Understand the contract of purchase and sale

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 British Columbia.

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 you’re:

• Buying 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. 

• Building a new house. The builder will ask you to sign a building contract or a residential construction contract. There are different arrangements that can be covered by these contracts.

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. Remember, these are legal promises. So they can be enforced in court.

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 both parties must perform their obligations under the contract (or face legal consequences). 

After this point, there are a few ways the buyer can legally get out of the contract. These are:

• The buyer typically has three business days after the offer is accepted to cancel the contract. This is called the cooling-off period. If the buyer chooses to cancel, they have to pay the seller a fee of 0.25% of the offer price. If the buyer doesn’t cancel within the cooling-off period, the contract continues to be binding on them.

• A buyer can include subject clauses in their offer. With these, a buyer is saying “I promise to buy the home only if I can satisfy certain questions I have about the sale or property, by a certain date.” They can walk away from the deal if they aren’t able to satisfy the subject clauses by the subject removal date. (A seller can use subject clauses too, but it doesn’t happen that often.) Legally speaking, a buyer shouldn’t use a subject clause to get out of the contract just because they’ve changed their mind. They must use reasonable efforts to satisfy the subject clauses.

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

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 it. 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 give written notice that they’re removing the subject clauses by the deadline, 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.

You’ll be more familiar with street addresses, but it’s not the only thing to pay attention to. 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.

Your lawyer or notary should check that all descriptions refer to the property you think you are buying or selling.

“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 visitors. We made an offer to buy the property. But then we found out there were some restrictions on putting up secondary buildings. These restrictions came with the land — we couldn’t remove them. It wasn’t meant to be.”

– Adrian, Vancouver, BC

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 

Having title to land means that the government recognizes you as being the legal owner. In BC, the land title office keeps an official record of who owns what land. In the standard purchase contract, 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.

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 reduces the value of the property or restricts its use. A mortgage is a typical example.

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. 

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 usually won’t be binding on them.

What’s included in the sale

A 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.

“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 housing market dipped quite a lot since we’d made the offer. 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, BC

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. (On the completion date, the buyer pays the purchase price, less the deposit they’ve already paid. Some of this money usually comes from a 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.