C2 M17 Writing Conditions To Be Included in An Agreement of Purchase and Sale Print V1

Module 17: Writing Conditions to be Included in an Agreement of Purchase
and Sale
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Module 17: Writing Conditions to be Included in an Agreement of Purchase
and Sale
Many offers will include additional terms or clauses to address the unique aspects of each sale. As you learned earlier,
acknowledgements, representations and warranties, and various other terms can become part of an offer to document
what is agreed to. These terms will help ensure the parties understand their rights and obligations associated with the
agreement.
This module will expand on what you learned previously; detailing the requirements when including a condition in an offer.
When an offer contains a condition, it allows the party a specified amount of time to complete the necessary due diligence
before being obligated to complete the transaction. Should the due diligence result in the party no longer wanting to
purchase the property, the proposed transaction will not proceed.
As a salesperson, you will be relied upon to provide advice and guidance to sellers and buyers relating to the transaction,
including all aspects of any condition included in an offer. Accuracy in drafting a condition to ensure it’s complete and
meets the needs of the party is a critical component of providing conscientious and competent service.
Understanding the structure of clauses, and knowing how to create sound and accurate clauses, is important for you to be
able to provide conscientious and competent service, and to ensure each party’s actions and obligations under an
agreement of purchase and sale are clear and understood. Each transaction is unique and can require incorporation of
many differing clauses and conditions. The conditions presented in this module focus on common circumstances
encountered in residential trades.

As you learned in an earlier module, organized real estate which includes membership with a local real estate board, The
Ontario Real Estate Association (OREA) and The Canadian Real Estate Association (CREA). If you become a member, you
will have access to standard forms and clauses created by OREA. However, not all salespersons choose to be members
of organized real estate and are not required to use these forms. As they are commonly used in trading, specific forms
and clauses will be used throughout this module and other modules for illustrative purposes. Images of OREA standard
forms and clauses are included with permission from OREA.
To check your understanding of this module, you must complete all the activities in the online module.
While navigating through the online module, click the Legislation button to view laws and regulations related to this
module.
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visit the Module Resources to find the list of all the KMS assets for this module.
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Menu: Writing Conditions to be Included in an Agreement of Purchase
and Sale
Number of Lessons 6 Lessons
Lesson Number Lesson Name

Lesson 1 An Introduction to Conditional Clauses
Lesson 2 Conditional Clauses Related to Financing
Lesson 3 Supplemental Conditional Clauses
Lesson 4 Environmental and Zoning Conditional Clauses
Lesson 5 Summary Practice Activities
Module Summary

Lesson 1 | Page 1 of 35
Lesson 1: An Introduction to Conditional Clauses
This lesson introduces two methods for drafting a condition. It details the distinct requirements for providing notice
depending on the method used. The lesson provides an example for each method to illustrate key aspects of a condition.

An Introduction to Conditional Clauses
When an offer doesn’t contain any conditions, it’s a binding agreement once accepted by all parties. In residential
transactions, many offers will include one or more conditions that set out stipulations that can result in a binding contract
either upon the occurrence or non-occurrence of a specific event. This lesson details the methods that can be used to draft
a condition. Two methods have evolved-condition precedent and condition subsequent. The vast majority of conditions
found in agreements of purchase and sale are condition precedent. Most conditions involve buyer’s activities, such as
obtaining financing, conducting an inspection, or selling the buyer’s property. There are situations that warrant seller
conditions, but their use is more limited in scope.
In many situations, a party can decide to proceed with the transaction even when a condition has not been fulfilled. This is
known as waiving a condition. However, in a few specific situations, a party will not be permitted to waive a condition but
rather will be required to fulfill the condition for the transaction to proceed. This is known as a true condition precedent.
This is also discussed in this lesson.

As a salesperson, including conditions in an offer will require you to monitor the due diligence time period closely. If the
required notice relating to a condition is not provided within the time period, the offer could become null and void, or the
seller or the buyer could be obligated to proceed with the transaction when they did not intend to do so.
Upon completion of this lesson, you will be able to:

• Identify how a condition precedent clause is structured
• Identify how a true condition precedent clause is structured
• Identify how a condition subsequent clause is structured
Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

Benefits of Writing Clear and Effective Clauses
Well-written clauses document the transaction clearly. They minimize the risk of liability for you, as a salesperson, and
protect the interests of the client. Clearly-written, effective clauses benefit all parties associated with a transaction—buyers,
sellers, salespersons, and the brokerages.
Some of the core benefits are:

• You protect the best interests of the client by ensuring each clause addresses your clients’ needs and prevents them
from having to do something they are unwilling or unable to do.
• The clause is less likely to be removed from the Agreement of Purchase and Sale, so you do not waste your time.
• The transaction is more likely to close, which makes both sellers and buyers happy, and helps you and your brokerage
meet client needs and earn an income.
• Your reputation is protected as someone who is thorough and effective, and who addresses client’s needs first. This
directly affects the reputation of real estate profession as an industry.
• You can start to fulfill your obligations to be fair and honest and to act with integrity. Fulfilling those obligations is not
simply a legal requirement. Doing so makes good business sense by helping build your reputation.

Conditional Clauses
As you learned earlier, many circumstances necessitate conditions, such as arranging a mortgage, sale of an existing
property, or conducting a home inspection. Conditions typically contain more complex wordings than clauses concerning
facts and assurances.
Two methods of drafting conditions are present in the profession—condition precedent and condition subsequent.
Condition Precedent
A condition in an agreement calling for an event to happen, or an act to be performed, before the agreement becomes
binding on the parties.
Condition Subsequent
A condition referring to a future event that, upon its occurrence, causes the contract to be no longer binding on the
parties.
The vast majority of residential conditions are condition precedent, but salespersons may encounter condition subsequent
in local marketplaces.

Conditional Clauses: Condition Precedent
The first, and most often used, method of drafting conditions is condition precedent. A condition precedent provides that
if the condition is not fulfilled or waived no binding contract has been formed. The party must take action to create a
binding agreement. The characteristics of a condition precedent include the following.
• When the offer has been accepted by all parties, there is no binding agreement.
• Upon acceptance of the offer, the parties are placed under some degree of obligation related to the terms of the
accepted offer. For example, the buyer is obligated to act in good faith to complete the due diligence related to the
condition and the seller is under an obligation to keep the property available to that buyer pending the outcome of
the buyer’s due diligence.
• Notice must be provided to the other party within the time period identified in the condition for the proposed
transaction to proceed.
• A binding agreement is formed when the notice is provided indicating the condition is either fulfilled or waived.
• If the notice is not provided indicating the condition is either fulfilled or waived, the offer becomes null and void.
As a salesperson, when drafting a condition precedent, specific information must be included to ensure the condition is
written accurately and completely.

Condition Precedent Clauses: Steps to Identify Required Information
As a salesperson, to draft a condition precedent clause, you will need to complete six steps to ensure the clause contains
the required information.
The following six tabs contain information on a condition precedent clause. You must review any or all of the tabs before
moving forward.
Who is to do it? The condition identifies which party is required to complete the tasks associated with
completing the due diligence for the condition. This is the party for whose protection the
condition was included (i.e., the seller or the buyer).
Who is to pay for it? Many conditions will have a cost associated with completing the due diligence; the
condition identifies who pays this. Typically, the party who is benefiting from the condition
pays, but this is not always the case. For example, an offer may be conditional upon a
buyer obtaining a minor variance but the seller has agreed to pay for it.

What is to be done? The condition describes the nature of the due diligence to be completed. Details regarding
this are required to ensure the parties understand their rights and obligations for
completing the required tasks.
Within what time The time limit for fulfilling the condition is identified, which includes both a time and date.
limit? Notice must be received by the other party prior to this time period expiring.
What happens in The condition states the offer will become null and void in the event the notice is not
received by the other party within the time period identified. It’s important to understand
the event it is not
that notice must be sent to proceed with the proposed transaction. No notice is required if
done? the party is not proceeding.
Can it be waived? The condition provides a waiver provision which allows the party to waive the condition
rather than fulfill the condition. The notice to waive the condition must be received by the
other party prior to the time period expiring.

Example: Condition on Obtaining Financing – Condition Precedent
A buyer wanting to ensure the appropriate financing is secured could include a condition making the offer conditional
upon obtaining financing. For example, OREA Clause MORT-2 could be used for this purpose.
The six components of a condition precedent clause are linked to the financing condition in the following way:
1. Who is to do it?
This offer is conditional upon the Buyer arranging,
2. Who is to pay for it?
at the Buyer’s own expense,
3. What is to be done?
a new first Charge/Mortgage for not less than Two Hundred Thousand Dollars ($200,000), bearing interest at a rate
of not more than 4% per annum, calculated semi-annually not in advance, repayable in blended monthly payments

of about One Thousand Fifty-Two Dollars and Four Cents ($1,052.04), including principal and interest, and to run for
a term of not less than 5 years from the date of completion of this transaction.
4. Within what time limit?
Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions
for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 8:00 p.m. on
the 15th day of November, 2019, that this condition is fulfilled,
5. What happens in the event it is not done?
This Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction.
6. Can it be waived?
This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in
writing to the Seller as aforesaid within the time period stated herein.

Providing Notice
The condition identifies the time period for the due diligence relating to the condition to be completed and notice to be
provided to the other party if the buyer intends on proceeding with the proposed transaction. The notice must be received
by the other party prior to the time period expiring. When drafting a condition, the wording of the clause may allow the
party the option of fulfilling the condition or waiving the condition.
Fulfilling a condition occurs when the party has performed the required tasks associated with the condition, and the results
of the due diligence reflect the wording of the condition.
Example – Fulfilling a Condition: A condition allows a buyer to have an inspection completed on a property and obtain a
property inspection report that is satisfactory to them. The buyer proceeds with the inspection and obtains a report.
Although the report identifies some deficiencies in the structure, the buyer is satisfied with the report. The condition would
be considered fulfilled.

Waiving a condition is relinquishing a right associated with that condition. It may result from the party not attempting to
perform the required tasks associated with the condition, or it may result from the terms of the condition not being
completed exactly as provided for in the condition.
Example – Waiving a Condition: A condition allows a buyer to have an inspection completed on a property and obtain a
property inspection report that is satisfactory to them. The buyer chooses not to proceed with the inspection or obtain a
property inspection report, but still wishes to proceed with the proposed transaction. In this instance, the buyer would
waive the condition in order to proceed with the transaction.
Although both actions result in the proposed transaction proceeding, understanding this distinction is an important part of
drafting conditional clauses.
No notice is required if the condition is not being fulfilled or waived as the lack of providing a notice automatically makes
the offer null and void.

Waiver Provision
Over the years the courts have firmly established that, unless specified otherwise in the agreement, a condition precedent
can be used by either party to the trade, and no one has the automatic and unilateral right to waive the condition. The
inclusion of a waiver provision in a condition precedent allows the party for whose protection the condition was included
to remove that condition entirely rather than fulfilling the condition. This action results in a binding agreement regardless
of whether the specific terms of the condition have been fulfilled or even attempted. It provides the party with the option
to release their rights associated with the condition and proceed with the proposed transaction.
A waiver provision is included as circumstances can change from what was originally contemplated by the party when
including the condition in the offer. Should the party determine the protection that was to be provided by the condition is
no longer required, or was achieved but not in accordance with the exact wording of the terms which were included in the
offer, the waiver provision permits the proposed transaction to proceed. In these instances, the protection and/or benefit
expected by the inclusion of the condition is achieved, but not in accordance with the exact terms as expressed in the

agreement. The result is the same but the circumstances of terms giving rise to that result are different from those
originally considered. For example, a buyer makes an agreement conditional on arranging a new mortgage, but before it is
arranged, receives a windfall and no longer requires the benefits and/or protection of the condition.
The waiver form allows the buyer to waive the condition, if it was included as part of the condition, and complete the
contract without reference to the fulfillment of the condition. As a consequence, rarely are condition precedent clauses
seen in practice without the corresponding waiver provisions. The waiver provision reads:
This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in
From OREA Clause MORT-2 ©2019 Ontario Real Estate Association. All rights reserved. Used under license.

Conditions Drafted as a Condition Precedent
Most conditions in a residential transaction are for the benefit of the buyer. Although the category of the condition can be
the same for each buyer, there can be various options for the condition that can be selected based on the specifics of each
trade. Common conditions in a residential offer include:
• Obtaining financing
• Having the property inspected
• Confirming insurance can be obtained
• Sale of a buyer’s property
While many offers may contain the same conditions, as a salesperson, it is important to understand how different property
types will require different conditions in an offer; for example:
• Condominium: the review of the condominium documents, such as a status certificate

• Multi-unit residential: an inspection to confirm fire and building code compliance
• Rural property: testing the well and/or septic system
• Waterfront property: confirming the legal status of any improvements such as a dock or boathouse
• Investment property: reviewing the leases and financial information
• Vacant land: obtaining a building permit or confirming available services
Under each of the given situations, a condition can be written as a condition precedent. What is important when drafting a
condition precedent clause is to ensure the six components are identified, and each is accurately and fully completed. You
will learn more about writing conditions later in this module.
As a reminder, the six steps to ensure a condition precedent clause contains the required information:
• Who is doing it?
• Who is paying for it?
• What is to be done?
• Within what time limit?
• What happens in the event it is not done?
• Can it be waived?
Although in most instances the final component—the condition may be waived—is applicable, not all conditions will
permit the party to do this. Prior to drafting a condition using the condition precedent method, ensure the party is able to
waive the condition. A true condition precedent requires action by a third party independent of the seller or buyer.
Because satisfaction of the condition is dependent on a third party, the seller or buyer cannot waive the condition. For
example, a condition might be dependent on an Advisory Committee providing consent to change a zoning bylaw. You
will learn more about true condition precedent clauses in this lesson.

Consider this clause: “This offer is conditional upon the Seller providing the Buyer with an
environmental report confirming the property is clean within 15 days from the acceptance
date, otherwise the offer is terminated.”
Which of the six steps to ensure the clause contains the required information are missing from this
clause?
There are six options. There is only one correct answer.
1 Who is to do it?
2 Who is to pay for it?
3 What is to be done?
4 Within what time limit?
5 What happens in the event it is not done?
6 Can the condition be waived?

Consider this clause: “The Seller agrees, at the Seller’s expense, to provide to the Buyer, the
appropriate Status Certificate for the unit immediately upon receipt from the condominium
corporation. This offer is conditional upon the Buyer’s lawyer’s approval of the Status
Certificate on or before ___ p.m., _______ (date), 20__; such approval is at the Buyer’s lawyer’s
sole discretion."
clause?
There are six options. There are multiple correct answers.
1 Who is to do it?

Conditional Clauses: True Condition Precedent
In certain instances, a condition must be fulfilled exactly as it’s detailed in the offer for the proposed transaction to
proceed. This type of condition is known as a true condition precedent. This condition must be met; it may not be waived.
No waiver provision is possible because the condition must be fulfilled for a binding contract to be created.

Conditional Clauses: True Condition Precedent
A true condition precedent is used when the nature of the condition requires the approval or consent of a third party. The
contract is not capable of being completed without fulfillment of the condition. The third party is someone other than the
seller and the buyer identified in the offer.
The situations where a true condition precedent would be used in an offer are:
• The buyer has agreed to assume the seller’s existing mortgage, but the buyer must be approved by the lender as a
borrower. In this instance, the seller could be harmed if the buyer does not assume the mortgage as a lender could
impose a penalty on the seller to discharge the mortgage prior to the term of the mortgage expiring.
• A property being sold that requires consent to sever one part of the property from the whole property. In this
instance, consent will typically be given subject to certain conditions including compliance with the Planning Act and
municipal bylaw. The condition will not be considered met until the Land Registrar issues a registerable title, usually a
reference plan. The person who obtained the severance has one year to complete the severance, which involves
registering the new deed on title. Usually the person applying for a severance is the seller although the buyer can
apply for it with the seller signing all the necessary documents to support the application.

Drafting a True Condition Precedent and Providing Notice
A true condition precedent clause is drafted using the same format as a condition precedent, with the exception of
including the waiver provision; the condition cannot be waived by either the seller or the buyer. The condition must be
fulfilled exactly as it’s written in the offer for the proposed transaction to proceed. In a true condition precedent, the
following steps must be accurately and completely detailed:
Since a true condition precedent cannot be waived, the notice that must be provided within the time limit is a notice
indicating the condition has been fulfilled. If a notice indicating the condition has been fulfilled is not provided, the offer
automatically becomes null and void.

Example: Assuming a Mortgage – True Condition Precedent
One situation that requires a true condition precedent clause is when the buyer has agreed to assume the seller’s existing
mortgage, however this mortgage assumption requires approval by the lender. For example, OREA’s clause MORT-1 can
be used for this purpose.
As identified in the clause, the buyer is required to provide a notice indicating the condition is fulfilled. There is no waiver
provision included in the conditional clause.
The information about a true condition precedent clause is as follows:

1. Who is to do it?
This Offer is conditional upon the Buyer obtaining the approval of the Chargee/Mortgagee to assume the existing
Charge/Mortgage.
The Buyer agrees to assume the existing Charge/Mortgage.

Buyer obtaining the approval of the Chargee/Mortgagee to assume the existing Charge/Mortgage.
not later than some time in p.m., date, day, and year,
this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction.

A true condition precedent is a specific type of condition precedent.

Which of the following is true about a true condition precedent?
There are five options. There is only one correct answer.
1 A true condition precedent can be waived by either the seller or the buyer.
2 A buyer requiring a home inspection as a condition is an example of a true condition precedent.
A true condition precedent is considered fulfilled unless a third party provides notice stating that it is not
3
fulfilled.
4 A true condition precedent clause is drafted using the same format as a condition precedent.
5 A true condition precedent is used when the nature of the condition requires the approval of a third party.

Conditional Clauses: Condition Subsequent
The second method of drafting a condition is by using the condition subsequent format. This method is distinctly different
and the characteristics of a condition subsequent should be fully understood to ensure appropriate action is taken when
the party is completing their due diligence.

Conditional Clauses: Condition Subsequent
A condition subsequent is in many ways the opposite of a condition precedent. It provides that if the party does not wish
to proceed with the proposed transaction, they must take action to terminate the agreement within the time limits. The
characteristics of a condition subsequent include the following.
• Upon acceptance of any offer, there is a binding agreement between the parties with an option to terminate under
certain circumstances.
• Termination of the agreement can only be based on the defined circumstances identified in the condition. The
conditional agreement will proceed unless the buyer terminates the agreement within the time allowed.
• Notice must be provided to the other party within the time period to terminate the agreement.
• If no notice is provided, the conditions within the agreement are deemed to be waived and either party can demand
the agreement be completed.

• Unless the buyer terminates the agreement within the time limit, the conditions are deemed to have been waived,
and the agreement remains firm and becomes fully binding on all parties.
• The only time a party needs to give notice is if they are terminating the agreement. For example, if the buyer is
intending to complete the transaction then the buyer does nothing but let the time lapse on the condition.
• If the condition requires the consent of a third party to be fulfilled (a true condition precedent), it cannot be drafted
in a condition subsequent format.
When drafting a condition subsequent, specific information must be included to ensure the condition is written accurately
and completely.
Conditions can be written in either a condition precedent or condition subsequent format, with the exception of those
conditions that must be written as true condition precedent requiring third party approval. The decision on which format
to use is usually dictated by brokerage policies or preference within the local trading area. Whichever format is used, a
salesperson must exercise due diligence in drafting and following up to ensure time limits are adhered to.
While navigating through the online module, click the KMS button in the Module Resources for tools and information on
this topic.

Condition Subsequent Clause: Steps to Identify Required Information
As a salesperson, to draft a condition subsequent, you will complete five steps to ensure the clause contains the required
information. Each of the hot spots on the image correspond to one of the five steps.
The following five tabs contain information on a condition subsequent clause. You must review any or all of the tabs
before moving forward.
What is to The condition describes the nature of the due diligence to be completed. Details regarding this
are required to ensure the parties understand their rights and obligations for completing the
be done?
required tasks.
Who is to do it? The condition identifies which party is required to complete the tasks associated with completing
the due diligence for the condition. This is the party for whose protection the condition was
included (i.e., the seller or the buyer).

Who is to pay Many conditions will have a cost associated with completing the due diligence. The condition
identifies who pays this. Typically, the party who is benefiting from the condition pays, but this is
for it?
not always the case. For example, a condition may benefit the buyer, but the expense is being
paid by the seller. An offer may be conditional upon a buyer obtaining a minor variance, but the
seller has agreed to pay for it.
Within what The time limit for fulfilling the condition is identified, which includes both a time and date.
time limit?
What happens It’s important to understand that notice must be delivered to the other party within the time
limit to terminate the agreement in the event the condition has not been satisfied. The condition
in the event it
states the agreement will remain firm and binding in the event the notice is not received by the
is not done? other party within the time period identified.

Example: Condition on Obtaining Financing – Condition Subsequent
A buyer wanting to ensure the appropriate financing is secured could include a condition making the offer conditional
upon obtaining financing. For example, OREA Clause MORT-5 could be used for this purpose.
As identified in the clause, the buyer is required to provide a notice to terminate the agreement. If no notice is received,
then the condition for financing is deemed to be waived and the agreement remains binding, whether or not the financing
has been arranged.
The information about a condition subsequent clause is as follows:

Provide a notice to the seller if a new first Charge/Mortgage cannot be arranged
2. Who is to do it?
the Buyer

at the Buyer’s expense.
not later than some time in p.m., date, month, and year
If no notice is received, the contract becomes firm and binding.

Consider this clause: “The Buyer may terminate this Agreement through written notice
delivered to the Seller personally or in accordance with any other provisions for the delivery of
notice in this Agreement of Purchase and Sale or any Schedule thereto, if a new first
Charge/Mortgage cannot be arranged by the Buyer, at the Buyer’s expense. This
Charge/Mortgage is to be for a sum of not less than ____________________ ($ ________) bearing
interest at a rate of not more than _____% per annum, calculated semi-annually, not in
advance, repayable in blended monthly payments of about __________________, ($ ________),
including both principal and interest, and to run for a term of not less than _____ year(s) from
the date of completion of this transaction. Upon receipt of the above notice, this Agreement
shall be null and void and the deposit shall be returned to the Buyer in full without deduction.
If no such notice is received within the above time limit, then this term of contract shall be
deemed waived by the Buyer and this Agreement shall remain valid and binding whether or
not such Charge/Mortgage has been arranged.”
Which of the five steps to ensure the clause contains the required information are missing from
this clause?
There are five options. There is only one correct answer.
1 Who is to do it?
5 What may happen in the event it is not done?

Using OREA Clause ZONING - 3

Consider this clause: “The Buyer shall have until not later than _____ p.m. on the _____ day of
__________________, 20_____, to satisfy the Buyer that the property is zoned in final and binding
form under the relevant zoning bylaws and official plan to permit it to develop or use the
property for the purpose of _________________________. If the Buyer is not so satisfied at the
Buyer’s sole and arbitrary discretion, the Buyer may terminate this Agreement by notice in
writing delivered to the Seller personally or in accordance with any other provisions for the
delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto prior to the
expiry of such period and the deposit shall be returned to the Buyer in full without
deduction.”
From OREA Clause ZONING -3 ©2019 Ontario Real Estate Association. All rights reserved.
Used under license.
clause?
1 Who is to do it?
5 What may happen in the event it is not done?

Summary: Condition Precedent Versus Condition Subsequent
Condition Precedent (Including Waiver Provision):
This offer is conditional upon the inspection of the subject property by the home inspector at the buyer’s own expense,
and the obtaining of a report satisfactory to the buyer in the buyer’s sole and absolute discretion. Unless the buyer gives
notice in writing, delivered to the seller personally or in accordance to any other provisions for the delivery of the notice in
this Agreement of Purchase and Sale or Schedule thereto not later than 11:59 p.m. on the 1st day of May, 20XX, that this
condition is fulfilled, this offer shall be null and void and the deposit shall be returned to the buyer in full without
deduction. The seller agrees to co-operate in providing access to the property for the purposes of this inspection. This
condition is included for the benefit of the buyer and maybe waived at the buyer’s sole option by notice in writing to the
seller as foresaid within the time period started herein.
• Who is to do it: This offer is conditional upon the inspection of the subject property by the home inspector.
• Who is to pay for it: at the buyer’s own expense.
• What is to be done: and the obtaining of a report satisfactory to the buyer in the buyer’s sole and absolute
discretion.
• Within what time limit: Unless the buyer gives notice in writing, delivered to the seller personally or in accordance to
any other provisions for the delivery of the notice in this Agreement of Purchase and Sale or Schedule thereto not
later than 11:59 p.m. on the 1st day of May, 20XX, that this condition is fulfilled.
• What happens in the event it is not done: this offer shall be null and void and the deposit shall be returned to the
buyer in full without deduction. The seller agrees to co-operate in providing access to the property for the purposes
of this inspection.
• Can the condition be waived: This condition is included for the benefit of the buyer and maybe waived at the buyer’s
sole option by notice in writing to the seller as foresaid within the time period started herein.
Condition Subsequent
The buyer may terminate this agreement in the event that a home inspection report satisfactory to the buyer in the sole
and absolute discretion of the buyer is not obtained from a home inspector who inspects the subject property at the
buyer’s expense. The buyer may notify the seller in writing personally or in accordance with any other provisions for the

delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto by 11:59 p.m. on the 1st day of May,
20XX of the inability to obtain a satisfactory home inspection report thus rendering this Agreement null and void and the
deposit shall be returned to the buyer in full without interest. If no such notification is received, this term of contract shall
be deemed to be waived by the buyer and the agreement shall remain valid and binding whether or not such satisfactory
home inspection report has been obtained.
• Who is to do it: from a home inspector who inspects the subject property.
• Who is to pay for it: at the buyer’s expense.
• What is to be done: a home inspection report satisfactory to the buyer in the sole and absolute discretion of the
buyer is not obtained.
• Within what time limit: The buyer may notify the seller in writing personally or in accordance with any other
provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto by 11:59 p.m. on
the 1st day of May, 20XX of the inability to obtain a satisfactory home inspection report.
• What may happen in the event it is not done:
o The buyer may terminate this agreement in the event that.
o thus rendering this Agreement null and void and the deposit shall be returned to the buyer in full without
interest. If no such notification is received, this term of contract shall be deemed to be waived by the buyer and
the agreement shall remain valid and binding whether or not such satisfactory home inspection report has
been obtained.
Notable differences between the two methods include:
Condition Precedent:
• Terminology used: Uses the term offer
• Action required: Notice is required to create a binding agreement
• Waiver provision: Waiver provision must be added to the clause
Condition Subsequent:
• Terminology used: Uses the term agreement
• Action required: Notice is required to terminate a binding agreement
• Waiver provision: Waiver provision is deemed included in the clause
Regardless of the method used, as a salesperson, you are required to follow up and remain involved during the due
diligence time period. Missing the time period allowed for a condition can result in:

• An offer that is null and void, when the seller or the buyer intended to proceed with the proposed transaction
• An agreement that remains binding, when the seller or the buyer did not intend to proceed with the proposed
transaction
Depending on your trading area, the nature of the property, or the preferences of a seller or a buyer, the method used for
drafting conditions can vary. For example, some new home builders might prefer to use a condition subsequent format.
Although many conditions are drafted using the condition precedent method, familiarity with both methods and the
specific situations which require the use of a true condition precedent are key aspects of drafting and negotiating offers.

Primary Risk when Writing a Condition Subsequent
When writing clauses, you can choose to write a condition precedent or a condition subsequent. However, the biggest risk
to consider when writing a condition subsequent is the "deemed waiver". This means that a buyer who forgets to deliver a
notice may unintentionally automatically buy a property. Keeping buyers on track to stay within the time limits can often
be difficult. It’s better to have a sale fall through and start over, than to try to get out of a sale that the seller thinks is
unconditional.
The condition subsequent form does not work well for buyers. The best advice is to avoid using conditions subsequent
wherever possible, or at the very least, use them only for relatively unimportant conditions. It is important to know about
them so you will be able to caution your clients as to the risks. While the concern is usually for buyers, the same can be
true with a condition subsequent for sellers. When they are obligated to do something, but fail to do it, it is deemed to be
done. This could cause serious consequences.
You would never be able to write a true condition precedent as a condition subsequent, by definition.

Conditions precedent and conditions subsequent are differentiated by some key features.
One of the features of condition precedent is that it uses the term offer.
Identify if the statement is true.
There are two options. There is only one correct answer.
True False
Conditions precedent and conditions subsequent are differentiated by some key features.
One of the features of condition precedent is that the waiver provision is deemed included in
the clause.
True False

Conditions precedent and conditions subsequent are differentiated by some key

features.
One of the features of condition precedent is that it uses the term agreement.
True False

features.
One of the features of condition precedent is that the waiver provision must be added to
the clause.
True False


features.
One of the features of condition precedent is that notice is required to create a binding
agreement.
True False

features.
One of the features of condition precedent is: notice is required to terminate a binding
agreement.
True False

It’s important for a salesperson to be able to differentiate between different types of

conditional clauses, so they can advise clients on what they can, must do or not do.
The following clause is a condition subsequent:
The Buyer shall have until not later than _____ p.m. on the _____ day of __________________,
20_____, to satisfy the Buyer that the property is zoned in final and binding form under the
relevant zoning bylaws and official plan to permit it to develop or use the property for the
purpose of _________________________. If the Buyer is not so satisfied at the Buyer’s sole and
arbitrary discretion, the Buyer may terminate this Agreement by notice in writing delivered to
the Seller personally or in accordance with any other provisions for the delivery of notice in
this Agreement of Purchase and Sale or any Schedule thereto prior to the expiry of such
period and the deposit shall be returned to the Buyer in full without deduction.
True False


The following clause is a condition precedent:
This Offer is conditional upon the Seller obtaining a release from a prior Agreement of
Purchase and Sale. Unless the Seller gives notice in writing delivered to the Buyer personally
or in accordance with any other provisions for the delivery of notice in this Agreement of
Purchase and Sale or any Schedule thereto not later than 11:59 p.m. on the 12th day of
January, 20xx, that this condition is fulfilled, this Offer shall be null and void and the deposit
shall be returned to the Buyer in full without deduction.
True False


The following clause is a condition precedent:
This Offer is conditional upon the Buyer or the Buyer’s appointed representative inspecting
the subject property for termites and obtaining a report satisfactory to the Buyer at the
Buyer’s own expense. Unless the Buyer gives notice in writing delivered to the Seller
personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____
day of __________, 20_____, that this condition is fulfilled, this Offer shall be null and void and
the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-
operate in providing access to the property for the purpose of this inspection. This condition
is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by
notice in writing to the Seller as aforesaid within the time period stated herein.
True False

Congratulations, you have completed the lesson!
There are three tabs on this page with a summary of the key topics that were covered in this lesson.
Condition A condition precedent provides that if the condition is not fulfilled or waived no binding contract
has been formed. The party must take action to create a binding agreement.
Precedent
The characteristics of a condition precedent include:
• When the offer has been accepted by all parties, there is no binding agreement.
• Upon acceptance of the offer, the parties are placed under some degree of obligation
related to the terms of the accepted offer.
• Notice must be provided to the other party within the time period identified in the
condition for the proposed transaction to proceed.
• A binding agreement is formed when the notice is provided indicating the condition is
either fulfilled or waived.
• If the notice is not provided indicating the condition is either fulfilled or waived, the offer
becomes null and void.
True Condition A true condition precedent is used when the nature of the condition requires the approval of a
third party and the contract is not capable of being completed without fulfillment of the
Precedent
condition.
Condition A condition subsequent provides that if the party does not wish to proceed with the proposed
transaction, they must take action to terminate the agreement.
Subsequent
The characteristics of a condition subsequent include:
• Notice must be provided to the other party within the time period to terminate the
agreement.
• If no notice is provided, the agreement remains binding and either party can demand the
sale be completed.
• There is no waiver provision required as a binding agreement is in place upon acceptance
of the offer.

• If the condition is not fulfilled exactly as described in the agreement, the party can achieve
the same results as a waiver by allowing the time period to pass—this results in the
agreement remaining binding, whether the condition has been fulfilled or not.

Lesson 2: Conditional Clauses Related to Financing
This lesson introduces conditions related to the buyer obtaining financing for a property they are interested in purchasing.
The lesson highlights financing conditions to address arranging a new mortgage, assuming an existing mortgage, and
Seller Take Back (STB) mortgages.

Conditional Clauses Related to Financing
In most cases, buyers will need to obtain mortgage financing to complete the purchase of a residential property. Lenders
have a wide variety of financing options; however, buyers will want to ensure suitable financing is available to them prior
to being obligated to the purchase. As a salesperson, you should consider the buyer’s needs when drafting a condition for
arranging financing to ensure an appropriate condition is included in the buyer’s offer. In some instances, a seller may
want assurance that the buyer will make a good faith effort in arranging the financing.
In this lesson we will review a selection of conditional clauses that address the following:
• Arranging a new mortgage
• Arranging a new mortgage satisfactory to the buyer
• Assuming an existing mortgage
• Arranging a Seller Take Back (STB) mortgage
Please note this is not an exhaustive list of financing conditions. A selection of conditional clauses related to financing is
being presented to assist with your learning.
• Identify options for including a condition for obtaining financing
• Identify additional clauses for consideration when an offer contains terms related to financing

Conditional Clauses Related to Financing: Arranging a New Mortgage
There are generally two ways of wording conditions related to arranging a new mortgage. One is to specify the minimum
mortgage terms that a buyer is willing to accept in order to satisfy the condition. If the terms spelled out in the condition
are realistic in the current market, this could provide assurance to the seller that the buyer is acting in good faith.
The alternative is to draft a condition without identifying any specific terms and leaving it solely in the buyer’s discretion as
to whether the terms of an available mortgage would be satisfactory.
In either instance, the buyer has an obligation to proceed diligently and with good faith to satisfy the condition.

At the time of submitting an offer on a property, the buyer will not know the specific terms a lender would be willing to
advance funds under. Factors can affect the mortgage terms, such as the covenant of the buyer and the specific property
being purchased. As a salesperson, when drafting a mortgage condition, you could include the minimum terms that a
buyer would be willing to accept to ensure that all fundamental mortgage particulars are identified within the clause,
including:
• The required minimum principal amount of the mortgage
• A maximum interest rate
• A minimum term
Based on these criteria, an estimated mortgage payment would also be calculated and described in the clause. Typically,
the payment is based on a monthly payment and a 25-year amortization, although there is no requirement to identify the
amortization in the clause.
The clause would also include a waiver provision which would allow the buyer the option to remove the condition whether
the buyer receives the planned financing or not. Leading practices would include both words and numbers when any dollar
amount is identified. The time period for the condition to be fulfilled should be based on market conditions, but typically 5
to 10 days following acceptance of the offer is appropriate.

As mentioned previously, a seller may look more favourably on an offer with a mortgage condition containing terms that
are realistic in the current market place.
As an example, the following clause could be used for this purpose:
This Offer is conditional upon the Buyer arranging, at the Buyer’s own expense, a new ________ Charge/Mortgage for not
less than ____________________ ($ ______), bearing interest at a rate of not more than ___ % per annum, calculated semi-
annually not in advance, repayable in blended monthly payments of about __________________ ($ _______), including principal
and interest, and to run for a term of not less than _____ years from the date of completion of this transaction. Unless the
Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery
of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of
__________, 20_____, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the
Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s
sole option by notice in writing to the Seller as aforesaid within the time period stated herein.
From MORT2: Condition Arranging a New Mortgage©2019 Ontario Real Estate Association. All rights reserved. Used under
license.

Conditional Clauses Related to Financing: Arranging a New Mortgage Satisfactory to

the Buyer
As another option, the buyer’s salesperson could include a clause stating that the offer is conditional upon arranging
financing satisfactory to the buyer. Written as a condition precedent, the clause would include waiver and notice of
fulfillment provisions. During negotiations, if the purchase price is increased, there is no need to change the wording of the
clause. A salesperson might use this clause if the buyer does not feel comfortable with the seller knowing their financial
details.
This Offer is conditional upon the Buyer arranging, at the Buyer’s own expense, a new _______________ Charge/Mortgage
satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to
the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase
and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of __________, 20_____, that this condition is
fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This
condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the
Seller as aforesaid within the time period stated herein.
From MORT-4: Arranging a new mortgage satisfactory to the buyer ©2019 Ontario Real Estate Association. All rights
reserved. Used under license.

Conditional Clauses Related to Financing: Arranging a New Mortgage (Condition

Subsequent)
A condition subsequent for new financing would include the same mortgage specifics as the condition precedent. There
would be no waiver provisions. The decision to use a condition precedent or subsequent is a matter of choice depending
on the salesperson, the brokerage’s policies or the preferences in the local market place. However, a true condition
precedent cannot be written as a condition subsequent. As a cautionary note, if a condition subsequent is used and the
financing is not approved, a notice of termination must be completed and delivered to the seller prior to the expiration of
the time period. Otherwise, the agreement remains firm and binding.
The Buyer may terminate this Agreement through written notice delivered to the Seller personally or in accordance with
any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later
than ______ p.m. on the _______ day of _________, 20____, if a new first Charge/Mortgage cannot be arranged by the Buyer, at
the Buyer’s expense. This Charge/Mortgage is to be for a sum of not less than ____________________________,($______________)
bearing interest at a rate of not more than _____% per annum, calculated semi-annually, not in advance, repayable in

blended monthly payments of about _________________________, ($__________), including both principal and interest, and to run
for a term of not less than _____ year(s) from the date of completion of this transaction.
Upon receipt of the above notice, this Agreement shall be null and void and the deposit shall be returned to the Buyer in
full without deduction. If no such notice is received within the above time limit, then this term of contract shall be deemed
waived by the Buyer and this Agreement shall remain valid and binding whether or not such Charge/Mortgage has been
arranged.
From MORT-5: Condition—Arranging New Mortgage©2019 Ontario Real Estate Association. All rights reserved. Used under
license.

Impact on Conditional Clauses Related to Obtaining Financing: Market Conditions
Market conditions can affect which financing conditions you, as a salesperson, and the buyer would include in the offer
that would be in their best interests.
For example, in a seller’s market a buyer could include the details of all aspects of the financing to be arranged to reassure
the seller that the buyer is committed to performing their due diligence.
In a buyer’s market, a buyer could include a clause in the offer that simply states that the buyer can obtain financing
satisfactory to the buyer without having to provide the specific details to the seller. The buyer is confident that they will
secure the financing and does not feel the need to reassure the seller.

When inserting a conditional clause related to financing, it’s important to know what
information to provide in the Agreement of Purchase and Sale, and the implications of
providing, or not providing that information.
Which of the following statements are true?
There are four options. There are multiple correct answers.
1 Mortgage assumptions for residential property do not typically require the mortgagee’s approval.
2 In a seller’s market a buyer should include the details of all aspects of the financing to be arranged.
In a buyer’s market, a buyer could include a clause in the offer that simply states that the buyer can obtain
3
financing satisfactory to the buyer without providing the specific details to the seller.
One risk of the condition subsequent mortgage clause is that if the buyer does nothing, the agreement will
4
continue regardless.

When writing a mortgage clause for a client, the first determination is whether to write a
condition precedent or a condition subsequent.
Which of the following would a well-written condition precedent mortgage clause include,
assuming the buyer wants to provide information about the loan?
1 The required minimum principal amount of the mortgage

2 A maximum interest rate
3 A minimum term
4 An estimated mortgage payment
5 The amortization of the loan
6 A waiver provision

Conditional Clauses Related to Financing: Assuming an Existing Mortgage
In some instances, there may be attractive financing already existing on a property. The mortgage may have been
arranged at a time when interest rates were lower than the current rates available for new mortgages. A seller may allow a
buyer to assume the existing mortgage in order to make the home more saleable and perhaps get a higher price. When
listing a property, a salesperson should inquire about the existing financing to see if it may be beneficial to the seller to
allow it to be assumed by a buyer.

The buyer may assume existing mortgage financing provided the mortgagee agrees. In most instances, the buyer must
qualify by being eligible to obtain a loan of this nature from the lender, just as the original mortgagor did. When a buyer
assumes the mortgage, they take over the mortgage balance and become responsible for the payments, terms and all
monies owed. By assuming an existing mortgage, the buyer may save on appraisal fees, some legal costs and survey costs.
The advantage to the seller may be a savings of any payout penalty or interest differential that may apply.
However, a seller should be cautioned that unless they are released from the personal covenant by the mortgagee, there is
a chance they may be responsible if the buyer defaults on the assumed mortgage and the lender takes action under the
power of sale.

Mortgage assumptions typically involve two clause structures —assumption with or without mortgagee approval. If
approval is required, the lender will require the new buyer to meet current lending criteria for the amount being assumed.

The Buyer agrees to assume the existing _____________ Charge/Mortgage held by _____________ for approximately
____________________, ($__________), bearing interest at the rate of _____ % per annum, calculated semi-annually not in
advance, repayable in blended monthly payments of ____________________ ($ __________), including both principal and
interest, and due on the _____ day of __________, 20_____. This Offer is conditional upon the Buyer obtaining the approval of
the Chargee/Mortgagee to assume the existing Charge/Mortgage. Unless the Buyer gives notice in writing delivered to the
Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and
Sale or any Schedule thereto not later than _____ p.m. on the _____ day of __________, 20_____, that this condition is fulfilled,
this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Buyer hereby

agrees to proceed immediately to make an application and provide such material as may be required by the
Chargee/Mortgagee for approval of the Buyer as the Chargor/Mortgagor.
From MORT1: The buyer wants to assume the existing mortgage ©2019 Ontario Real Estate Association. All rights reserved.
Used under license.
Please note that this clause is a true condition precedent and neither a seller nor a buyer is entitled to waive this
condition as there is no waiver provision.

Impact on Conditional Clauses Related to Financing: Time Frames
There are other factors to take into consideration when using financing conditions.
Time frames are important to keep in mind; for example if the financing condition is for a new mortgage, it may take
approximately 5 to 10 days. Time frames could be affected by market conditions or lender requirements.
In a seller’s market the clauses would most likely include shorter timelines due to the following.
• There are more buyers competing for properties.
• The seller has a larger buyer pool to choose from.
• The seller may not want to tie up their property with too many conditions.
In a buyer’s market the timelines might be longer due to the following.

• More properties on the market than buyers.
• Homes are more likely to sit unsold.
• Buyers have more choices and more leverage to negotiate.
As a salesperson, you should include a date that allows the buyer sufficient time to secure the approval.
Some factors that may affect timing are as follows.
• Lender requirements such as documents to provide a commitment.

• If it is a high ratio mortgage, approval may be required by the lender and the insurer.
• If an appraisal is required it may mean a longer conditional period.

Time frames to arrange a new mortgage can be affected by market conditions or lender
requirements.
Which of the following statements about time frames for a financing condition are true?
1 Typically, it takes 5 to 10 business days to arrange a new mortgage.

2 In a seller’s market the clauses would most likely include longer timelines.
For a high ratio mortgage, although approval may be required by the lender and the insurer, time frames are
3
unlikely to be affected.
4 If an appraisal is required the conditional period may need to be longer.
5 Requirements for more documentation from a lender will lengthen the conditional period.
6 In a buyer’s market, buyers can negotiate longer timelines.

An offer, submitted by a buyer, includes a financing condition that requires the buyer to
secure financing through the same lender that currently holds a first mortgage on the
property.
In this situation, which of the following statements is correct about a waiver provision?
There are four options. There is only one correct answer.
1 The clause would include a waiver provision

2 The clause would not include a waiver provision
3 The clause must include both a waiver provision and an escape clause
4 None of the options are correct

Conditional Clauses Related to Financing: Arranging a Seller Take Back Mortgage
A financing option that could be available to a buyer is when the seller is willing to be the lender. This financial
arrangement is called a Seller Take Back (STB) mortgage. An STB mortgage can allow for more creative terms negotiated
between the seller (mortgagee) and the buyer (mortgagor).
With an STB mortgage, the seller might improve the marketability of their property through attractive terms. The seller
could also use the STB mortgage as an investment tool to earn a higher interest rate on the property’s capital. A buyer, for
example, might not have enough money for the down payment. Instead of borrowing the extra money from a bank, the
buyer might instead arrange a STB mortgage. By borrowing directly from the seller, the buyer can avoid certain costs and
paperwork typically associated with conventional lenders.

Conditional Clauses Related to Financing: Arranging a Seller Take Back (STB)Mortgage
The STB could be a first, second or third mortgage. In some instances, the seller might include their willingness to do an
STB mortgage in the property listing. The buyer could arrange a first mortgage with the seller. The buyer could also be
assuming the current mortgage but be short of funds. In this latter case, the seller could offer a second mortgage to make
up the difference. The second mortgage would allow the transaction to proceed and also save discharge fees for the
seller’s mortgage.
As a salesperson, you should have a general knowledge of tax implications for the seller offering an STB mortgage. The
Income Tax Act provides a guideline regarding the collection of interest. You should not, however, provide tax advice and
instead refer the seller to an income tax professional for help.

Seller Take Back Mortgages: Benefits to the Seller
A STB mortgage can be attractive to a seller for these benefits.
• Higher Interest Earnings and Monthly Income.

o Because the seller is acting as the lender, the seller can set the interest rate on the STB mortgage higher than market
interest rates. The higher interest rate can provide the seller with an increased return on investment as well as a
potential monthly income. With the proper agreement set up, the seller can be protected in the same way as a
financial institute should the buyer default on the loan.
• Improved Marketability of Property.
o For certain buyers, an STB mortgage can be an attractive feature increasing the potential sale of a property in a
slow market or for a hard to sell property. Sellers can include their intention to hold an STB mortgage in the listing
stating the amount of the mortgage and interest rate.
• Higher Purchase Price.
o Sellers providing an STB mortgage with attractive terms might command a higher purchase price for their property.

Seller Take Back Mortgages: Benefits to the Buyer
A STB mortgage can be attractive to a buyer for these benefits.
• Alternate Mortgage Financing.

o For buyers who require additional funds to finance the purchase of a property, an STB mortgage can
provide another option. The buyer’s ability to negotiate an STB will depend on the seller’s motivation to sell
and willingness to tie up capital into the property.
• Saving on Costs and Timing for Financing.
o Financing a property through banks and other lenders involves various costs such as appraisal, survey,
lender fees, and mortgage insurer fees. The process of obtaining approval for a mortgage can also take time
depending on the complexity of the transaction. With an STB mortgage, buyers can save money and time
because they are dealing directly with the seller. As well, the seller might not impose a penalty for pre-
paying a mortgage before the end of the term which a financial lender would impose.
• Negotiable Interest Rate and Terms.
o An STB mortgage can allow the buyer more flexibility in negotiating the rate of interest and the terms of the
mortgage.

Conditional Clauses Related to Financing: Seller Take Back Mortgages
As detailed earlier, the seller is the lender with an STB mortgage. Therefore, the clause included in the Offer will clearly
state the terms agreed to by the seller and the buyer. The details in the clause will document the exact amount, interest
rate, monthly payments and the term of the mortgage. Specific clauses for an STB mortgage will vary based on
circumstances.

The Seller agrees to take back a _______________________ Charge/Mortgage in the amount of _____________________________ ($
__________), bearing interest at the rate of _____% per annum, calculated semi-annually not in advance, repayable in blended
monthly payments of ____________________ ($__________), including both principal and interest, and to run for a term of _____
years from the date of completion of this transaction.
From MORT-14: Seller take back mortgage©2019 Ontario Real Estate Association. All rights reserved. Used under license.

Additional Clauses to Consider When Dealing with Seller Take Back Mortgages
When a STB mortgage is included in an agreement of purchase and sale, you will need to consider including
additional clauses. Keep in mind that the actual mortgage documents, drafted and reviewed by respective lawyers,
will include the details as they pertain to the STB. A salesperson is not involved in the drafting of the actual
mortgage documents as this is beyond the expertise of a salesperson. All clauses a seller or buyer wishes to
appear in a Charge/Mortgage of Land must appear in the Agreement of Purchase and Sale (e.g., pre-payment,
postponement, renewal, due on sale, non-assumption, etc.). The lawyers will complete the Charge/Mortgage of
Land based solely on what is in the Agreement of Purchase and Sale.
The following seven tabs contain information on these additional clauses. You must review all the tabs before
moving forward.
Credit check clause A seller offering a STB mortgage will want assurance the buyer has the ability to
make payments. To ensure the buyer has the financial capability, the seller can
include a credit check clause to make the offer conditional on the seller obtaining a
satisfactory credit report on the buyer.
The credit report will allow the seller to make a well-informed decision to proceed
with mortgage arrangements. The buyer would have to be notified that a credit
report would be referred to, which is covered under the Consumer Reports clause
on the Agreement of Purchase and Sale.
This Offer is conditional upon the Seller being satisfied concerning the personal
and/or credit worthiness of the Buyer. Unless the Seller gives notice in writing to the
Buyer personally or in accordance with any other provisions for the delivery of
notice in this Agreement of Purchase and Sale or any Schedule thereto not later
than _____p.m. on the _____day of ________, 20 ___, that this condition is fulfilled, this

Offer shall be null and void and the deposit shall be returned to the Buyer in full
without deduction. This condition is included for the benefit of the Seller and may
be waived at the Seller’s sole option by notice in writing to the Buyer as aforesaid
within the time period stated herein.
From MORT-6: Credit Check ©2019 Ontario Real Estate Association. All rights
Prepayment clause A prepayment is a privilege, and not a right, given to a mortgagor to pay all or part
of the mortgage debt in advance of the maturity date based on stipulated terms. A
prepayment clause allows the buyer to make payments toward the STB mortgage in
addition to scheduled payments.
Prepayment options for the mortgagor can include the following terms.
• Fully open—prepay any amount at any time.
• Open—pay all or part of the principal on the next mortgage payment date. If a
partial prepayment is made, the amount must total the principal amounts of
the payments next falling due under the mortgage.
• Open on anniversary date—pay a percentage of the original principal amount
on each anniversary date without notice or bonus.
• Prepayment subject to a bonus— pay a percentage of the original principal
amount on each anniversary date subject to a bonus of a specified number of
month’s interest on the principal being prepaid.
As previously mentioned, a prepayment is a privilege, not a right. Typical clause

wording in a prepayment privilege would stipulate that the prepayments could only
be made if the mortgage is not in default.
This Charge/Mortgage shall contain a clause permitting the Chargor/Mortgagor,

when not in default, the privilege of prepaying all or part of the principal sum
outstanding at any time or times without notice or bonus.
From MORT-23: Term—Prepayment—Fully Open©2019 Ontario Real Estate

Association. All rights reserved. Used under license.

Renewal clause A buyer (mortgagor) in a STB mortgage, may want to renew the mortgage with the
seller (mortgagee) if it is not discharged at the end of the term. A renewal gives the
mortgagor a privilege to renew the STB mortgage once the term is completed
provided the loan is in good standing.
When the buyer’s STB mortgage term is due, the buyer might want to renew it at
the same rate if the lending interest rates are increasing. As the mortgagee, the
seller may want to take advantage of current rates at the time of renewal. As a
salesperson, you will want to discuss the pros and cons of a renewal.
This Charge/Mortgage shall contain a clause permitting the Chargor/Mortgagor,

when not in default, the privilege of renewing this Charge/Mortgage upon its
maturity, for a further term of__________ year(s) at the rate of interest charged by
____________________, on the date thirty days preceding the maturity date of the
Charge/Mortgage, to credit worthy borrowers for__________ year Charge/Mortgage
loans, and otherwise on the same terms and conditions save and except for the
right of a further renewal.
From MORT-28: Term—Renewal—At Current Rate of Interest©2019 Ontario Real

Estate Association. All rights reserved. Used under license.
Postponement clause A postponement clause, commonly used in second and subsequent mortgages
such as a STB, gives the buyer the right to arrange a new first mortgage or renew
the existing mortgage in priority to the second. Upon default, the first mortgage
would be paid before any existing second or subsequent mortgages are paid. If the
second mortgage term extends beyond the first mortgage term, a postponement
clause is a must.
This protects the first mortgagee. The mortgagee for the second mortgage is also
protected by the postponement clause because the clause would also state that if
the first mortgage is renewed or replaced at any time, any increase in the principal
amount of the first mortgage would be applied to reducing the second mortgage. In
the event the first mortgages is no longer on the property, the second mortgage

and any subsequent mortgagee would move up as well which would move the
second mortgagee into priority position.
Over financing A new first mortgage clause with the wording “not less than” a certain amount to be
prevention clause borrowed would mean the buyer could borrow that amount or more.
If there is an STB second mortgage, the seller has agreed to a set amount of the
second mortgage based on their comfort level of risk, between the amount of the
first mortgage, the amount the seller is willing to lend for the second and the
amount of the buyer’s down payment. Because of the wording of the first mortgage
of “not less than”, the buyer could arrange a mortgage for a higher amount and the
seller would be unaware of the amount. The higher the amount of the first
mortgage, the less the buyer’s down payment would be. This could put the seller’s
second mortgage at risk in the event of a mortgage default.
The salesperson would need to include a clause in the Agreement of Purchase and
Sale stating that if the buyer arranges a mortgage amount higher than stated in the
clause, the excess monies would need to be applied to reduce the second
mortgage. The buyer would have to provide a confirmation of the amount
borrowed to either the seller or their lawyer prior to completion.
This clause would need to be used in conjunction with the STB clause.
In the event that the first mortgage arranged by the Buyer has a principal amount in
excess of ____________________ ($ ___________), the principal amount of the second
mortgage will be reduced by the excess amount, with a corresponding reduction in
the payment for the second mortgage. The Buyer agrees to provide the Seller or the
Seller’s lawyer with a confirmation of the principal amount of the first mortgage to
be registered.
From MORT-15: Seller Take Back Mortgage—Second Mortgage Clause to Prevent

Over financing (Oklahoma) © 2019 Ontario Real Estate Association. All rights

The right to sell the A seller may decide to sell the mortgage prior to closing to another lender. To
mortgage clause protect the seller’s interests, a condition would be included in the offer allowing the
seller to obtain a commitment of the sale to another lender.
The seller would want to include a clause in the agreement that is an

acknowledgement from the buyer that they understand and agree that the
mortgage may be sold and the buyer agrees to provide any information required in
order to sell the mortgage.
As a salesperson, you should be aware that lenders involved in purchasing an STB

mortgage normally require the following.
• The seller to declare that there is good title other than encumbrances
declared in the purchase agreement (e.g., additional mortgages) and allow a
time limit to check out that title. It should be noted that title insurance can be
required in support of title.
• The seller to sell at a discounted value, to increase the rate of return to the
investor, unless the mortgage already has terms that are very favourable
compared with the current market.
• The seller to supply a duly executed assignment of mortgage document.
• The seller to supply an affidavit attesting to the balance of the mortgage and
that such mortgage is up-to-date and not in default.
• The agreement to be subject to the buyer of the mortgage making an
inspection of the property.
As an example, the following two clauses could be used for this purpose:
This Offer is conditional upon the Seller obtaining at the Seller’s own expense, a
commitment for the sale of the aforementioned _______________ Charge/Mortgage
[for an amount of not less than ____________________ ($ __________)] OR [at a discount
of not more than _____% of the amount of said Charge/Mortgage]. Unless the Seller
gives notice in writing delivered to the Buyer personally or in accordance with any
other provisions for the delivery of notice in this Agreement of Purchase and Sale or
any Schedule thereto not later than _____ p.m. on the _____ day of __________, 20_____,

that this condition is fulfilled, this Offer shall be null and void and the deposit shall
be returned to the Buyer in full without deduction. This condition is included for the
benefit of the Seller and may be waived at the Seller’s sole option by notice in
writing to the Buyer as aforesaid within the time period stated herein.
From MORT-10: Condition—Sale of Mortgage by Seller©2019 Ontario Real Estate

The Buyer acknowledges that the Charge/Mortgage being taken back by the Seller
may be sold. The Buyer agrees to co-operate fully with the Seller in connection with
the sale of this Charge/Mortgage, and shall provide such personal and financial
information, together with such documents as the Assignee of the Charge/
Mortgage may reasonably require, forthwith upon request by the Seller, in order
that the sale of the Charge/Mortgage may be completed.
From MORT-17: Seller Take Back—To Be Sold By Seller Prior to Closing (Buyer to Co-
operate) ©2019 Ontario Real Estate Association. All rights reserved. Used under
license.
Note: MORT-10 is a condition for the seller to sell the mortgage. MORT-17 would
provide the buyer’s acknowledgement that the mortgage will be sold and agrees to
provide any information required to sell the mortgage.
Discharge of the existing There could be circumstances where the seller would need to pay a fee to discharge
mortgage clause the mortgage currently registered on the property prior to the expiration of the
term. The amount the seller would be required to pay could affect the price the
seller is prepared to accept during negotiations with the buyer. They would want to
confirm the details of the discharge prior to committing to an offer from the buyer.
This Offer is conditional upon the Seller being satisfied that the cost to discharge
the_______________ Charge(s)/Mortgage(s) shall not exceed the sum of
_________________, ($_____). Unless the Seller gives notice in writing delivered to the
Buyer personally or in accordance with any other provisions for the delivery of

notice in this Agreement of Purchase and Sale or any Schedule thereto not later
than _____ p.m. on the _____ day of __________, 20_____, that this condition is fulfilled,
this Offer shall be null and void and the deposit shall be returned to the Buyer in
full without deduction. This condition is included for the benefit of the Seller and
may be waived at the Seller’s sole option by notice in writing to the Buyer as
aforesaid within the time period stated herein.
From MORT-7: Condition—Discharge of Mortgage(s)—Cost©2019 Ontario Real

Estate Association. All rights reserved. Used under license.

In most cases, buyers will need to obtain mortgage financing to complete the purchase of a
residential property. A salesperson should consider the buyer’s needs when drafting a
condition for arranging financing to ensure an appropriate condition is included in the buyer’s
offer.
When dealing with mortgage conditions, which of the following statements is correct?
A typical postponement clause provides that if additional monies are advanced by way of a new first
1
mortgage, the excess must be paid to reduce the second mortgage.
2 A renewal clause must only provide for a single renewal of a mortgage.
STBs require the same approval process, as would be undertaken had the buyer secured financing through a
3
lending institution.
A seller who decides to take back a mortgage is not typically required to report interest received on that
4
mortgage until the mortgage term has ended.

Your seller client wants to offer a potential buyer an STB mortgage. While this would have
some clear benefits for your client, several additional considerations may need to be
addressed with additional provisions in the agreement of purchase and sale. With such a
potentially complex scenario, your client is best-advised to see a lawyer to write the clauses.
Which of the following are additional considerations you would discuss with your client about STB
mortgages?
There are seven options. There are multiple correct answers.
1 Credit check
2 Credit check
3 Renewal
4 Postponement
5 Over financing prevention
6 The Right to Sell the Mortgage
7 The Right to Sell the Mortgage

There are three tabs on this page with a summary of the key topics that were covered in this lesson.
Arranging a There is usually a clause included in the Agreement of Purchase and Sale stating that the offer is
conditional upon the buyer arranging a new mortgage, unless the sale of a property is an all
new mortgage
cash offer.
The amount of the new mortgage is typically the sale price less the down payment.
When using a clause to arrange for a new mortgage, the timeline typically is 5 to 10 business
days to fulfill the condition.
Assuming an There may be circumstances when a seller will offer the buyer the option to assume the existing
mortgage.
existing
mortgage The assumption would typically be dependent upon approval from the lender that currently
holds the mortgage on the property.
A seller may offer the buyer the option to assume the mortgage if the market conditions are
slow. This may make their property more attractive to a buyer.
A buyer may want the option to assume the mortgage because the interest rates with another
lender might be higher than with the current lender.
Seller Take In an STB mortgage, the seller is the actual lender (mortgagee).
Back The seller could improve the marketability of their property through attractive terms. An STB
mortgage mortgage also provides the seller with an investment opportunity.
The buyer could avoid certain costs and paperwork typically associated with conventional
lenders.

Lesson 3: Supplemental Conditional Clauses
This lesson highlights supplementary conditional clauses that could be included in an agreement of purchase and sale; for
example, addressing home inspections, obtaining insurance, the sale of the buyer’s property and obtaining a lawyer’s
approval.

Supplemental Conditional Clauses
A critical component of drafting an offer is to ensure the seller or the buyer are provided an opportunity to complete the
necessary due diligence. As a salesperson, you will need to consider various factors that could impact the specific condition
you include. Sellers and buyers will rely on your advice and guidance to ensure the condition is accurate and reflects their
specific requirements related to supplementary conditional clauses.
In this lesson we will review a selection of conditional clauses that address a property inspection, insurance, sale of the buyer’s
property, and a lawyer’s approval.
Please note this is not an exhaustive list. A selection of conditional clauses has been compiled to assist with your learning.
• Identify options including a condition for property inspection
• Identify options for including a condition for obtaining insurance
• Identify options for including a condition on the sale of the buyer’s property
• Identify options for including a condition for the Agreement of Purchase and Sale to be reviewed by a lawyer

Supplementary Conditional Clauses: Property Inspection
To assess the structure and systems of a residential property, many buyers will request a property inspection report from a
qualified property inspector. The property inspection is focused on the performance of the home rather than cosmetic or
design issues.
The property inspector will assess a checklist of important items such as the condition of the roof, walls, floors, windows,
heating, air conditioning, electrical, and plumbing. The inspection report will summarize findings to help the buyer
determine the extent and cost of repairs, replacement, and remediation work to the property.
To obtain an inspection report, the buyer will need to add a clause to the agreement of purchase and sale. Without an
inspection clause, buyers should understand they are acknowledging no inspection report will be obtained.
As a salesperson, you should discuss with the buyer the benefits of having a property inspection and the type of
inspection clause that would be included in the offer. You should never discourage a buyer from having an inspection
completed.

You have various options for the type of inspection a buyer would require, and which would be in their best interest. A
clause could provide for a satisfactory inspection report at the buyer’s sole and absolute discretion. The decision as to what
is satisfactory rests solely with the buyer.

A typical property inspection condition allows the buyer to obtain an inspection report from a home inspector at the
buyer’s expense. After the inspection is complete, if the home inspector found deficiencies and the buyer is not satisfied,
they have the option to not proceed with the transaction.
This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer’s own expense, and
the obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice
in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of _____________, 20_____,
that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without
deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This
From INSP 1 – Inspection of Property by a Home Inspector—General Inspection©2019 Ontario Real Estate Association. All
rights reserved. Used under license.

An inspection condition can include wording that allows the seller to remedy any deficiencies found during a property
inspection. The clause might also contain wording that provides certain limits, such as the remedial costs borne by the
seller or the inspection scope. For example, a property inspection clause limiting the scope might limit the inspection to
mechanical or electrical systems. An inspection can also focus on a specific issue such as remediation necessary to comply
with the Fire Code or electrical standards.

Supplementary Conditional Clauses: Property Inspection and Market Conditions
With the sale of any property, market conditions can make a difference in choosing the inspection clause that is in the
buyer’s best interest.
In a seller’s market, the buyer could include a clause that would allow the seller to remedy any deficiencies. Including this
type of clause would possibly make their offer more appealing than the buyer including a clause that would indicate that
the inspection is in the buyer’s sole and absolute discretion.
In a buyer’s market, the buyer might choose not to offer the opportunity for the seller to remedy any deficiencies but
choose to have the inspection as their sole and absolute discretion.

Supplementary Conditional Clauses: Property Inspection Other Considerations

As a salesperson, you will discuss with the buyer an appropriate time period in the condition for a property inspection by a
home inspector to be arranged and completed. The amount of time for the condition to be fulfilled or waived could be
dictated by the trading area and market conditions. The seller may be only willing to accept a shorter time period in one
market or trading area than what might be accepted in another. Generally, the time period would be 5 to 10 days and
similar to the time allowed to arrange the appropriate financing.
The home inspector is hired by the buyer. They receive an inspection report and there is no obligation on the part of the
buyer to provide the seller with a copy of the report. The buyer may insert a clause in the agreement to provide a copy of
the report showing any deficiencies in the property to the seller as a good faith gesture.
A seller may also request this clause be included in the agreement in case the buyer does not proceed with the transaction.
The seller may want to remedy the deficiencies prior to placing the property back on the market.

Home inspections are often an integral part of an agreement of purchase and sale.
Any condition relating to a home inspection must not include a waiver provision.
True False
In a sellers’ market where properties sell very quickly with multiple offers, you should
discourage a buyer from having an inspection completed, so that their offer is as clean as
possible.
True False

The focus of a home inspection is on the performance of the home, rather than cosmetic
or design issues.
True False
A salesperson’s expertise includes performing home inspections.
True False

Home inspections are typically requested by buyers seeking to assess the condition of
property prior to a planned purchase.
True False
A home inspection is another phrase for a municipal inspection involving compliance with
local codes.
True False

Which of the following is a most notable benefit of a professional home inspection?
1 The determination of the presence or absence of hazardous substances

2 The assistance given in estimating market value
3 The assessment of the strength of internal structural components
4 A report including systems or components in need of immediate repair

Supplementary Conditional Clauses: Insurance
The typical agreement of purchase and sale will include a clause stating that prior to completion the buyer will confirm that
the property can be insured against risk of fire. If the property can not be insured, the buyer will be unable to secure
financing for the property.
To protect the buyer, you will discuss the merits of including a condition upon obtaining insurance in the agreement. The
decision to include a condition is typically based on the age, location, and condition of the property. Including a clause will
allow the buyer to confirm they will be able to obtain the insurance, otherwise they will not continue with the transaction.
The buyer can include a clause that is conditional on obtaining suitable insurance.

This clause states that the buyer will attempt to arrange insurance that is satisfactory in their sole and absolute discretion.
The buyer’s decision on what is satisfactory would typically take into account the amount and extent of coverage, and the
cost.
This Offer is conditional on the Buyer arranging insurance for the property satisfactory to the Buyer in the Buyer’s sole and
absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any
other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than
_____ p.m. on the _____ day of __________, 20_____, that this condition is fulfilled, this Offer shall be null and void and the
deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the
property, if necessary, for any inspection of the property required for the fulfillment of this condition. This condition is
included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as
aforesaid within the time period stated herein.
NOTE: Due to the nature of this clause, a short time frame should be chosen for this condition.
From Insur 1 – Arranging Insurance ©2019 Ontario Real Estate Association. All rights reserved. Used under license.

Supplementary Conditional Clauses: Factors Influencing Insurance
The buyer may want to purchase an older property or one that is in a remote location. In this situation, the buyer might be
concerned about the ability to get or the cost of property insurance. Insurance companies are becoming more careful of
what they will insure and at what cost. For instance, there could be an environmental issue or it could be on or near a flood
plain.
Some property types, condition, or location could impact the premium, for example:
• A rural property in a remote location that is far from a fire department which could include a volunteer department—
the distance to the fire department could impact the premium.
• Other factors such as outdated wiring, underground oil tanks or other matters requiring remedial action can also
have an impact on insurance premiums or possible refusal.
Other Considerations
The time frame for the insurance condition would be similar to the financing or home inspection conditions unless there
are circumstances such as those mentioned previously that could require additional time.

Consider the following clause: “This offer is conditional on the Buyer, at the Buyer’s own expense, arranging insurance for
the property satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing
delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of
Purchase and Sale or any Schedule thereto not later than time in p.m., date, month, and year, that this condition is fulfilled,
this offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees
to co-operate in providing access to the property, if necessary, for any inspection of the property required for the
fulfillment of this condition. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole
option by notice in writing to the Seller as aforesaid within the time period stated herein.”
The parts of the insurance clause based on the six steps of a clause are as follows:
1. Who is to do it: “This Offer is conditional on the Buyer”
The buyer is responsible for performance.
2. Who is to pay for it: “at the Buyer’s own expense”
Even without explicitly stating so, it would be quite clear that this would be at the buyer’s expense.
3. What is to be done: “arranging insurance for the property satisfactory to the Buyer in the Buyer’s sole and absolute
discretion.”
Performance requires arranging insurance for the property.
4. Within what time limit: “not later than time in p.m., date, month, and year”
The clause states a specific deadline.
5. What happens in the event it is not done: “Unless the Buyer gives notice in writing delivered to the Seller personally
or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any

Schedule thereto not later than time in p.m., date, month, and year, that this condition is fulfilled, this offer shall be
null and void and the deposit shall be returned to the Buyer in full without deduction."
This clause is a condition precedent, as it requires the condition to be fulfilled or waived for the agreement to
continue.
6. Can it be waived: “This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole
option by notice in writing to the Seller as aforesaid within the time period stated herein.”
The clause contains a waiver statement at the end, another indication that this is a condition precedent.

Supplementary Conditional Clauses: Addressing the Sale of the Buyer’s Property
A buyer may find a property they are interested in purchasing. To finalize the sale, however, the buyer might need to
ensure they have sold their current property. The buyer could add a clause to their offer that would ask the seller for a
conditional period longer than the average 5 to 10 days to give them the opportunity to sell their property.

This clause is one of the longest in terms of the conditional time period when dealing with residential properties. Selling a
buyer’s property will typically take longer than other matters such as arranging financing or a property inspection. In a
seller’s market, home owners are not usually inclined to accept this condition.
The clause will include the municipal address of the buyer’s property.
This Offer is conditional upon the sale of the Buyer’s property known as ________________. Unless the Buyer gives notice in
writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of __________, 20_____,
deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in
From SPB/SA 1 – Buyers Property©2019 Ontario Real Estate Association. All rights reserved. Used under license.

The condition of the sale of a buyer’s property can require a longer period of 30 to 60 days. To make the longer
conditional time in the buyer’s offer more acceptable to the seller, the buyer can insert an escape clause. This clause would
allow the seller to continue offering the property for sale and to accept a second offer during the conditional period of the
first offer. The second offer would be conditional upon being released from the first offer. To release the first offer, the
seller would need to go back to the first buyer and explain that the original time period to sell the buyer’s property is no
longer available. The buyer would then need to decide whether to waive the condition and continue with the transaction
or release the seller from it. The escape clause would typically include a time period of 24 to 72 hours for the first buyer to
make a decision to either waive the condition or not move forward with the transaction.


Sellers are not typically willing to accept offers with long conditions. However, in a buyer’s market or in the case of a
property that has proven to be difficult to sell, a seller may agree to a long condition provided that an escape clause is
included. The escape clause is usually added by the salesperson drafting the offer before it is presented to the seller.
There is an escape clause that only requires the removal of the condition relating specifically to the sale of the buyer’s
property.
Provided further that the Seller may continue to offer the property for sale and, in the event the Seller receives another
Offer satisfactory to the Seller, the Seller may so notify the Buyer in writing by delivery to the Buyer personally or in
accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule
thereto. The Buyer shall have __________ hours from the giving of such notice to waive this condition by notice in writing
delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of
Purchase and Sale or any Schedule thereto, failing which this Offer shall be null and void, and the Buyer’s deposit shall be
returned in full without deduction.
From SBP/SA4 Escape Clause—Buyer’s Property©2019 Ontario Real Estate Association. All rights reserved. Used under
license.

Consider the scenario where a seller has accepted an offer conditional on the sale of the buyer’s property. In that first offer,
the buyer’s salesperson added an escape clause to allow the seller to continue to offer the property for sale during the
conditional period. A second buyer makes an offer. Before accepting the second offer, a clause must be added making it
conditional upon the seller being released from the first offer. Without this type of clause added to the second offer, the
seller could wind up selling the property to two different buyers.
This Offer is conditional upon the Seller obtaining a release from a prior Agreement of Purchase and Sale. Unless the Seller
gives notice in writing delivered to the Buyer personally or in accordance with any other provisions for the delivery of
notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of
__________, 20_____, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the
Buyer in full without deduction.
NOTE: This clause is a true Condition Precedent and neither a Seller nor a Buyer is entitled to waive this condition.
From SPB/SA 3 - Seller’s Release from Previous Agreement©2019 Ontario Real Estate Association. All rights reserved. Used
under license.

Clients want to make an offer on a property they have just viewed for a second time.
However, the clients will need to sell their current property in order to come up with the down
payment. They are told by their salesperson that they could make the offer conditional upon
the sale of their property. To make the offer more attractive to the seller, it’s suggested that
an escape clause be inserted with the condition.
Which of the following statements are correct about the sale of buyer’s property condition and
escape clause?
An escape clause allows the seller to continue to offer the property for sale even after accepting an offer from
1
the buyer.
An escape clause could result in the buyers having to decide to waive the condition for the sale of their
2
property even though their property has not sold.
3 A condition for the sale of the buyers’ property is more likely to be accepted in a seller’s market.
The address of both the seller and the buyer must be included in a condition for the sale of a buyer’s property
4
in order to identify the properties involved in the transaction.

A seller client has received an offer to purchase their property. The offer is conditional on the
sale of the buyer’s property, which also includes an escape clause. The seller then receives a
second offer, which is not conditional on the sale of the second buyer’s property. The seller
wants to go ahead and accept the second offer.
Given this situation, what should the seller’s salesperson do to ensure the seller does not
unintentionally sell their property twice?
Include an escape clause for the seller in the second offer so that the seller can terminate the first offer
1
immediately.
Ensure the second offer contains a condition on the seller being released from a previously accepted offer
2
on or before the specified date and time.
Ensure the second offer has a waiver provision included with a condition for the seller’s release from a
3
previous agreement.
Advise the seller that they cannot accept another offer because the previous offer has an escape clause for the
4
benefit of the buyer.

Supplementary Conditional Clauses: Lawyer’s Approval
A clause could be included in the Agreement of Purchase and Sale that is conditional upon the approval of either the
seller’s or the buyer’s lawyer. There could be certain situations where you, as a salesperson may want to suggest to your
seller or buyer that they should seek their lawyer’s advice regarding the transaction. A seller or buyer may themselves want
to have their lawyer’s advice or approval of the agreement.
Some sellers, though not many, refuse to accept any offer until their lawyer has seen it. A seller may be in an assisted living
facility and as a salesperson, you would want to get their lawyer and/or family member involved. A brokerage may be
selling a private sale to a buyer client and the seller may want their lawyer to review the offer since they have no
representation.

Supplementary Conditional Clauses: Lawyer’s Approval

In some instances, whether it be initiated by the seller or the buyer or on advice from the salesperson, an offer will contain
a clause on lawyer’s approval of the terms of the agreement.
This Offer is conditional upon the approval of the terms hereof by the Buyer’s Solicitor. Unless the Buyer gives notice in
deduction. This condition is included for the benefit of Buyer and may be waived at the Buyer’s sole option by notice in
From LAW-1: Condition-Lawyer’s Approval-Buyer©2019 Ontario Real Estate Association. All rights reserved. Used under
license.

There are four tabs on this page with a summary of the key topics that were covered in this lesson.
Home Home inspection clauses allow the buyer to have a professional home inspector inspect the
property prior to finalizing the sale. Depending on the outcome of the home inspection, there
inspection
might be issues that the buyer wants the seller to address.
clauses
Insurance clauses In order to obtain a mortgage from a conventional lender, the buyer must be able to obtain
insurance for the property they are intending to purchase. In some cases, the buyer may not be
willing to pay more than a certain amount for insurance.
Sale of the Another common clause that is included in an agreement of purchase and sale is the sale of the
buyer’s own property. If a buyer finds a house before selling their own, then they would include
buyer’s property
this type of clause. Many sellers may not want to accept a sale of the buyer’s property clause, so
clauses the buyer would include a clause stating that the seller can still offer the property for sale and
accept offers during the conditional period. A seller might get a second offer which would then
affect the original buyer’s conditional time period.
Clauses for a There are certain circumstances where a salesperson will recommend that either the seller or the
buyer seek a lawyer’s approval of the Agreement of Purchase and Sale.
lawyer’s
approval

Lesson 4: Environmental and Zoning Conditional Clauses
This lesson highlights conditional clauses that could be included in an agreement of purchase and sale to address
environmental issues and zoning.

Environmental and Zoning Conditional Clauses
A critical component of drafting an offer is to ensure the seller or the buyer are provided an opportunity to complete the
necessary due diligence. As a salesperson, you will need to consider various factors that could impact the specific condition
you include.
Sellers and buyers will rely on your advice and guidance to ensure the condition is accurate and reflects their specific
requirements related to environmental and zoning clauses.
In this lesson we will review a selection of conditional clauses that address environmental issues and zoning. A selection of
commonly used conditional clauses are being presented to assist with your learning.

• Identify options for including a clause to address other considerations relating to environmental and zoning
considerations in an agreement of purchase and sale

Supplementary Conditional Clauses: Environmental Issues
Environmental issues are increasingly impacting real estate transactions. Duties and responsibilities of a salesperson do not
extend to offering advice regarding environmental legislation or understanding the technical complexities of
environmental problems.
Although not an expert, as a salesperson, you should have a general knowledge of environmental considerations and
potential hazards to help a buyer determine the appropriate clauses to include in an offer. Buyers may want the seller to
provide a representation and warranty. In other circumstances, buyers may want to include a condition that would give
them the opportunity to investigate and verify any concerns with the property.

Examples of concerns the buyer may have with the property include whether hazardous conditions or substances exist and
whether limitations or restrictions exist which would affect the use of the property including an environmentally protected
zone, flood plain or hazardous land.

Supplementary Conditional Clauses: Environmental Issues
Most properties that are new have no real environmental concerns to speak of. Depending on the age and location of the
home, some residential properties may have any or all of these environmental issues:
• Oil tanks
• Vermiculite
• Asbestos
• Wells and septic
It’s worth mentioning again. Although not an expert, as a salesperson, you should have a general knowledge of
environmental considerations and potential hazards to help a buyer determine the appropriate clauses to include in an
offer.
In all cases, the Ministry of Environment, Conservation and Parks (MECP) has guidelines to follow for both potable and
non-potable situations.

Supplementary Conditional Clauses: Environmental Issues Related to Fuel Oil Tanks
Fuel oil tanks, whether buried or above ground can present problems. The presence of a buried oil tank (if known), must be
disclosed to a potential buyer as it’s a material latent defect due to the potential of environmental contamination.
Insurance companies are hesitant to insure these types of properties because of the potential claims arising from spills and
contamination. An appropriate clause must always be added to an agreement of purchase and sale involving a property
with an oil tank.
The following three tabs contain information on clauses related to oil tanks. You must review any or all of the tabs before
moving forward.
Oil tank— A buyer is interested in purchasing a property that contains an oil tank and wants to
determine that the tank system is safe and meets the current requirements of the
Aboveground or
Technical Standards and Safety Act before committing to a firm and binding agreement.
underground clause
This Agreement is conditional upon the Buyer obtaining a report from a fuel oil
distributor registered under the Technical Standards and Safety Act, 2002, and any
Regulations thereto as amended from time to time stating the tank system in, on or
about the property is in a safe operating condition and complies with the requirements
of the Technical Standards and Safety Act, 2002, and any Regulations thereto as
amended from time to time. Seller agrees to allow access to the property by the fuel oil
distributor for purpose of obtaining a report. Unless the Buyer gives notice in writing
delivered to the Seller personally or in accordance with any other provisions for the
delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not
later than _____ p.m. on the _____ day of __________, 20_____, that this condition has been
fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer
in full without deduction. This condition is included for the benefit of the Buyer and
may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid
within the time period stated herein.

From ENV-5 – Oil Tank—Aboveground or Underground©2019 Ontario Real Estate
Underground tank— The fact that an underground oil tank was on a property and has since been removed
would have to be disclosed to a buyer. Inclusion of a clause protects the seller by
Seller has removed
having an acknowledgement that the disclosure was made. It provides assurance to the
clause buyer that it was removed properly, the surrounding soil was tested, and any
contamination removed.

The Buyer acknowledges that there was an underground fuel tank on the property that
has been removed and the Seller agrees to provide to the Buyer at the Seller’s own
expense by no later than _____ p.m. on the _____ day of __________, 20_____, evidence that
a contractor registered under the Technical Standards and Safety Act, 2002, and any
Regulations thereto as amended from time to time, has removed the said fuel oil tank,
assessed the soil surrounding the underground fuel oil tank for contamination and
cleaned and removed any contamination.
From ENV-13 – Underground Tank—Seller Has Removed©2019 Ontario Real Estate
Underground tank— A buyer may be interested in a property that has an underground oil tank but is not
willing to assume the potential liability associated with the tank. The buyer’s offer may
Seller to remove clause
include a clause requiring the seller to remove the tank at the seller’s expense and
ensure that any possible contamination is removed.

The Seller agrees that the Seller will, at the Seller’s expense, have the underground fuel
oil tank on the property removed from the property by a contractor registered under
the Technical Standards and Safety Act, 2002, and any Regulations thereto as amended
from time to time by no later than _____ p.m. on the _____ day of __________, 20_____, and
thereafter to have the soil surrounding the underground fuel oil tank assessed for
contamination and any contamination cleaned and removed by a contractor registered
under the Technical Standards and Safety Act, 2002, and any Regulations thereto as
amended from time to time, and on or before closing to provide evidence of the said
testing, cleaning and removal from the said contractor and to restore the grading and

landscaping on the property to the existing or a comparable condition to which it was
prior to the removal of the said fuel oil tank.
From ENV-14 – Underground Tank—Seller to Remove©2019 Ontario Real Estate

Supplementary Conditional Clauses: Vermiculite and Asbestos
Vermiculite, as you learned earlier, is a mineral that does not burn and when heated expands which makes it suitable for
insulation. Vermiculite itself is not a health concern, but some vermiculite insulation contains asbestos which when
airborne and inhaled can cause health problems.
Asbestos floor tiles were also common in houses built in the 1960s. If left intact, they do not pose health hazards. But any
dust created in trying to remove them poses a health hazard. Removal of asbestos needs to be done by qualified
professionals.
If the seller is aware the property is insulated with vermiculite containing asbestos or any other type of asbestos, they
would need to disclose this material latent defect to the buyer. The seller may not be aware of the type of insulation used
in their property. In order to protect the buyer, you as a salesperson could insert a clause in the offer that is conditional
upon testing the property for asbestos.
If the property has been previously tested and asbestos was not found, a seller could provide the buyer with the test
results.
Alternatively, the seller could state in a clause that they have no knowledge of the insulation and therefore makes no
warranty to the buyer.

Supplementary Conditional Clauses: Vermiculite
Depending on the age of the property a buyer might for their own peace of mind include a clause that is conditional upon
them testing the property for the presence of asbestos within the vermiculite insulation.
As an example, the following clauses could be used for this purpose:
This Offer is conditional upon the Buyer testing the subject property for the presence of asbestos within the vermiculite
insulation located upon the property at the Buyer’s own expense, and the obtaining of a report, respecting the said test
the results of which are satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice
in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this
deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This
From VER 1 – Testing of Property for Vermiculite©2019 Ontario Real Estate Association. All rights reserved. Used under
license.
A buyer would want this added so they can do an inspection during the conditional time period.

Supplementary Conditional Clauses: Environmental Issues Related to Water and Septic

System
Many rural properties are not on municipal services and, as a result, have their own private water and sewage systems. A
salesperson must be aware of these well and septic systems to properly advise sellers and buyers. When a property is
being purchased, clauses should be added to an offer to give the buyer time to have a professional check the water and
septic systems to determine that they are in proper operating condition.


System
When it comes to private water systems, in addition to the condition of the well, two things are of paramount
importance—quantity and quality. A buyer wants to ensure there is a sufficient quantity of water for their normal
household use and that the water is potable (drinkable).
The following clause could be used for this purpose:
This Offer is conditional upon the Buyer determining, at the Buyer’s own expense, that: (1) there is an adequate water
supply to meet the Buyer’s household needs; (2) the pump and all related equipment serving the property are in proper
operating condition; and (3) the Buyer can obtain a Bacteriological Analysis of Drinking Water from the authority having
jurisdiction indicating that there is no significant evidence of bacterial contamination.

Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the
delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day
of __________, 20_____, that these conditions have been fulfilled, this Offer shall become null and void and the deposit shall
be returned to the Buyer in full without deduction. These conditions are included for the benefit of the Buyer and may be
waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein. The
Seller agrees to allow access to the subject property to the Buyer or the Buyer’s agent for the purpose of satisfying this
condition.
From SEWER/WATER-2 – Condition—Water Supply—All Well Types©2019 Ontario Real Estate Association. All rights
The water sample used for the bacteriological analysis should be taken by the buyer or a professional retained by the
buyer rather than by the seller or the salesperson. It is imperative that the sample be taken from the actual water supply
and not substituted by a sample taken from a different source.


System
A private sewage system (septic system) must be adequate to meet the needs of the buyer’s family. A typical buyer would
want to make sure that the system is totally within the property and meets the setback requirements, it was installed
correctly and with applicable permits.
The following clause could be used for this purpose:
This Offer is conditional upon the Buyer determining, at the Buyer’s own expense, that: (1) all sewage systems serving the
property are wholly within the setback requirements of the said property and have received all required Certificates of
Installation and Approval pursuant to the Environmental Protection Act; (2) all sewage systems serving the property have
been constructed in accordance with the said Certificates of Installation and Approval; (3) all sewage systems serving the
property have received all required use permits under the said Act or any other legislation; and further, that on inspection,
the septic bed is in good working order.

The Buyer shall be allowed to retain at the Buyer’s own expense, a professional in the septic business to make an
examination of the septic system.
Seller agrees to allow access to the property for the purposes of a septic inspection and agrees to allow the Buyer to
request information as outlined above from the appropriate authorities having jurisdiction. Unless the Buyer gives notice in
that these conditions have been fulfilled, this Offer shall become null and void and the deposit shall be returned to the
Buyer in full without deduction. These conditions are included for the benefit of the Buyer and may be waived at the
Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.
From SEWER/WATER-1 – Condition—Sewage Systems—Approvals©2019 Ontario Real Estate Association. All rights
Since this condition does not speak to the working order of the septic system, the clause below could be added to the
offer to have the seller warrant the condition.
The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that, during the Seller’s occupancy of
the building, the sewage system has been and will be in good working order on closing. The Parties agree that this
representation and warranty shall survive and not merge on completion of this transaction but apply only to the state of
the property existing at completion of this transaction.
From SEWER/WATER-4 – Sewage System—Good Working Order—Warranty©2019 Ontario Real Estate Association. All
rights reserved. Used under license.

Supplementary Conditional Clauses: Zoning
There could be circumstances when a buyer may want to apply to the municipality to change the zoning of the property to
allow for a different use. The buyer could make the offer conditional on being able to change the zoning. If the zoning
cannot be changed, the buyer may not want the property. If the buyer waits to obtain a zoning change until after closing,
it will be too late. If the rezoning application is turned down, the buyer will be stuck with the property.

Supplementary Conditional Clauses: Zoning

Let’s assume a buyer has found a home he would like to purchase but it lacks a double garage. If a double garage were to
be built on the side of the house, it would come within three feet of the property line. The current zoning requires a four-
foot setback. The buyer makes his offer conditional on obtaining a minor variance to the zoning bylaw to enable him to
build the double garage.
As an example, the following clauses could be used for this purpose: This Offer is conditional upon the [Seller/Buyer]
obtaining at the [Seller’s/Buyer’s] expense, a [rezoning/minor variance], to allow for [specify exact variance/use] for said
property. Both Seller and Buyer agree to proceed in a diligent manner to acquire the [re-zoning/minor variance]. Unless
the [Seller/Buyer] gives notice in writing delivered to the [Seller/Buyer] not later than ____ p.m. on the _______ day of
____________, 20___, that this condition is fulfilled, this Offer shall become null and void and the deposit shall be returned to
the Buyer in full without deduction.
NOTE: If the Buyer wishes to retain the right to purchase the property, even though the rezoning or minor variance is not
approved, then a “Waiver” should be included.
From ZONING-1 – Re-zoning/Minor Variance©2019 Ontario Real Estate Association. All rights reserved. Used under license.

A client wants to make an offer on a property that in the past had been the location for a
manufacturing factory. The client is concerned about potential environmental contamination
and has asked for the salesperson’s advice.
How should the buyer’s salesperson proceed with respect to the offer and the buyer’s concerns
regarding environmental contamination?
The salesperson should proceed to conduct their own environmental investigation prior to an offer being
1
made.
Have the buyer provide the seller with a representation and warranty that there are no environmental issues
2
with the property.
3 Insert a conditional seller warranty and representation clause that there are no environmental issues.
Insert a clause that makes the offer conditional on the buyer determining that there are no environmental
4
issues.

A buyer wants to make an offer to purchase a property. The buyer’s salesperson has
expressed concerns that a number of similar homes in the area have been found to be
insulated with vermiculite. This home was built in the 1950s and the seller is the third owner.
The seller says that they did not insulate the home with vermiculite, but cannot say what the
previous owners did.
Given the information, which of the following statements about vermiculite and drafting an offer
to protect the buyer are correct?
1 Vermiculite is another name for asbestos.

If the seller is aware the property is insulated with vermiculite containing asbestos, they would have to disclose
2
this to the buyer.
3 Vermiculite itself is considered a health concern.
To protect the buyer, the salesperson should recommend inserting a clause in the offer that states the offer is
4
conditional upon testing the property specifically for the presence of asbestos within vermiculite.
A clause which makes an offer conditional on the buyer testing a property for the presence of asbestos within
5 vermiculite insulation would need to state that any report regarding the testing would need to be satisfactory
to the seller.
While the seller in this scenario could warrant and represent that they had not caused the buildings on the
6 property to be insulated with vermiculite, they would be unable to warrant and represent that there was no
vermiculite in the property.

The buyer clients want to make an offer on a large century home that they have now viewed
for the third time. Their intention is to convert the place into a bed and breakfast. This would
require a change of zoning. The buyers have asked their salesperson to include a zoning
condition in the offer that makes the offer conditional on the buyers being able to obtain the
necessary rezoning.
Which of the following are true about a zoning condition that may be required in an offer these
buyer clients make on the property?
If the buyers wish to retain the right to purchase the property, even though the rezoning is not approved, then
1
a “Waiver” should be included in a rezoning condition.
A clause that requires rezoning to be granted before the condition is fulfilled would be a true condition
2
precedent.
The zoning condition should ensure that both the seller and the buyer agree to proceed in a diligent manner
3
to acquire the rezoning.
4 Any conditional rezoning clause must include the current zoning and present use of the property.

There are four tabs on this page with a summary of the key topics that were covered in this lesson.
Environmental As a salesperson, it is important that you understand the impact of environmental issues on real
estate transactions.
clauses
You should have a general knowledge of environmental considerations and potential hazards to
help a buyer determine the appropriate clauses to include in an offer.
Fuel oil Fuel oil tanks, whether buried or above ground can present problems. The presence of a buried
oil tank (if known) must be disclosed to a potential buyer as it is a latent defect due to the
tank
potential of environmental contamination.
clauses A buyer may want to include a clause that gives them the opportunity to verify any potential
environmental concerns with the property before the offer becomes firm and binding.
Vermiculite While vermiculite is not a health concern on its own, some vermiculite insulation contains
asbestos which can be a health hazard when particles become airborne and inhaled. If the
and asbestos
property has been insulated with vermiculite containing asbestos, then the seller must disclose
clauses this latent defect. It is in the buyer’s best interest that a clause is included to address any
vermiculate concerns.
A buyer may want to include a clause that gives them the opportunity to verify any potential
environmental concerns with the property before the offer becomes firm and binding.
Zoning clauses There might be some instances when a buyer may be interested in purchasing a property for a
different purpose than what it is currently zoned for. In this case, the buyer would want to
include a zoning clause to ensure that if they cannot obtain rezoning/variance then they have
the option to not continue with the offer.

Lesson 5: Summary Practice Activities
This lesson provides a series of activities that will test your knowledge on the entire module.

Summary Practice Activities
This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test
your knowledge on the topics presented.

A salesperson represents a buyer looking for a single family detached house with a finished basement. The salesperson has
found a property that the buyer really likes. It meets all the client’s needs and wants. The basement is newly renovated by
the seller and looks beautiful. The buyer would like to make an offer on the property but is concerned about whether the
seller completed the home renovations properly with the necessary permits.

Consider this clause: “This Offer is conditional upon the Buyer determining that the Seller’s
basement renovations received all necessary approvals and permits from the appropriate local
municipality and any other relevant authorities. Unless the Buyer gives notice in writing to the
Seller personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule thereto no later than __5____ p.m., on the
8th day of March, 20XX, that this condition is fulfilled, this Offer shall be null and void and the
deposit shall be returned to the Buyer in full without deduction. This condition is included for
the benefit of the buyer and may be waived at the Buyer's sole option by notice in writing to
the Seller within the time period stated.”
clause?
1 Who is to do it?

A salesperson is writing a home inspection clause to protect the buyer client. The following
clause has been recommended but the salesperson realizes it’s missing some key information:
This Offer is conditional upon the inspection of the subject property at the Buyer’s own
expense. Unless the Buyer gives notice in writing delivered to the Seller personally or in
accordance with any other provisions for the delivery of notice in this Agreement of Purchase
and Sale or any Schedule that this condition is fulfilled, this Offer shall be null and void. The
Seller agrees to co-operate in providing access to the property for the purpose of this
inspection. This condition is included for the benefit of the Buyer and may be waived at the
Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated
herein.
Which of the six steps to ensure the clause contains the required information are missing in the
written clause provided?
1 Who is to do it?

The following clause in the previous decision point is missing wording that would protect the
buyer. The issues have been identified in the previous decision point. Once again, the offer is
being drafted on March 3, 20XX. This Offer is conditional upon the inspection of the subject
property at the Buyer’s own expense. Unless the Buyer gives notice in writing delivered to the
Seller personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule that this condition is fulfilled, this Offer shall
be null and void. The Seller agrees to co-operate in providing access to the property for the
purpose of this inspection. This condition is included for the benefit of the Buyer and may be
waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time
period stated herein.
Identify a conditional home inspection clause that protects the interests of the buyer and
addresses the buyer’s needs and concerns.
WHILE NAVIGATING THROUGH THE ONLINE MODULE, CLICK THE EXPERT RESPONSE BUTTON TO VIEW THEIR ANSWER.


Module Summary | Page 1 of 4
Module Summary
This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge
Management System.

Module Summary
Congratulations, you have completed this module!
This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in the
Knowledge Management System.

There are nine tabs on this page with a summary of the key topics that were covered in this module.
Identify how a As a salesperson you need to fully understand what a condition precedent clause is, how
it is structured and when to use it.
condition precedent
clause is structured A condition precedent means that something has to happen in writing, within the
conditional time period before an offer becomes firm and binding on the parties.
When reviewing or drafting a condition precedent clause, you will complete six steps to
ensure the clause contains the required information. The six steps include:
• Can it be waived?
There are many different clauses that can be included as a condition precedent clause in
an agreement of purchase and sale, including but not limited to:
• Obtaining financing
• Having the property inspected
• Confirming insurance can be obtained
• Sale of a Buyer’s property
Identify how a A true condition precedent is structured differently than a condition precedent clause. It
does not allow for the condition to be waived, meaning that the condition must be
true condition
satisfied or fulfilled as written or the offer is considered null and void.
precedent clause
A true condition precedent clause is reviewed or drafted using the same format as a
is structured
condition precedent, with the exception of including the waiver provision. The condition
cannot be waived by either the seller or the buyer.

When reviewing or drafting a true condition precedent clause, you will complete only
five of the six steps to ensure the clause contains the required information. Remember,
the sixth step—can it be waived? Is not required. The five remaining steps include:
A common circumstance where a true condition precedent clause must be used would
be when a buyer has agreed to assume a seller’s existing mortgage, however this
mortgage assumption requires approval by the lender.
Identify how a A condition subsequent is in many ways, the opposite of a condition precedent. It
provides that if the party does not wish to proceed with the proposed transaction, they
condition subsequent
must take action to terminate the agreement.
clause is structured
A condition subsequent means that something has to happen in writing, within the
conditional time period in order to terminate an agreement or it will remain a firm and
binding contract.
Identify options for One of the most common conditions included in an agreement of purchase and sale is
related to financing. There are many different clauses linked to specific conditions that
including a condition
can be included in an agreement of purchase and sale, including but not limited to:
for obtaining financing • Arranging a new mortgage
and identify additional • Arranging a new mortgage satisfactory to the buyer
clauses for • Assuming an existing mortgage
• Arranging a Seller Take Back (STB) mortgage
consideration when an
offer contains terms The market conditions can dictate which clause you, as a salesperson should use. In a
seller’s market the clauses would most likely include shorter timelines. In a buyer’s
related to financing market the timelines might be longer.
An STB mortgage means the seller is the lender or mortgagee and the buyer will be the
mortgagor. A clause could be added to the agreement such as the seller obtaining a
credit check of the buyer to confirm their credit worthiness. Additional clauses for the
benefit of the buyer could be a pre-payment or renewal option.

There is a right to sell the mortgage clause in which the buyer acknowledges the sale of
the mortgage contract and agrees to provide any necessary information to facilitate the
sale of the mortgage.
Identify options for A common condition that would be recommended to the buyer is a property inspection
by a qualified home inspector or if the buyer chooses, a third party.
for a property The general inspection clause would be at the buyer’s sole and absolute discretion as to
whether they are satisfied and wish to continue with the transaction. Another clause
inspection
option would allow the seller to remedy any deficiencies found during the inspection.
There are also limited inspections in which the inspector only looks at the building,
mechanical, and/or electrical systems.
Identify options for You learned about the merits of including a clause in the agreement conditional upon
obtaining property insurance.
for obtaining Another option for a clause in regards to insurance allows the buyer to ensure they are
able to obtain insurance for specified perils or risks at an amount not to exceed what the
insurance
buyer determines they would be willing to pay.
Identify options for You learned that there are instances where a buyer may find a property that they are
interested in purchasing but they have not sold their property. The buyer could insert a
clause in the agreement stating that the offer is conditional upon them selling their own
on the sale of the home within a specified time period.
buyer’s property
Identify options for Purchasing a home is one of the biggest investments people can make. As a salesperson,
including a condition for in certain circumstances it is important for you to suggest to the seller or the buyer that
they have a lawyer review the offer.
the Agreement of
Purchase and Sale to be The seller or buyer could include a clause in the agreement that would be conditional
reviewed by a lawyer upon their lawyers reviewing and providing advice regarding the agreement.
Some transactions in selling or purchasing a property are very complex and these should
be reviewed by a lawyer especially estate sales, environmental issues or where there is
multiple representation.

Identify options for Environmental issues with properties, especially older homes can cause great concern for
a buyer. Issues such as buried oil tanks, vermiculite and zoning should be addressed
including a clause to
during the offer process.
address other
Although not an expert, a salesperson should have an awareness and general knowledge
considerations in an
of potential hazards in order to provide a seller or buyer with accurate information to
agreement of determine the clauses that could be inserted in an agreement. Buyers may want the
purchase and sale seller to provide a representation and warranty. The buyer may want to include a
condition that would give them the opportunity of investigating and verifying any
concerns with the property.

Module Resources
There is a helpful resource related to this module that you can search for in the Knowledge Management System.
Condition Precedent vs Condition Subsequent: This job aid provides a visual comparison between a condition precedent
and a condition subsequent, outlining the differences and similarities. A salesperson can use this job aid to help identify
the similarities and differences between a condition precedent clause and a condition subsequent clause.
While navigating through the online module, click the KMS button for tools and information on this topic.

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Module 17: Writing Conditions to be Included in an Agreement of Purchase

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Number of Lessons 6 Lessons

Lesson Number Lesson Name

©2019 Real Estate Council of Ontario

Lesson 1: An Introduction to Conditional Clauses

©2019 Real Estate Council of Ontario

An Introduction to Conditional Clauses

©2019 Real Estate Council of Ontario

Upon completion of this lesson, you will be able to:

©2019 Real Estate Council of Ontario

Benefits of Writing Clear and Effective Clauses

Some of the core benefits are:

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©2019 Real Estate Council of Ontario

Conditional Clauses: Condition Precedent

©2019 Real Estate Council of Ontario

Condition Precedent Clauses: Steps to Identify Required Information

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Example: Condition on Obtaining Financing – Condition Precedent

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Conditions Drafted as a Condition Precedent

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Conditional Clauses: True Condition Precedent

©2019 Real Estate Council of Ontario

Conditional Clauses: True Condition Precedent

©2019 Real Estate Council of Ontario

Drafting a True Condition Precedent and Providing Notice

©2019 Real Estate Council of Ontario

Example: Assuming a Mortgage – True Condition Precedent

The information about a true condition precedent clause is as follows:

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

A true condition precedent is a specific type of condition precedent.

©2019 Real Estate Council of Ontario

Conditional Clauses: Condition Subsequent

©2019 Real Estate Council of Ontario

Conditional Clauses: Condition Subsequent

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Condition Subsequent Clause: Steps to Identify Required Information

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Example: Condition on Obtaining Financing – Condition Subsequent

The information about a condition subsequent clause is as follows:

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Using OREA Clause ZONING - 3

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Summary: Condition Precedent Versus Condition Subsequent

Condition Precedent (Including Waiver Provision):