If you do not want a condition to be a true condition precedent which must be fulfilled for the transaction to proceed, it is important that the condition be appropriately worded and that the entitlement to waive the condition be available to the party in favour of whom the condition has been inserted.

If the right to waive a condition is inserted into the agreement, then the condition is considered to be fulfilled upon the execution of a waiver. If all conditions are waived or fulfilled, then the agreement is a "firm" or unconditional agreement. If all the conditions are not fulfilled by the date specified in them, then, barring an extension on the time allowed for fulfilling the condition, the agreement is null and void and, in most circumstances, the purchaser's deposit will be returned in full.

Conditions relating to the sale of the purchaser's own home deserve further comment. These conditions are often worded in such a way that the builder can continue to offer the new house for sale until such time as the purchaser waives or fulfills the condition relating to the sale of his or her own home. They usually also provide that if the builder receives another acceptable offer on the new home, then the builder is to provide written notice to this effect to the purchaser at which point the purchaser will have a specified period of time, usually 24 hours or 48 hours, to waive the condition. If the original purchaser does not do so, his or her Agreement of Purchase and Sale is null and void and the developer is free to sell the house to the new purchaser.

Depending on the state of the local real estate market, builders may not be willing to accept conditional offers, especially those that are conditional on the sale of the purchaser's own home. Consequently, if you can only buy on a conditional basis, it makes sense to ask the developer early in your discussions whether or not a conditional offer will be considered.

Carefully worded conditions can respond to the needs of both vendor and purchaser. A poorly worded condition can become a headache for all concerned. Consequently, it is always wisest to consult your lawyer on the wording of conditions. This consultation should take place before the agreement is signed. Once it is executed, your lawyer is unlikely to be able to negotiate changes in wording.