Subject to Inspection Clause in the BC Contract of Purchase and Sale

Updated December 28, 2024 by Mike Stewart PREC

In Episode 14, we talked about Subject to Financing and how this is a powerful way to protect a first time home buyer when it comes to financing a home purchase.

Today we are going to talk about the subject to inspection clause in a British Columbia Contract of Purchase and Sale and how this can protect a new home buyer in Vancouver.

Subject to clauses are often referred to as “escape clauses” or “conditions precedent” in other jurisdictions or business sectors.

What Does Subject to Inspection Mean?

An Inspection or Home Inspection as they are commonly referred to in Vancouver is when the Buyer has a qualified and certified Home Inspector check over the physical condition of the property that is of interest.

In most cases the Home Inspection is done after there is an accepted offer and the Home Inspector checks the following:

• The exterior envelope of the home (be it a condo or a house) that including, the foundation, parking garage, the roof, the walls, etc as well as the drainage systems and any outbuildings or features on the grounds of the property
• The interior of the home and all its mechanical and structural systems including plumbing, electrical, flooring, wall systems like drywall, ventilation, windows, skylights, etc

At the end of the Home Inspection, the Buyer receives an inspection report which will clearly lay out the condition of the property and any issues the property may have.

Why Do We Use Subject to Inspection?

Quite simply, a Home Inspection is designed to protect the home buyer from a money pit or in BC a Leaky Condo.

The inspection subject works just like the other Subject Clauses in that the Buyer gets an accepted offer on the property that is subject to the Buyer approving the results of their home inspection. If the Buyer does not like what they see in the home inspection they can either re-negotiate the accepted offer or kill the deal.

Here is an example of a Subject to Inspection clause:

Subject to Inspection – Buyer Power to Kill an Accepted Offer

This clause gives a buyer a very powerful protection in that it allows the Buyer to walk away from a deal if they are not happy with the physical condition of the property once the home inspection has been done.

The buyer can also re-negotiate the contract based on the findings of the inspection (provided the Seller agrees to negotiate at that point) and threaten to kill the deal if the Seller does not agree to the Buyers proposals to repair or deal with the issues discovered in the home inspection.

FAQ: Subject to Inspection Clause in Vancouver BC Real Estate Contracts

1. Subject to inspection meaning in a real estate contract?

“Subject to Inspection” is a clause in a real estate contract that makes the purchase offer conditional upon the successful completion of a property inspection. This clause protects the buyer by allowing them to renegotiate or withdraw their offer based on the findings of the inspection.

2. Why is the inspection clause important in real estate contracts?

The inspection clause is crucial because it ensures that the buyer is fully informed about the property’s condition before finalizing the purchase. It allows the buyer to identify any major repairs or issues that could affect the property’s value or their decision to buy.

3. How does the “Subject to Inspection” clause work?

When an offer is made “subject to inspection,” it means the sale is conditional upon a satisfactory inspection report. If significant issues are discovered during the inspection, the buyer can either negotiate with the seller to have the issues resolved at the seller’s expense, adjust the purchase price, or withdraw the offer without penalty.

4. What areas does a home inspection cover?

A home inspection typically covers the examination of the property’s major systems and structures. This includes the exterior and interior of the building, the roof, foundation, electrical, plumbing, HVAC systems, and other critical components to assess their condition.

5. How can buyers benefit from an inspection clause in a real estate contract?

Buyers benefit from an inspection clause as it provides an opportunity to identify any potential issues with the property that may require costly repairs or affect the property’s safety. It gives buyers leverage to negotiate better terms or decide against proceeding with the purchase if the property doesn’t meet their standards.

6. Can sellers benefit from agreeing to a “Subject to Inspection” clause?

Yes, sellers can benefit too. An inspection clause can make a property more attractive to cautious buyers, potentially leading to a smoother sale process. It also demonstrates the seller’s transparency and confidence in the condition of their property, which can positively influence the negotiation process.

In episode 16 we will talk about Subject to clause covering the documentation required to purchase a property in Vancouver.

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