What’s The Difference Between Conditions & Terms?

We’re all accustomed to hearing the words “condition” and “term” bandied about when discussing contracts.  The two words are often interchanged as though they’re synonymous, however there are crucial differences between a condition and a term in an Offer to Purchase.

Put simply, conditions need to be satisfied or waived prior to a specified deadline in order for the sale to go forward, while terms are obligations to be performed as part of the contract.

Conditions

Conditions have a time and date by which the action must be completed, referred to as the ‘condition date.’  If the condition date passes without the condition being waived, it effectively ends the deal.

Common examples of conditions are financing, property inspection, and condo document review.   Let’s look at an example:

Excerpt from AREA's residential purchase contract

Excerpt from AREA’s residential purchase contract

In the above excerpt, the buyer has two conditions: a financing condition and a property inspection condition (without a schedule).  The buyer has until 9pm May 16th to satisfy their two conditions.

If the buyer is unable to get financing approved or if they are not happy with the outcome of the inspection, they won’t waive conditions and the deal dies.   A non-waiver notice may need to be completed.

Reasonable efforts need to be taken to satisfy conditions.  If a party does not act reasonably (ie. the buyer neglects to apply for a mortgage altogether), then they are at risk of losing  their initial deposit and may be liable for other damages.

On the other hand, if the buyer wants to proceed with the purchase, a notice must be signed outlining the conditions being waived.  This signed notice must be communicated back to the other party identified in Section 12 of the contract before the condition date, in this case May 16th by 9pm.

Although less common, sellers can also have conditions written in the Offer to Purchase.  Some examples include backup offer situations or if the sellers need to verify some information such as the cost of work that the buyer wants undertaken at the seller’s expense.

Terms

Additional terms of sale are obligations that need to be performed by the buyer, seller, or both and are written in section 7.6 of AREA’s residential purchase contract.

A common term added by buyers is that they will be permitted access to the to the property the day before closing for a prepossession walkthrough.

Terms usually have monetary penalties to ensure that the other party performs what is required of them.  For example, let’s say the buyer wanted the house professionally cleaned before possession.  A term might look something like this:

The Seller agrees, at their expense, to have the home professionally cleaned prior to the possession date.  The seller will leave the receipt behind on the kitchen counter.  The Buyer’s lawyer will hold back $500.00 in trust from the sale proceeds which will be returned to the buyer if the home is not professionally cleaned by possession date.

Notice this term has two parts:  a required action and a consequence for not complying.   Unlike a condition, if the seller didn’t abide by the term (ie. professionally cleaning the home)  it would not kill the deal.

Understanding the difference between a condition and a term is essential and only a small aspect of the real estate transaction.  I would be glad to represent you as either a buyer or seller’s agent.  Feel free to contact me at 403-554-2284 or at mike@findcalgary.com

The comments expressed in this article are for information purposes only and serve to highlight general principles. Each situation is different and you should seek legal counsel before pursuing any particular course of action. These articles do not create an agency relationship and do not constitute legal advice.

3 responses to “What’s The Difference Between Conditions & Terms?

  1. Your blog is a wealth of information Mike. Have you ever considered a ‘new buyers’ section where you link this sort of post and other content/old posts like the HBP etc for a consolidated access point for readers? Might be a nice feature to potential readers/first time home buyers. Just a thought. Great stuff as always!

  2. Thanks for that suggestion! I’ll make the changes soon

  3. thank you so much, your information is valuable.

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