While conditional offers may be rare in the Greater Toronto Area, where multiple bidders compete for most properties, buyers in less heated markets may sometimes negotiate a limited time period to have a home inspection, arrange financing or complete other due diligence before the agreement becomes firm and binding.

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The precise wording of any conditions included in an Agreement of Purchase and Sale (APS) is particularly important, as a buyer may have an obligation to provide written notice of the fulfilment of the conditions by a stated deadline, failing which the agreement becomes null and void. Buyers should not assume that communications with a seller during the conditional period will extend the deadline or require a seller to accept unilateral demands for amendments to the agreement.

The decision of Fenyes v. Nellipudi, 2021 ONSC 3913 (CanLII) illustrates what happens when a buyer attempts to introduce new terms during the conditional period, which are not accepted by the seller, and the conditional period expires prior to delivery of a notice of fulfilment of condition.

On March 23, 2021, the buyers entered into an APS for the purchase of a property in Coboconk, Ont. for $2.5 million, with a deposit of $100,000. The APS had two conditions for the buyers to obtain a satisfactory home inspection and arrange financing. Each condition had a deadline requiring the buyer to provide written notice to the seller that the conditions had been fulfilled by no later than the 10th calendar day following the date of acceptance – April 2, 2021.

It appears that a great deal of communication occurred during the conditional period relating to furniture and other chattels that the buyers wanted to be included as part of the sale, as well as work that they wanted the sellers to do to the property before closing.

On April 2, the buyers delivered a proposed Amendment Agreement to the sellers, which deleted the two conditions for a home inspection and financing, but which added terms relating to the chattels and work that they wanted the sellers to agree to complete before closing. The wording of the Amendment Agreement required that it be accepted by the sellers by 11:59 p.m. on April 2 – one minute before the buyers were otherwise required to have provided notice of of the two conditions in the APS.

The sellers, though, did not sign back the Amendment Agreement.

On fulfilment April 3, at 9:01 a.m., the buyers’ real estate agent (who was also representing the sellers) sent an email to the sellers indicating that the buyers had decided not to improve the terms of the APS after all.

However, on the same day, the sellers entered into a new agreement to sell the property to another buyer. This agreement had no conditions.

The sellers subsequently requested that the original buyers agree to sign a mutual release for the return of their $100,000 deposit. The buyers refused to do so. Instead, they took the position that the APS remained legally enforceable, and that the Amendment Agreement was a waiver or notification of fulfilment of the two conditions even though it had not been signed back by the sellers. Further, they argued that the sellers had violated a duty to act in good faith in completing the APS. The buyers registered a Notice of a Purchaser’s Lien on the title of the property, pursuant to section 71 of the Land Titles Act. Litigation ensued on an urgent basis thereafter, given that a second buyer was in the wings, waiting for the dispute to be resolved one way or the other.

In the court application, the sellers took the position that the buyers had failed to comply with the two conditions on inspection and financing within 10 calendar days of March 23, and the APS had therefore expired and was null and void.

The sellers argued that the proposed Amendment Agreement was not a waiver or notification of fulfilment of the conditions, and that it had attempted to introduce terms that the sellers had not accepted. Further, since the sellers did not sign the Amendment Agreement, they argued that there was no binding contract and they did not breach any duty to act in good faith.

The application was heard by Ontario Superior Court Justice Phillip Sutherland in May. In Justice Sutherland’s view, there was no dispute that there had been a binding written agreement between the parties, signed on March 23, subject only to the two conditions. The terms of the APS were clear and unambiguous.

However, it was also clear that the buyers had not complied with the wording of the conditions, which required written notice to the seller that the conditions were fulfilled or waived by April 2, failing which the APS was null and void and the deposit would be returned.

Instead, by sending the Amendment Agreement to the sellers on the same day that notice of the conditions had to be provided, the buyers were “hedging their bets” that the sellers would accept the new terms, which included chattels and work to be done to the property before closing. Justice Sutherland noted that the deadline for acceptance of the Amendment Agreement was one minute before the expiry of the conditions.

Justice Sutherland therefore concluded that the buyers did not comply with the two conditions concerning inspection and financing. They did not notify fulfilment or waive the two conditions by the end of the calendar day on April 2 and based on the plain and unambiguous language of the conditions, the APS was null and void and the deposit was to be returned without deduction. As of 12 a.m. on April 3, the buyers no longer had any interest in the property.

In Justice Sutherland’s view, there was no evidence indicating that the sellers had lied or acted dishonestly in a manner that amounted to a breach of the duty of good faith discussed by the Supreme Court of Canada in C.M. Callow Inc. v. Zollinger, 2020 SCC 45 (CanLII). The terms of the APS were clear. The buyers had the onus of waiving the two conditions, not the sellers. The buyers could have waived the conditions and hoped to negotiate the concerns of chattels and repairs prior to closing. For their own reasons, they chose not to do so. To find that the sellers had some additional obligation would be to confer an “unbargained benefit” to the buyers, which was outside of the terms of the negotiated APS.

As a result, the buyers lost their right to purchase the property and the sellers were free to complete the sale to the second purchaser. As the APS was null and void, rather than breached by either party, the buyers were entitled to the return of their $100,000 deposit.

The decision reflects the careful attention that must be paid by the parties to the steps required to firm up an Agreement of Purchase and Sale during the conditional period. Communications and negotiations that occur during a conditional period may not amount to a new agreement. A buyer should not expect to have a unilateral right to introduce new terms into the bargain. There is generally no obligation on a seller’s part to accept any amendments to the purchase price or other terms of the APS. If a buyer seeks an extension of the conditional period or to introduce any other new terms, they should ensure that these are negotiated and confirmed in writing by the seller before the expiry of the conditional period.

26 COMMENTS

  1. This scenario needs to be explained clearly to the buyers and the irrevocable should have been earlier than the time frame for the conditions. That way, if the amendment was not signed, the buyers could still have sent their Notice of Fulfillment and firmed up the sale without the extra chattels and work being done. The agent should have ( and may have) prepared them for this happening and had the NoF already signed and ready to be sent to the sellers if they did not sign the amendment, if that was the choice the buyers would be making.

    • Problem is, the same agent represented (or worked with, in any case) both agents. Yet another reason it should not be legal for one agent to work with both parties to a transaction.

  2. This was clearly a Buyer’s tactic to renegotiate the deal via amendment with irrevocable being one minute prior to expiration of the conditions to be waived. Well, it backfired as appears there was no communication to verify the Seller’s would be in agreement to these amendments. I’ve done amendments when fulfilling conditions but have received confirmation the other party is in agreement.

  3. The Buyers played themselves and when you play stuiped games, you win stuiped prizes. Congrats to the sellers for their firm sale and the listing agent for handling this in a professional manner.

  4. A bit confused that the agent is double ending the deal. Was it the agent’s own listing or was it a FSBO. The agent would know there is another offer coming in and I’m guessing knowing it’s at a better price. The buyers should go after the agent for making an amendment that was set for failure. Make it expire at a reasonable time so they buyers have a few hours to firm up if the sellers won’t sign an amendment.

    • If the agent represented the buyer as a client the listing agent should not be giving anyone any negotiating advice, so if they stayed neutral the buyer made the decision for themself and is sol.

      Just one more reason multiple representation should be banned.

      During my time in phase one it was drummed into our heads that an amendment is dangerous even when it contained the waiver of conditions since the receiving party can take the position that the amending party is trying to renegotiate the terms of the agreement. Obviously that still holds true. That warning is what the agent should have given to the buyer.

  5. This happens often. As a listing agent I have received amendments that expire well after the conditional period.

    • There is no law to prevent listing realtor should not represent both parties. Buyers wanted more and their realtor sent an amendment, nothing wrong with that. Issue is it should have been discussed earlier and agreed with sellers. Only person who lost here is their realtor.

      • I’m aware, thanks. But clearly this rep didn’t represent his buyer CLIENTS very well, and only thought of the sellers (and possibly his paycheque) considering the knowledge that there was another buyer waiting for the first to fall apart.

        Had this agent done his job, he’d have been clear with the buyer that submitting this amendment so close to the expiry of the conditions brought a very good chance the deal would simply fall apart.

        It seems that’s what the agent wanted.

        Poor representation of the clients here, for sure.

    • Why what did the agent do wrong other than double ending the property. The amendment is an attempt at renegotiating the original offer which failed , end of story. I do hope that the vendors received costs in this judgement as this case should never have gone to court in the first place. . Anon you mentioning that the buyer should have gone to RECO is a little confusing . This is nothing else than a purchaser wanting their cake and eating it too, period.

      • You’re joking, right Nick?

        The buyers agent submitted an amendment which carried a strong likelihood the deal would fall apart. There are way better ways to have handled this scenario, ESPECIALLY since the agent represented the sellers also. That’s the primary head scratcher.

        The agent should have tried to negotiate a one day extension on the conditions to give ample time for his sellers to consider the proposal by the buyers. Had he been looking out for the best interest of both his clients, ensuring both have time is important. He failed to do that.

        His buyers were out of time, and were asking for chattels and work to be completed. With mere minutes to spare on conditions.

        The conditions expired. It sounds like, by the case notes, that the buyers actually thought they still had first rights to the house the next morning, in spite of the conditions expiring.

        In no way is this anyone’s fault but this agents. And he’s a broker of record. Embarrassing.

      • They will not win the house, but they will almost certainly see penalties levied against the agent who did not provide conscientious advice.

    • Reco can’t rule against this court. The time in the offer ran out. Time is of the essence. Basic. Basic. Lesson learned the hard way.

  6. This tactic happens often……whereby the buyer tries to change the terms and waive all conditions via amendment rather than notice of fulfillment. The realtor clearly did not serve the best interest of the buyer and seller (since this is multiple representation) when allowing the amendment irrevocable time period to be such a short period of time.

    • The agent did serve the interests of the seller as he was fully aware of a better offer on the table. He used his position working both sides of the transaction to the betterment of one and detriment of the other. The practice should be illegal, and this agent should be penalized.

      • You are assuming that, as it does not state that the realtor was in multiple representation situation with 2nd offer.

      • That’s just speculation Bruce. We have no idea when the agent first became aware of the new offer or even the details of the offer. All we know is that the 2nd Offer was agreed to the day after. Per the case summary:

        ” The negotiations appear to have culminated in an Amendment to Agreement of Purchase and Sale, being form 120 of OREA for the Province of Ontario. This Amendment Agreement was delivered to the applicants on April 2, 2021 and was to be accepted by 11:59 p.m. on April 2, 2021….

        The applicants did not sign back the Amendment Agreement.

        [13] On April 3, 2021 at 9:01 a.m., the Agent sent an email to the applicants indicating that these respondents decided not to improve the terms of the APS.

        [14] On April 3, 2021, the applicants entered into a new Agreement of Purchase and Sale with the Sahai (APS2). APS2 had no conditions concerning financing or an inspection. Terms in APS2 included:.”..

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