Sellers Not Allowed To Rely On "Escape Clause" To Accept A Better Offer

• Published date: 29 November 2021
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

In some cases, sellers may wish to 'hedge their bets' by accepting a conditional offer that contains a term allowing them to continue to market the property for sale until the deal is firm. Such terms are a matter of negotiation between the buyer and seller, but the seller must comply with any obligations to allow the first buyer the opportunity to complete the purchase.

Grayson v. Creasy, 2021 ONSC 7637 (CanLII) involved a failed real estate transaction in Peterborough, Ontario between the applicant buyers and the respondent sellers which contained a term allowing the sellers to continue to market the property.

In January 2021, the applicants saw that the respondents' home was for sale. They were looking for a larger home to accommodate their growing family, and the property met their wish list, as it was a larger house in the same neighbourhood and school district, and even had a backyard pool.

On January 26, 2021, the applicants made an offer to purchase the property for $530,000, and the parties entered into an Agreement of Purchase and Sale ("APS") with a closing date of March 19, 2021.

At the time the APS was entered into, the applicants were represented by a lawyer. The respondents relied upon their realtor for assistance.

The standard OREA form of APS was used with three additional conditions. The first condition gave the applicants the option of voiding the APS if they were unable to obtain mortgage financing. The second condition gave the applicants the option of voiding the APS if they were unable to obtain a satisfactory air quality test.

The third condition, which the court described as an "escape clause," permitted the respondents to continue marketing the property for sale after signing the APS, pursuant to the following term:

Provided further that the Sellers may continue to offer the property for sale and, in the event that the seller receives another Offer satisfactory to the Seller, the Seller may so notify the Buyer in writing by delivery to the Buyer personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedules thereto. The Buyer shall have 24 hours from the giving of such notice to waive this condition by notice in writing delivered to the seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedules thereto, failing which this Offer shall be null and void, and the Buyer's...