Encyclopedia
Subject clause
A condition in a contract that must be met or waived, such as financing or inspection.
For example: A buyer includes a financing subject. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you make an offer on a warehouse with subjects for financing, a building inspection and an environmental review. You set dates your lender and consultants can actually meet. The seller knows exactly when the deal will firm up, and you have time to do the work properly.
What I’d tell a friend
Make your subjects specific and your dates realistic. A subject that is too vague or too short can cause problems for both sides.
Why it matters to you
It's your way out of the deal. If your subjects are too narrow or too short, you may have to complete even when financing, inspections or approvals don't work out.
How to use it in your deal
Buyers and tenants should write subject clauses clearly, with specific conditions, deadlines and who benefits. Allow enough time for inspections, reports, financing approvals and lease reviews, and start right away. Know that a subject must be exercised honestly and in good faith; courts have found that a buyer can't walk away arbitrarily. Sellers want short, specific subjects and may resist vague ones.
Track deadlines and remove or waive subjects in writing. If you need more time, ask for an extension before the deadline. Deposits often become non-refundable once subjects are removed. Get legal advice before removing subjects. List each subject with its own date if the work takes different lengths of time; financing often needs longer than inspection.
Ask your lender and inspector for their timelines before you write the offer. Once subjects are gone, the deal is firm and walking away can cost you the deposit and damages, so be sure.
Mistakes I see
Vague subjects. Too little time. Missing the deadline.
In BC and Vancouver
Contract law governs; case law on good faith is on CanLII.
Official sources: CanLII (court decisions) · BC Financial Services Authority
Writing subjects that work
A good subject says what must happen, by when and who decides whether it is satisfied. Vague wording can lead to disputes about whether a party acted in good faith.
Check with a BC lawyer on how to word subjects for your deal, especially if they depend on third parties like a lender or the city.
Removing subjects
Agree how subjects are removed, usually by written notice by a set time on a set date. If the date passes without notice, the contract may end.
Track each date closely and talk with the other side early if you need more time. Extensions are common but have to be agreed in writing.
Your subject period, in order
Subject periods go fast. This is the order I work in so nothing important is left for the last day. General information, not legal advice; your lawyer drafts the actual terms.
- Day 1: one written document request. Leases and every amendment, the rent roll, two or three years of operating statements, the property tax and assessment notices, utility bills, service contracts, insurance, any building or environmental reports, and for a strata lot the strata documents and minutes.
- Days 1 to 5: leases against the rent roll. Check each tenant’s rent, term, renewal options, deposits and any free rent against the actual lease. Then check the bank deposits or ledger, so you know the rent is collected, not just billed.
- Days 3 to 10: additional rent. Compare what tenants pay in operating costs and taxes to what the building actually spends. Check that recoveries follow each lease.
- In the offer: a rent roll warranty. Attach the rent roll and have the seller confirm it is accurate, with wording your lawyer sets up to survive closing.
- As a subject: signed estoppels from the main tenants. Each key tenant confirms in writing their rent, term, deposit, options and that there are no disputes. If a tenant’s answer doesn’t match the rent roll, you find out before you go firm.
- Building, environmental, zoning and financing run in parallel. Order inspections early, since reports take time.
- Before removing subjects: list anything you found, and decide whether it means a price change, a repair credit, more time or walking away. Ask for any extension in writing before the deadline.
Questions to ask before you sign
- What are the subjects?
- When is the deadline?
- Who benefits?
- What happens to the deposit?
Keep reading
Related terms: Subject removal, Due diligence
Working through this right now? Questions are free. Book a 15-minute call or call or text 604 256 2002, and I’ll give you a straight answer.
Back to the A–Z index · common questions · tactics to watch for · the shorter glossary
General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.