Financing, Inspection and Other Conditions in an Ontario APS

Conditions are clauses in an Agreement of Purchase and Sale that make the deal’s completion dependent on something specific being confirmed within a defined time frame. They exist to let a buyer (and occasionally a seller) manage risk — committing to a deal while reserving a short window to confirm that financing is available, that the property’s condition is acceptable, or that some other important fact checks out, before becoming fully bound.

Until every applicable condition is either satisfied (the underlying event happens) or waived (the benefiting party gives up the right to rely on it), the deal is conditional rather than firm. For background on this distinction and how an APS becomes binding generally, see our overview of the Agreement of Purchase and Sale in Ontario.

Each condition in a standard Ontario agreement is its own clause with its own deadline, and the specific wording matters a great deal — two conditions that look similar on the surface can work very differently depending on exactly how they are drafted.

Conditions can also run in the seller’s favour, though this is less common in ordinary residential resale deals. A seller might, for instance, include a condition tied to finding a replacement property to move into, or confirming approval for a severance or other change affecting the land. Whoever a condition is written to protect is generally the only party who can choose to waive it.

It is also worth distinguishing a condition from a simple term of the agreement. A term, such as the closing date or the included chattels, applies regardless of anyone’s later choice. A condition, by contrast, builds in a decision point — a defined moment where a party gets to decide, based on new information, whether the deal moves forward at all.

Standard board forms generally include a handful of commonly used condition templates that can be checked off and customized with specific dates and details, though buyers, sellers, and their lawyers are free to draft a custom condition addressing something more unusual, provided both sides agree to include it in the final signed agreement.

A financing condition gives the buyer a window of time, typically a short number of business days after the offer is accepted, to confirm they can obtain mortgage financing on terms acceptable to them. If financing cannot be arranged within that period on acceptable terms, the buyer can generally rely on the condition to end the deal.

Lenders generally require an appraisal and underwriting review before issuing a final commitment, which is one reason financing conditions exist even for buyers who received an informal pre-approval earlier in the process. A pre-approval is not the same as a final, unconditional mortgage commitment.

The appraisal step can matter in practice as well as on paper. If a property appraises for less than the agreed purchase price, a lender may reduce the amount it is willing to lend, which can leave a buyer short of funds even though their income and credit would otherwise support the mortgage. A financing condition that has not yet been satisfied or waived gives the buyer a defined way to respond if that happens.

An inspection condition lets the buyer arrange a professional inspection of the property and review the results before the deal becomes firm. Depending on how the clause is worded, an unsatisfactory inspection can give the buyer the right to end the deal outright, or, in some versions, an opportunity to request repairs or a price adjustment from the seller first.

The timing of an inspection condition also matters in practice. Because the window is often short, buyers generally need to book an inspector and arrange access to the property quickly after the offer is accepted, leaving little room for delay if the inspector is unavailable or the report takes longer than expected to prepare.

When the property is a condominium unit, buyers commonly include a condition allowing their lawyer to review the status certificate — a package of financial and legal information about the condominium corporation — before the deal becomes firm. This review generally covers the health of the reserve fund, any pending or threatened litigation involving the corporation, and whether a special assessment has been levied or is being considered.

Our dedicated guide to status certificates in Ontario covers what the document contains and why it matters in more depth. Because status certificate conditions are often shorter than financing or inspection windows, buyers and their lawyers generally need to move quickly once the certificate is requested.

A sale-of-home condition makes a buyer’s purchase conditional on successfully selling their current property, often by a specified date. This type of condition protects a buyer who needs the proceeds from their existing home to fund the new purchase, but it also makes an offer less attractive to a seller, since it introduces a second transaction’s uncertainty into the deal.

Some sale-of-home conditions include a provision allowing the seller to keep marketing the property and, if a better offer comes in, to give the original buyer a short window to remove the condition or lose the deal — sometimes called a “time clause” or “right of first refusal” provision. These arrangements are negotiated and not automatic.

Sellers tend to weigh a sale-of-home condition against how it compares to competing offers without one. In a slower market, a seller may be more willing to accept this kind of condition, while in a fast-moving market, buyers relying on the sale of an existing property sometimes find their offers are less competitive against unconditional ones.

A condition is generally satisfied in one of two ways: the underlying event actually happens (financing is approved, the inspection comes back clean), or the party who benefits from the condition chooses to waive it in writing, giving up their right to rely on it even if the underlying matter has not been fully confirmed. Once waived, a condition generally cannot be revived — the buyer cannot later change their mind and try to rely on the same condition again after giving it up.

Ontario courts generally expect conditions to be pursued and exercised honestly and in good faith — meaning a genuine effort has to be made to satisfy the condition, rather than using it as a convenient excuse to escape a deal the buyer simply no longer wants. A buyer who never actually applies for financing, for example, may have difficulty relying on a financing condition to walk away without consequence.

Missing a condition’s deadline without taking any action can also have serious consequences, since many clauses specify that the deal automatically ends, or automatically becomes firm, if no notice is given in time. For what happens when a firm deal subsequently falls apart, see our guide to what happens if a buyer or seller fails to close. This article is general information, not legal advice about a specific condition or deadline.