Am I Required to Complete my Real Estate Purchase? (a.k.a. the Mystifying World of Conditions Precedent)
Posted in Real Estate

Agreements to purchase real estate are generally negotiated between real estate agents without the benefit of legal advice.  This can often lead to vagueness when “special” terms are added to the standard form agreements of purchase and sale. A case in point is the recent decision of the British Columbia Court of Appeal in Peier v. Cressey Whistler Townhomes Limited Partnership, 2012 BCCA 28.  In this case, the Court overturned the trial judge and decided that the condition precedent in issue was not one that allowed the purchaser not to complete the purchase but, rather, was one that only suspended the purchaser’s obligation to complete until it was performed provided it was performed prior to the outside completion date.  The fact that it took two levels of the courts (4 judges) and two years to arrive at this conclusion highlights the economic ramifications of lax drafting.

In this case, the Purchaser contracted to purchase a Whistler townhome.  A term was added to the agreement as follows:

It is a condition of this contract that the power/hydro lines on Nancy Greene Drive be buried prior to completion.  Should the power lines not be able to be buried, the Purchaser may cancel this contract at their option and have all deposit monies returned including interest.

The power/hydro lines were not buried as at the date of the initial closing notice.  The Purchaser provided a notice of termination.  The vendor sent an extension notice and the power/hydro lines were buried prior to ultimate completion date (which was inside the allowable outside completion date).  Both level of courts focussed on whether this was a true condition precedent, which entitled the Purchaser to terminate, or whether it a different type of condition, which only suspended obligation pending performance.  In large part, this question turned on the intention of the parties as determined by the words of the agreement.

The Court of Appeal found the clause did not give a right to terminate in these circumstances.  In doing so, it disagreed with the trial judge and interpreted the clause as follows:

If they could not be buried, or if they could be buried but were not buried prior to the Outside Date, the purchase price would never have to be paid and the deposit would be returned.  There was a condition precedent that suspended the purchaser’s obligation to pay the purchase price, but the suspension was not open-ended. 

Peier is an illustration of a real estate transaction gone wrong due to the uncertainty created by the drafting of a bespoke clause.  This dispute could have been avoided by clearer drafting at the outset and serves as a cautionary tale to vendors and developers alike.


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