Suspensive conditions

For the promising buyer, the offer to purchase is a way to reserve a property on conditions that he sets himself. When signing an offer to purchase, it may be that certain aspects surrounding the sale are beyond its control. This will happen, for example, if they have to sell their principal residence before buying, or if they need to get a mortgage before acquiring the new property. To this could be added another imponderable, that is to say that it may lack information to carry out a due diligence verification before the purchase. For this reason, offers to purchase generally include an obligation that is described as conditional, which is recorded as a suspensive condition.

Clause with suspensive conditions

This type of clause allows the future buyer of a property to renounce the offer to purchase. It constitutes conditions that must be met in order to validate the offer to purchase. These suspensive conditions must depend on third parties and not on the goodwill of the seller or buyer. To ensure that he is not caught off guard, the offer to purchase must be conditional on:

• The concretization of certain events that it does not control;
• The transmission (for review) of all the information and documents it will need;
• His satisfaction with the condition of the building concerned.

For these conditions to be effective, it will be necessary to include escape clauses in the offer to purchase, for example suspensive conditions that will allow the buyer to withdraw from its offer, if necessary. In order to prevent these clauses from being subject to interpretation, their wording must be precise and adequate. They will also have to allow sufficient time, so that the promising buyer has an adequate reaction time before they expire.

Most common suspensive conditions

Offers to purchase almost always contain the following suspensive conditions:

• Obtaining a confirmation from a lender of the grant of a hypothecary loan (amount, rates, term) etc.; 
• The reception of a recent certificate of location of the immovable;
• The reception of a pre-purchase inspection report prepared by a qualified professional, confirming, to a reasonable extent, that the state of repair and maintenance of the immovable is sufficient to go ahead with the purchase of the condo;
• The reception of the vendor’s declaration;
• The sale of your present residence, as the case may be.

The offer to purchase should include a clause providing for a mechanism for reporting a defect discovered as a result of receipt of the pre-purchase inspection report. This clause should also set out the rights and obligations of the parties in such a case.

Suspensive conditions specific to the co-ownership

The offer to purchase must also be conditional on the promising buyer being able to conduct various checks with the syndicate of co-owners, whose conclusions must meet his expectations. In particular, it will be necessary to check:

• The certificate of the syndicate attesting to the condition of the immovable held in co-ownership;
• If the syndicate is duly registered;
• The minutes of the meetings of the co-owners and of the Board of Directors for the last three years (are there calls for charges to carry out major work to come?);
• The declaration of co-ownership, including any amendments thereto, if any (method of apportionment of the common expenses between the co-owners and right of use in the common areas for restricted use);
• Amendments made to the By-laws of the immovable and filed in the register of the syndicate;
• The insurance policies of the co-ownership;
• The reception of a copy of the evaluation report of the entire immovable fixing its reconstruction value;
• The history of lost ratio;
• The amount of sums accumulated in the self-insurance fund;
• The inventory of fixtures, namely the private portions (e.g., housing, parking space or storage space) and the common portions of the building (e.g., allocation plan for common portions for restricted use);
• The regularization by the meeting of the co-owners of certain irregular works affecting the common portions (for example: work undertaken by the co-owner that encroaches on the common portions);
• The reception and review of the certificate describing the level of soundproofing of the apartment;
• The reference unit intended to describe the original development;
• The financial statements of the syndicate of co-ownership;
• The syndicate's tax declarations;
• The amount of the sums accumulated in the contingency fund;
• The contingency fund study that determines the sums to be paid into this fund;
• The cadastral plan, to know what the exact area of the private part is;
• The arrears of common expenses affecting the unit(s) that are the subject of the sale;
• The financial statements of the syndicate of co-ownership, to know if the current fiscal year is in deficit.
• The asset management plan and the certificate on the condition of the immovable;
• The preventive maintenance log book;
• Any legal proceedings or judgment involving the syndicate.

Suspensive conditions relating to receipt of the pre-purchase inspection report

The promise to purchase is generally conditional on the buyer being able to have the building, including all common areas, inspected by a building inspector or a professional within a period determined by the promise to purchase following its acceptance. In the circumstances, the seller must obtain all the required authorizations from the board of directors of the syndicate of co-owners to do this. In the event that the inspection report reveals the existence of a factor relating to the immovable, likely to significantly reduce its value or income or increase its expenses, the promising buyer must notify it the seller, in writing, and provide him with a copy of this report. Once notified, the promise to purchase becomes null and void. However, if the promising buyer neglects to notify the seller within the time period and in the manner provided in the promise to purchase, he is deemed to have waived the benefit of this suspensive condition.

Lifting of suspensive conditions

When the suspensive conditions have allowed the promising buyer to make all the verifications to his full satisfaction and these conditions have been lifted, for example due to the granting of mortgage financing, a conclusive examination of the various registers of the co-ownership and an inspection report that meets expectations, the latter will then be able to proceed with the transaction with full knowledge of the facts.

Conversely, if one of the conditions of the offer to purchase is not met, the promising buyer must inform the promising seller within the time limit.  This could, for example, be the case where the syndicate or the seller has not provided all of the requested documents. Consequently, all the commitments to which they have subscribed will become null and void. The parties involved will remain there, and the promising buyer may request the refund of the deposits paid.

WHAT YOU SHOULD KNOW! Article 1068.2 of the Civil Code of Quebec requires the syndicate of co-owners to give the promising buyer the documents or information enabling the latter to make an informed choice. This article mentions that documents and information must be provided diligently to the promising buyer, at the latter's expense, subject to the provisions relating to privacy, including in particular articles 35 to 41 of the Civil Code of Québec. The syndicate must inform the owner in question of all the documents or information it has thus provided to the promising buyer, so that all parties have the same information.

WHAT TO KEEP IN MIND: The Promise to purchase - Divided co-ownership form of the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ) includes a section that makes the promise to purchase conditional on the examination and verification of the declaration of co-ownership, or any other documents that may be required as well as all the amendments that have been made and to certain other documents held by the syndicate including,  in particular, the minutes of the board of directors and the meeting of the co-owners.

WARNING! It is important in an offer to purchase to respect all deadlines, whether they are the deadlines of financing, inspection, counter-proposal, etc. A tracking error can cause you to lose the coveted apartment or force you to buy it even if you have changed your mind.

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