Contracts of Purchase and Sale Explained

Table of Contents:

Section 1: Information about the Contract of Purchase and Sale

1. Contracts
2. Deposit(s)
3. Completion
4. Possession
5. Title
6. Customary Costs
7. Closing Matters
8. Risk
9. Form of Contract
10. REALTOR® Code, Article 11
11. Residency
12. Agency Disclosure

Section 2: Contract of Purchase and Sale

1. Purchase Price
   
2. Deposit
3. Terms and Conditions
4. Completion
5. Possession
6. Adjustments
7. Included & Excluded Items
8. Viewed
9. Title
10. Tender
11. Documents
12. Seller's Particulars and Residency
13. GST Certificate
14. Time
15. Buyer Financing
16. Clearing Title
17. Costs
18. Risk
19. Plural
20. Representations and Warranties
21. Personal Information
22. Assignment of Remuneration
23. Restriction on Assignment of Contract
24. Agency Disclosure
25. Acceptance Irrevocable
26. Disclosure of Buyer's Rescission Right
27. Legal Disclaimer
28. Counterparts
29. Offer
30. Acceptance
31. Notice for Buyer's Rescission Right

Addendum 1: CPS 

1. Provincial Property Tax
2. No Appliance Warranty
3. Deposits
4. Fireplaces, Fireplace Inserts, Wood Stoves and Chimneys
5. Property Inspections
6. Secondary Accomodation
7. GST
8. Property, Dwelling Size and Room Requirements
9. Title to Property
10. Disclosure of Material Latent Defects
11. Survey Certificate

Addendum 2: CPS

1. Buyer Financing
2. Property Inspection
3. State of Property Title
4. Fire/Property Insurance
5. Property Disclosure

Addendum 1: Strata CPS

1. Special Levy
2. Notification of Changes in Bylaws or Rules
3. Form B Information Certificate

Addendum 2: Strata CPS

1. The Seller Agrees...

Section 1: Information about the Contract of Purchase and Sale

Clause 1: Contracts

This section is relatively straightforward. The CPS becomes legally binding once signed by both parties. However, the key point you want to recognize and explain to clients is that under Section 42 of the Property Law Act, buyers of residential real property have the right of rescission within the prescribed period. During that time, the buyer can cancel the contract, subject to payment of the rescission fee.

Clause 2: Deposits

This section explains what happens to a deposit during the course of a transaction. Deposits must be held by the brokerage as a stakeholder, not on behalf of one party. This is an important point, as it means that the deposit is being held on behalf of both parties in order to facilitate the transaction. Release of deposits requires written agreement by both parties or, failing that, a court order.

Additionally, if rescission rights are exercised, the statutory rescission fee is deducted from the deposit and paid to the seller. 

Clause 3: Completion

This clause outlines the completion process, and is important for your clients to understand. Completion is the legal transfer at the Land Title Office. In practice, funds are paid into trust with the buyer’s lawyer or notary, who coordinates registration and payment.

Clause 4: Possession

This clause outlines the possession process, and tenancy considerations. Possession occurs at the time stated in the CPS. If tenants are present, their rights must be respected under the Residential Tenancy Act.

Clause 5: Title

This clause emphasizes the importance of carefully reviewing the property’s title. Buyers must confirm that the title supports their intended use of the property and is free of restrictions that could interfere with their plans. A thorough review of the title document is essential, not only for the buyer’s understanding but also because the mortgage lender must find the title acceptable before approving financing. If there is any uncertainty, including a financing condition or a “buyer satisfaction with title” subject is strongly recommended to ensure the title will meet both the buyer’s and the lender’s requirements.

Clause 6: Customary Costs

This clause sets out the additional costs that accompany a real estate transaction and reminds buyers to account for them in their budget. Among these costs, the Goods and Services Tax (GST) is particularly important. The clause clarifies that GST is deemed to be included in the purchase price unless the parties have agreed otherwise. Listing agents need to make sure sellers are aware of this. 

Historically, many agents inserted this wording into their standard terms and conditions, but because it appeared so frequently, it has now been incorporated directly into the standard contract for clarity and consistency.

Clause 7: Closing Matters

This clause outlines the closing matters set out in sections 11, 11A, and 11B of the contract. These sections detail the documents and confirmations required to make the agreement binding. They include particulars about the seller, such as residency status (important for tax compliance) and whether GST applies to the property. The preparation and exchange of these documents are typically coordinated by the buyer’s lawyer or notary and reviewed by the seller’s legal representative to ensure the transaction closes smoothly and in compliance with legal requirements.

Clause 8: Risk

Details when insurance should be arranged by the buyer. In scenarios where you are unsure whether insurance can be arranged for a property, an insurance condition may be prudent. 

Clause 9: Form of Contract

This clause clarifies that the Contract of Purchase and Sale is primarily intended for the purchase and sale of freehold residential properties. For other types of transactions—such as new construction, leasehold interests, business sales, assignments, or properties on First Nations land—specialized contracts may be required. Using the correct form helps ensure that all unique legal and financial considerations are properly addressed.

Clause 10: REALTOR® Code, Article 11

This clause specifies that a REALTOR® must disclose if they have a personal interest in a property transaction. Disclosure is made through the Disclosure of Interest in Trade form and is mandatory in any of the following situations:

1. When the REALTOR® is buying or selling on their own behalf.

2. When the transaction involves their spouse or partner.

3. When the transaction involves a corporation or company in which they hold a direct or indirect ownership interest.

The disclosure must be made in writing and provided before entering into the contract to ensure full transparency and compliance with the Real Estate Services Rules. 

In scenarios where you are acting on behalf of a family member (brother, sister, child or parent), you are required to notify the other side of the transaction, but the Disclosure of Interest in Trade form does not need to be used. The disclosure can be made in writing or within the contract of purchase and sale in the terms section. 

Clause 11: Residency

This clause simply states that the buyer and seller should seek legal advice in regards to their residency and citizenship status. There are certain tax implications to be aware of, specifically, there is the foreign buyer's tax, vacancy and speculation tax among other things. 

Clause 12: Agency Disclosure

This clause specifies that all agents in an agency relationship with the client should be indicated on the contract of purchase and sale. In some cases, the number of agency relationships may exceed the allotted space in the contract and must be included on a separate addendum. In these cases, the field should state, "See Addendum X". 

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Section 2: The Contract of Purchase and Sale

The opening section of the contract sets out the basic details of the transaction. It identifies the parties involved—the buyer and the seller—and provides a legal description of the property being purchased. By clearly defining who is bound by the agreement and what property is included, this section establishes the foundation for the entire contract.

Clause 1: Purchase Price

This section sets out the purchase price and the corresponding rescission amount. As an agent, it is essential to review these fundamental terms carefully with your client. Make sure they understand not only the agreed purchase price, but also the rescission fee and when it applies. Clear explanation up front helps prevent confusion or frustration if the buyer later exercises their right of rescission.

Clause 2: Deposit

This section of the contract outlines the terms of the deposit. The fillable area after “unless agreed as follows” allows agents to specify deposit timing and conditions. Examples include:

• “Payable within 24 hours of subject removal”

• “Payable within 2 days of acceptance”

In most cases, deposits are held in trust by the buyer’s brokerage. However, some brokerages—such as Fair Realty or 1% Realty—do not maintain trust accounts. In those cases, funds may be directed to another brokerage’s trust account or to the buyer’s lawyer, provided the requirements of clauses A, B, and C are met.

It is critical to emphasize that failure to pay the deposit within the agreed timeframe can terminate the contract. The clause also confirms that the rescission fee is deducted from the deposit if the buyer exercises their right of rescission. Both points should always be reviewed with clients to prevent misunderstandings.

Clause 3: Terms and Conditions

This section of the contract is where the specific terms and conditions of the deal are entered. For longer or more detailed lists of conditions, an addendum may need to be attached to the contract. Keep in mind that several standard terms are already included in Addendums 1 and 2, unless removed by the client. This section is best reserved for conditions that are unique to the property or more complex than those covered by the standard addenda.

Clause 4: Completion 

This section outlines the timeline for when the transaction will be completed. This can be different from the Possession and Adjustment dates. On Vancouver Island, all transactions will complete through the Victoria Land Title Office. 

Clause 5: Possession

This section sets out when the buyer will receive vacant possession of the property and is a fundamental term of the contract. If you are representing the seller, it is crucial to pay close attention to this deadline and ensure it can be met.

Clause 6: Adjustments

This section specifies the adjustment date, which is the point at which expenses are divided between the buyer and the seller. On completion, the buyer receives a statement showing costs the seller has already paid for the year that must be shared fairly. The primary adjustment is usually property taxes, which are paid in advance for the calendar year. The buyer covers their portion from the adjustment date forward, while the seller covers theirs up to that point. Other common adjustments include tenant rents and security deposits.

Clause 7: Included and Excluded Items:

Agents and clients should pay close attention to this section. The distinction between fixtures (which are always included in the sale) and chattels (which are only included if specifically listed) has been the subject of frequent disputes and even litigation.

When in doubt, it is best to list the item as included to avoid misunderstandings. Common examples that often cause confusion include built-in vacuum systems, garage door openers, built-in stereo or entertainment systems, garden sheds, planters, built-in appliances, bathroom mirrors, and hot tubs.

Clause 8: Viewed

The term “substantially the same condition” has been the subject of significant legal interpretation. It does not mean the property must be in exactly the same state as when viewed, nor does it guarantee that it will be clean and free of personal items. If the buyer wants junk or unwanted belongings removed, this must be stated explicitly in the contract.

In some situations, a holdback can be negotiated at the time of the offer to ensure certain items are removed before funds are released. Importantly, holdbacks cannot be added later—they must be agreed to in advance.

If issues arise at completion or possession, the buyer’s most common remedy is to proceed with closing and then pursue a claim for damages afterward.

Clause 9: Title

This section confirms that the title will be cleared of all encumbrances, except for those specifically permitted to remain. In practice, these exceptions usually include non-financial charges such as rights-of-way, easements, or restrictive covenants that stay registered on title and continue with the land.

Clause 10: Tender

Buyers should arrange all funds well in advance—both for the deposit and for completion. In some cases, funds are transferred by wire, which can take several days to process. To avoid delays, buyers should initiate transfers early and always obtain a copy of the wire receipt, forwarding it to their agent as confirmation. This ensures compliance with the Tender section of the CPS, where timely payment of funds is critical to closing.

Clause 11: Documents

This section is fairly straightforward, but one important detail is that registration of documents can occur as late as 4:00 p.m. on the completion date. As a result, funds may not reach the seller until later in the day. This timing is one of the main reasons why possession is typically scheduled for the day after completion.

Clause 11A: Seller's Particulars and Residency

As noted in the information section, this clause relates to the seller’s tax status and requires the seller to provide the appropriate documents to their lawyer. If the seller is a non-resident for tax purposes, they may face significant withholding requirements under the Income Tax Act. For this reason, it is essential that sellers seek legal and accounting advice early in the process to avoid delays or unexpected liabilities at completion.

Clause 11B: GST Certificate

Buyers and sellers should determine before an offer is made whether GST applies to the property. GST liability depends on the seller’s use of the property, meaning two seemingly identical properties may differ—one may be subject to GST while the other is not. The general rule is that all properties are taxable unless exempt, with the most common exemption applying to used residential housing (which covers the majority of transactions).

However, there are many situations where GST can apply, including farms, short-term rentals (e.g., Airbnbs), vacant land, substantially renovated homes, and properties with any commercial use.

Clause 12: Time

This is one of the most important clauses in the contract. Key dates must be followed strictly and should be clearly diarized. Missing a deadline—such as failing to remove conditions or to pay funds on time—can give the seller the right to terminate the contract.

Clause 13: Buyer Financing

In this section, the contract sets out that funds of a new mortgage may be paid in trust to the Seller's lawyer. This allows for the property to be registered at the Land Title Office prior to the funds being recieved granted the three conditions noted in the clause are met. 

Clause 14: Clearing Title

This section specifies that the seller is obligated to clear all financial charges, but that the clearing of these charges may be delayed until the funds for the transaction are recieved. This process is conducted by the Seller's lawyer, and as mentioned above, allows for low transaction costs when compared to other jurisdictions. 

Section 15: Costs

This section is relatively straightforward but worth highlighting: the buyer’s legal expenses are usually higher than the seller’s, as the buyer’s lawyer prepares most of the closing documents. However, the seller also requires legal representation to ensure the transaction is completed smoothly. Again, this relates to the Norfolk Aikens clause and allows for one of the most efficient land title systems in the world. 

Clause 16: Risk

This section relates to insurance of the property, specifically, that it ends at 12:01am on the Completion Date and that after that time the Buyer is covering the risk for major items. 

Clause 17: Plural

This section specifies that the contract remains binding even if a party dies or becomes incapacitated. This can create challenges if the seller passes away, as the property cannot transfer until probate is granted—a process that may take from six weeks to several months or even longer in complex cases. 

Clause 18: Representations and Warranties

This section is one of the most important clauses in the contract. It makes clear that only items written into the contract count as the seller’s representations and warranties. Verbal promises or informal assurances should never be relied upon. If a matter is important, it must be documented by amendment. For very minor issues, an email may sometimes be sufficient.

Clause 19: Personal Information

This section relates to the parties' personal information and how it is used in the transaction. Like many jurisdictions, the use of buyers’ and sellers’ personal information is highly regulated. Within the real estate system, this information is collected and used to ensure accurate reporting of property sales and market data. Parties should also understand that certain information—such as property assessments, ownership details, and financial charges registered against title—is already publicly available through government and Crown corporation websites.

Clause 20: Assignment of Remuneration

This section relates to the payment of commission through the agent's brokerage. This allows for simple and fast disbursement of commission to the appropriate parties and is handled by the brokerage's conveyancing team. 

Clause 20A: Restriction on Assigment of Contract

This section addresses the assignment of the contract to other parties. Buyers and agents should recognize that even adding a family member for financing support—as is common with first-time home buyers—may be treated as an assignment and therefore requires the seller’s consent. If this scenario is anticipated, it should be dealt with at the time of offer by including a specific clause permitting the assignment, along with completing the Notice to Seller Regarding Assignment Terms form.

Clause 21: Agency Disclosure

This section outlines the representation and disclosure acknowledgements made by the parties in the transaction. It confirms that each party has received, read, and understood the Disclosure of Representation in Trading Services form, ensuring transparency and compliance with regulatory obligations.

Clause 22: Acceptance Irrevocable

This section specifies acceptance of the contract is binding. This was to deal with a historical legal argument that contracts made without a deposit (or in the alternative, a seal) can be revoked by the Seller. 

Clause 23: Disclosure of the Buyer's Rescission Right

This section explains the Home Buyer Rescission right, outlining when it can be exercised and identifying the exemptions that may apply. It also serves as a signed disclosure, confirming that both parties understand their rights and obligations under the rescission period.

Clause 24:

Clause 25: Counterparts

This section relates to how the contract may be signed and delivered. It allows each party to sign separate copies, which can be exchanged electronically by fax, email, or other means. Each signed copy is treated as an original, and together they form one binding contract as though all parties had signed the same document.

Clause 26: Offer

This section relates to the timeline for acceptance of the offer. It clarifies that a buyer may rescind their offer at any time before acceptance, and that sufficient time should be allowed for the seller to review and respond. While it is customary for sellers to reply, they are under no legal obligation to do so. Importantly, buyers and agents cannot rely on verbal acceptance, as it can be revoked—written acceptance must be received before the deadline. If the acceptance period expires without a signed response, the offer is no longer valid and must be resubmitted.

Clause 27: Acceptance

This section relates to the acceptance of the offer within the specified time frame. If the seller accepts within that period, the offer becomes a binding Contract of Purchase and Sale, and both parties are legally obligated to complete the transaction. As noted in paragraph 11, time is of the essence, meaning deadlines in the contract must be met precisely.

Notice for Buyer's Rescission Right

Agents must ensure that the Home Buyer Rescission Period has fully expired before relying on a signed contract to support another offer. Calculate the expiry precisely, factoring in all permitted notice methods—especially mail, which can delay deemed delivery. After the period has expired, it can be helpful to obtain written confirmation from the buyer that they have not exercised their rescission right. This adds comfort but does not replace the legal calculation of the deadline.

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Contract of Purchase and Sale Addendum 1

Addendum 1 covers the various agreements between the buyer and seller. These are explained in more detail below:

Clause 1: Provincial Property Tax

This clause specifies that the buyer is aware that property transfer tax is payable on the purchase. This is a useful section of the contract to point your clients to if they are curious what this amount will be. 

Clause 2: No Appliance Warranty

This section signals that the seller will not be guaranteeing the working order of any equipment. It is important that the buyer reads this carefully. It is possible to submit a term that negates this clause, but must be done at the time of offer. 

Clause 3: Deposits

This section outlines the guidelines around release of a deposit. It is best to get bank drafts or certified funds as banks can take 10 days or so to fully clear a cheque to a brokerage. 

Clause 4: Fireplaces, Fireplace Inserts, Wood Stoves and Chimneys

This section specifies that the buyer is responsible for verifying that fireplaces, fireplace inserts, wood stoves, and chimneys are compliant with government authorities (i.e., W.E.T.T. Certified). If this is important to the buyer, they should seek assurances from the seller that everything is, in fact, W.E.T.T. certified. 

Clause 5: Property Inspections

This section relates to the buyer’s lender or insurer needing access to the property. In some cases, lenders or insurers may require entry even after conditions have been removed. To avoid complications, this should be addressed at the time of offer by adding a term such as: “The buyer’s lender or insurer may access the property if required for insurance or lending purposes.”

Clause 6: Secondary Accommodation

This section relates to secondary suites. Buyers should understand that most suites are not legally authorized, even if the zoning allows them. Many municipalities enforce bylaws on a complaint basis, with traffic and noise being the most common triggers. However, there is no guarantee that the continued use of an illegal suite will be permitted, and buyers should be cautious when relying on rental income from such units.

Clause 7: GST

This clause relates to the GST section in the CPS. See notes in Clause 11B. 

Clause 8: Property, Dwelling Size and Room Requirements

This section specifies that the buyer is satisfied with the area of the dwelling, land etc. and that the measurements provided thus far are approximate only. If it is important to the buyer, these measurements should be independantly verified through a subject condition. 

Clause 9: Title to Property

This section is much the same as noted in Clause 9 of the CPS. It signals that the buyer is aware that is their responsibility to understand the nature of the various encumbrances and charges on title. 

Clause 10: Disclosure of Material Latent Defects

This section relates to the disclosure of latent defects, which is one of the most common areas of misunderstanding and dispute. Sellers and their agents are obligated to disclose latent defects, including issues such as unpermitted work. Buyers, however, should perform as much due diligence as possible, as it can be difficult to prove whether a seller knew of a defect or had a duty to disclose it.

Clause 11: Survey Certificate

This section relates to surveys and title insurance. A current survey can be extremely valuable for buyers, as property lines often differ from visible fence lines. Without a survey, buyers may be unaware of encroachments or other boundary issues. If a survey is not available, obtaining title insurance is strongly recommended as an added layer of protection.

Clause 12: Fuel in Tank

By default, fuel in tank is included unless otherwise agreed to in the contract. For example, should the buyer not want any of the fuel, this would have to be specified in the contract. 

Clause 13: Property Disclosure

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This section relates to the Property Disclosure Statement (PDS). Buyers should review the PDS carefully, as once it is incorporated into the Contract of Purchase and Sale, the seller’s statements can become binding warranties. This means inaccurate or misleading disclosures may give rise to contractual remedies.

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Contract of Purchase and Sale Addendum 2

This is a set of standard conditions that can be used to do basic due diligence on a property. 

Clause 1: Buyer Financing

This condition allows the buyer to confirm their ability to secure financing for the property. It is commonly set for seven days after acceptance, though the timeline can be adjusted depending on the buyer’s circumstances and lender requirements.

Clause 2: Property Inspection

This condition provides the buyer with time to investigate the property and confirm it meets their needs, while checking for any significant maintenance issues that may not have been disclosed. It is especially valuable when a property shows signs of disrepair or when buyers want reassurance about the home’s overall condition before proceeding.

Clause 3: State of Property Title

This condition allows the buyer to conduct a review of the property title, typically with the assistance of legal counsel. The review examines any encumbrances, charges, or notations that may affect ownership or use. This condition is especially important for properties with a long or complex list of charges, or when buyers have specific intended uses that could be impacted by easements, rights-of-way, or restrictive covenants.

Clause 4: Fire/Property Insurance

If there is any doubt about a property’s insurability, this condition is essential for buyers. Certain types of properties are considered “hard to insure” by many providers. Common examples include:

• Pre-1930s homes that may still have knob-and-tube wiring, as many insurers either refuse coverage outright or require upgrades, inspections, or higher premiums.

• Properties in wildfire-prone or flood-risk areas, which can attract high premiums, coverage restrictions, or in some cases denial of coverage.

• Homes with a history of insurance claims, where insurers may refuse to provide coverage unless system upgrades (such as electrical, plumbing, or security) are completed.

These situations do not always make a property “uninsurable,” but they often mean coverage is more expensive, conditional, or limited. Without satisfactory insurance, buyers cannot secure financing, and they may be left exposed to significant risk.

Clause 5: Property Disclosure

If the Property Disclosure Statement (PDS) raises concerns or is not present at the time of the offer, it may be advisable to include this condition. This gives the buyer additional time to review the disclosures carefully and consider their position before committing to the purchase.

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Addendum 1: Strata CPS

The Strata Addendum to the Contract of Purchase and Sale modifies the standard addenda to address unique considerations for strata properties. There are three key distinctions:

Clause 11: Special Levy

This clause allocates responsibility for special levies. If a levy is passed and payable before the Completion Date, the seller is responsible. If payable after completion, the buyer is responsible.

Buyers may find this problematic if a building has been deferring maintenance and a levy is likely imminent. To protect themselves, buyers sometimes include a holdback clause in the contract, ensuring funds from the seller’s sale proceeds are reserved for potential levies.

Clause 12: Notification of Changes in Bylaws and Rules: 

The seller must notify the buyer of any new bylaws or rules passed between acceptance and completion. This ensures the buyer is fully informed of changes that may affect their ownership. In some cases, the buyer may negotiate to receive proxy voting rights for meetings held before completion.

Clause 13: Form B Information Certificate

This clause requires the seller to provide the buyer with a Form B Certificate, which discloses important details about the unit and strata corporation, including:

• Monthly strata fees

• Any arrears owed by the seller

• Parking and storage allocations

• Other relevant financial and structural information

Buyers often include a condition to review the Form B to confirm that the information is acceptable before proceeding.

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Addendum 2: Strata CPS

Again, this is a modification of the standard addenda and has one major distinction.

Clause 1: The Seller Agrees...

This section requires the seller, at their expense, to provide the buyer with key strata documentation by a specified date. These documents typically include:

• The Property Disclosure Statement for Strata Properties

• The Registered Strata Plan and any amendments or resolutions affecting common property

• Bylaws and financial statements of the strata corporation

• Minutes from recent annual and general meetings, plus strata council meetings (for a set number of months)

• Correspondence from the strata council to owners (past 12 months)

• The Form B Information Certificate and strata rules

• Details of any building warranty

• Any Building Envelope, Remediation, or Engineering Reports

• Any additional documents required under Section 35 of the Strata Property Act

The buyer then has until a specified date to review and approve this information. This condition is for the sole benefit of the buyer, allowing them to withdraw if the documents reveal concerns.