Real estate professionals must act in accordance with the lawful instructions provided by their clients, as set out in Real Estate Service Rules 30(b).¹ But what happens when a buyer asks their agent to insert a subject condition for a purpose other than what the plain language states?

For example, buyers might ask their agent to insert a financing subject when, in fact, what the buyers need is a subject to the sale of their own property. A subject-to-sale condition is generally less attractive to sellers, and buyers may be concerned that their offer will not be accepted if a subject-to-sale condition is included.

Can an agent comply with this type of instruction? It can be risky to do so for the following reasons.

Typically, financing subject conditions have relatively short deadlines for removal, while subject-to-sale conditions have longer deadlines to accommodate marketing efforts, especially in slower markets. It may not be of much help to the buyers to have only a seven- or 14-day period to sell their own property. However, inserting a 60-day or longer deadline for a subject-to-financing condition may raise the sellers’ suspicions about the buyers’ good-faith intentions.

Importantly, buyers are required to use good-faith efforts in performing their due diligence obligations as set out in any subject conditions, and buyers have a general duty of honest performance. The duty to exercise any contractual discretion in good faith is a general doctrine of contract law that applies without regard to the intentions of the parties.²

Buyers may be held liable for breach of contract if they improperly seek to rely on a subject clause to terminate the transaction, and courts have held that buyers cannot excuse their breach of contract by relying on their own failure to make honest or good faith efforts to fulfill or waive subject conditions. Sellers who suspect they have been misled by buyers’ stated reasons for not removing subject conditions may sue the buyers for breach of contract, which is a risk the buyers need to be aware of. Damages in such cases can include not only the buyers’ deposit but also the difference in price if the sellers find another buyer who pays less for the property. It can also potentially include any carrying costs incurred by the sellers in the meantime.

In the reverse context of sellers’ conditions, a seller refused to remove the following condition and was sued by the buyers, who alleged that the seller improperly used this condition to terminate their contract:

“Subject to the Seller’s legal representative/lawyer approving the terms and conditions of the contract on or before October 17, 2016. This condition is for the sole benefit of the Seller.”

The Court³ found that the real reason the seller did not remove this condition was that she had received a higher offer during the subject removal period. The Court found the seller had failed to act in good faith when she used the pretext of the lawyer’s approval to get out of the deal, in order to make a better deal with the second set of buyers. The seller was ordered to complete the sale to the first set of buyers.

Real estate professionals should ensure that subject conditions accurately reflect their clients’ needs and intentions. When presented with an instruction to insert a subject condition for a purpose other than that stated in the language of the condition itself, buyers’ agents should recommend that their clients first seek legal advice. Licensees should ensure that any advice and instructions received are documented in writing. Buyers’ agents may also wish to consult their managing brokers and / or BCREA’s Professional Services Support Advisors (BCREA Access login required) for advice on how to best meet their own duties to their clients.

Further Reading

• Legally Speaking #349: Duty of Good Faith to Complete Contracts
• Legally Speaking #9: Best Efforts’ Cases
• Legally Speaking #497: Subject Removal
• BC Financial Services Authority’s Knowledge Base on subject conditions

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	1.	Rules, s. 30(b).
	2.	See Bhasin v. Hrynew, 2014 SCC 71, paras. 89, 93 and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7.
	3.	Zhang v. Amaral-Gurgel, 2017 BCSC 1561.

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