Kim Mullan Blog
What Buyers Need to Know: Conditions and Obligations
October 17th 2015
Conditions. Subject-to Clauses. Contingincies.
These are a buyer's way of securing a property while they perform their due diligence.
What buyers may not realize it that they have a legal obligation to make a reasonable effort to satisfy the conditions of the offer. That is their contractual obligation. They are not simply "escape clauses" to allow a buyer to walk away from the Purchase and Sale agreement.
What does that mean?
If there is a condition of home inspection the buyer must attempt to carry out a home inspection. If the buyer wishes to walk away from a property because they are not satisfied with the results of the inspection they must have completed the inspection. The buyer cannot simply refuse to do the inspection, let the condition expire and state that they are walking away because they didn't fulfill the home inspection.
They must attempt to satisfy the condition or they may find themselves in breech of contract.
While the buyer may opt out of doing an inspection and still firm up (waiving the inspection) they cannot walk away based on a dissatisfactory inspection if they haven't completed one.The buyer cannot refuse to do the inspection and assume they will be released from the agreement by using the inspection as a loophole.
If the other party to the contract doesn't believe that you have made a serious effort to satisfy the conditions they may consider you to be in breech of contract and seek legal advice and damages.
This holds true for buyers who have an SOP condition (Sale of Buyers Property). The buyer are obligated to make a concerted effort to sell their own home in a timely manner to satisfy the conditions of their offer during the conditional period. A buyer who cools off and takes steps to interfere with or stop the sale of their own home during that period could find themselves in a legal battle based on breech of contract or anticipatory breech of contract.
The conditions require a good faith attempt to satisfy them before they can be safely used as the basis for a mutual release from at Accepted Agreement of Purchase and Sale.
Courts have held that contracts containing conditions requiring "seller satisfaction" still create an enforcable contract and can be challenged as to whether the lack of satisfaction was unreasonable or "feigned" to avoid the contract.
In a nutshell, the conditions of a buyers offer expected to made in "good faith" and must be addressed with a reasonable attempt to satisfy them within the conditional period before being grounds to negate the contract by way of a release.
Conditions are not simply "escape clauses" and buyers must cautious about using them to as a way to create a cooling off period.