Understand the contract of purchase and sale

“The seller’s realtor told us the roof was in great shape. It started leaking a week after we moved in, and we had to borrow $20,000 to get it replaced. There was nothing in the purchase contract about the state of the roof, so we couldn’t get the seller to cover this expense.”

– Jose, Squamish

When someone wants to buy a home, they must make a written offer to the seller. In BC, this is often done with a standard contract of purchase and sale.

What you should know

When the standard purchase contract is used

The standard purchase contract is published jointly by the Canadian Bar Association BC Branch and the BC Real Estate Association. It’s used for most residential sales in BC.

If you’re not using the standard purchase contract, or if you’re making changes to it, the information below may not apply. A different contract may be used if someone:

  • Buys a home before it’s built. You’ll be asked to enter a pre-sale contract. These are written by the developer’s lawyers and strongly favour the developer. 

  • Builds a new house. The builder will ask you to sign a construction contract. This is a standard contract developed by the Home Builders’ Association of BC.  

Before you sign

Before you sign any contract to buy, sell, or build a home, it’s a good idea to get a lawyer to review it. Or, you can make your offer on the condition that your lawyer approves the contract.

The contract sets out your rights and obligations

The purchase contract is the key document when buying or selling a home in BC. It sets out the rights and obligations of both the buyer and the seller. It says who must do what, and by when. 

The basic promises made in the contract are:

  • the seller promises to transfer ownership of the home to the buyer

  • in exchange, the buyer promises to pay the purchase price to the seller

Each party promises now to do these things at a date in the future (called the completion date). The parties agree to certain terms and conditions that are attached to these promises.

When you become locked into the contract

In BC, the buyer’s realtor typically fills out a standard purchase contract, inserting the terms on which the buyer is prepared to buy a home. The seller can choose to accept or reject the buyer’s offer. They can also propose a change to the terms of the offer (called a counteroffer), such as asking for a higher sale price.

When a seller accepts an offer, they agree to sell the home to the buyer on the terms of that offer.

The purchase contract is legally binding as soon as an offer or counteroffer is accepted in writing. This means that the buyer and seller must each now perform their obligations under the contract (or face legal consequences).

Including subject clauses

A buyer can include subject clauses in their offer. With these, a buyer is saying “I promise to buy the home, if I can satisfy certain questions I have about the sale, by a certain date.” The buyer can walk away from the deal if they can’t satisfy the subject clauses. 

We go deeper into offers, counteroffers and when a contract becomes legally binding in our step-by-step guide to buying a home.

Key dates in the process

Once an offer is made, the legal process follows a general timeline. In their offer, a buyer must propose the dates on which they want certain steps in the process to take place. 

  • Date and time the offer expires. When a buyer makes an offer, they put a time limit on the offer. Usually it’s a day or two. If the seller doesn’t accept or make a counteroffer in time, the offer expires. Both parties can walk away.

  • Subject removal date. If the buyer includes subject clauses in their offer, they propose a date by which they’ll satisfy their inquiries. By this date, they must tell the seller whether they want to go ahead with the sale. This is typically a week or so. But it depends on the complexity of the issues the buyer is trying to resolve. If the buyer doesn’t confirm whether they want to proceed by the subject removal date, the contract ends. This means that neither party is required to go ahead with the deal.

  • Completion date. This is sometimes referred to as the “closing date.” It’s when ownership of the home is legally transferred to the buyer. The buyer also pays the balance of the purchase price to the seller on this date. This date is usually 30 to 90 days from the acceptance of the offer, but may vary depending on the needs of the seller or the buyer.  

  • Possession date. This is the date the buyer can take physical possession of the property. It’s usually one or two days after closing. Practically speaking, it’s when the buyer receives the keys and can move in. If it’s a rental property, the possession date is when the new landlord (the buyer) takes charge of the building.

Take the deadlines seriously

In a standard purchase contract, the parties agree that “time is of the essence.” This means each party must meet strict deadlines — or face the legal consequences. If you do miss a deadline, the other party may choose to overlook it. But don’t count on it. 

For example, if you’re the buyer and you don’t pay what you owe by the completion date, the seller might cancel the contract and keep your deposit. They can also sue you for any losses they experience as a result of your failure to complete.

How the property is described

At the top of the standard purchase contract, the property is described by:

  1. The street address.

  2. A legal description of the property, from the land title office records. 

  3. Property identifier (or PID). This number is used by the land title office to uniquely identify a parcel of land.

You’ll be more familiar with street addresses, but it’s not the only thing to pay attention to. Your lawyer or notary should check that all descriptions refer to the property you think you are buying or selling.

The risk of damage passes from the seller to the buyer

There’s always a risk that fire, flood, vandals or disgruntled tenants cause damage to the property once the contract is signed. In the standard purchase contract, the seller is responsible for damage or loss to the property, up to (but not including) the completion date. After that time, the risk passes to the buyer. 

Purchasing insurance

A buyer should purchase “all risk” home insurance that covers them for property damage starting at 12:01 am on the completion date. 

What the seller promises to give the buyer

“We thought we’d found the perfect spot on the Sunshine Coast. We’d hoped to build our retirement home, alongside a separate cottage for when our kids and grandkids came to visit. We made an offer to buy the land, but it turned out there were some restrictions on how we could use it. Our lawyer said there were limitations on putting up secondary buildings, as well as restrictions on boat parking. These restrictions came with the land — we couldn’t remove them. It wasn’t meant to be.”

– Adrian, Vancouver

In a standard purchase contract, a seller promises to deliver to the buyer title “free and clear” of all encumbrances, except those agreed upon in the contract. The seller is locked into this promise once they accept an offer or counteroffer.

Let’s unpack some of these legal concepts.

Delivering title

The seller transfers ownership of the property to the buyer. They do this by registering the transaction with the land title office on the completion date.

Title to land

Having title to land means you legally own it. In BC, the land title office keeps an official record of who owns what land.

Free and clear of encumbrances

An encumbrance represents the right of someone other than the property owner to use the property, or to claim a debt against it. It typically reduces the value of the property or restricts its use. 

Most buyers assume they’re buying the property with no restrictions attached. But under the standard contract, the seller promises to deliver clear title subject to some exceptions

Generally, the seller doesn’t have to remove non-financial encumbrances. For example, there may be a restrictive covenant on the title. This prevents something from being done to or with the property. The covenant could, for instance, prevent multi-unit dwellings. Under the standard purchase contract, the seller wouldn’t be required to remove this type of charge. 

Searching for encumbrances

If you’re a buyer, make sure to ask your notary or lawyer to check the title for any charges that the seller isn’t required to remove. If any restrictions are found, ask yourself whether it’s still a good purchase for you. You can do this by making your offer subject to searching title for any charge that might affect the property's use or value.

What the seller says about the property

The standard purchase contract says that the seller isn’t making any representations, guarantees or promises other than what’s written in the contract. This means a buyer generally can’t rely on anything the seller (or their realtor) says about the property if it’s not written in the contract. Unless they’re deliberately misleading you, oral comments by the seller won’t be binding on them.

What’s included in the sale

fixture is anything that’s attached to the home such that removing it would cause damage or require repair. The bathroom sink is an obvious example. When someone sells a home, all the fixtures go along with it. On the other hand, anything you can move without causing damage to the property is called a chattel. Appliances such as the washer, dryer, fridge and stove are chattels.

Be clear on what you want included

It’s not always clear what’s included in the sale. A buyer should specifically write in their offer anything they want included in the sale. A seller should specifically exclude from the sale anything they want to take with them.

What the buyer promises to give the seller

“We made an offer on a condo, and put down $50,000 for the deposit. Shortly after, Elise got a job offer in Australia. It was too good to pass up. But it was bad timing because the market had crashed since we’d made the offer. If the seller put their home on the market now, they’d probably get way less than what we’d promised to pay. Our lawyer told us if we pulled out of the deal, the seller would keep our deposit, and could sue us for their loss. We decided to complete the purchase, and find a place to rent in Australia.”

– Georgia, Surrey

The buyer’s basic promise is to pay the seller the purchase price for the home by the completion date.

The deposit is an amount of money the buyer gives to the seller to secure the sale. It’s usually paid when an offer is accepted or when subjects are removed. The buyer pays the balance of the purchase price on the completion date (reduced by the deposit they already paid). If the buyer is taking out a mortgage, some of this money will come from their lender.

If the buyer doesn’t complete the sale, the seller can:

  • Cancel the agreement and keep the deposit. The seller may be able to claim additional damages.

  • Continue with the sale. If a buyer tries to back out of a binding contract, the seller could sue them for specific performance of the contract. This is where a court forces a party (in this case, the buyer) to go through with the sale. The seller could also sue the buyer for damages arising from the failure to complete the sale.

About to make an offer?

Use our home buyer's checklist to help you understand what you're signing.

  • This information applies to British Columbia, Canada
  • Reviewed for legal accuracy in November 2019
  • Time to read: 10 minutes

Reviewed for legal accuracy by

Lisa Frey, Lawson Lundell LLP

Lisa Frey

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