Subject clauses: how a commercial offer protects you

General information, not tax or legal advice. Every deal is different. Talk to your lawyer and accountant before you act on anything here.

What a subject clause is

A subject clause, or condition precedent, says the contract only goes ahead if something happens by a set date: your financing is approved, the inspection comes back clean, the zoning allows your use. Until the subjects are removed, the deal is in suspense. Once you remove them in writing, it’s firm and your deposit is at risk.

Residential deals tend to use one or two standard subjects on a standard form. Commercial contracts are usually longer and custom, because every property and buyer needs something different.

Subjects commercial buyers use

• Financing on terms you can accept.
• Title: review of charges, easements and any registered leases or options.
• Inspection of the structure, roof and building systems.
• Financial review: statements, rent roll, leases and service contracts.
• Tenant estoppels confirming each lease and that no one is in default.
• Zoning and permits that allow your intended use.
• Environmental review, often a Phase 1 assessment.
• A list of included equipment and contents, attached to the contract.

Give each subject enough time. Reports, lender approval and estoppels all depend on other people’s schedules. The due diligence checklist covers what to look at during that time.

Word them carefully

The more freedom a subject gives one side to walk away, the bigger the risk a court finds there was never a binding contract. A clause that leaves everything to one party’s sole discretion, with nothing objective attached, is the classic problem. Clear, specific conditions with dates hold up better.

In BC, each subject usually says which party it benefits, for example “for the sole benefit of the Buyer”. That matters because the Law and Equity Act lets the party a condition benefits waive it, even one that depends on someone outside the deal, such as a municipality. Your lawyer drafts the wording, and I make sure the business terms behind it are right.

Letter of intent first, if it helps

On larger deals, buyers and sellers sometimes agree the main points in a short letter of intent before the full contract: price, deposit, subjects and their timing, and the completion date. It’s usually non-binding on the deal itself. It saves both sides paying lawyers to draft a contract before the big points are agreed.

Deposits, counter-offers and removal

A deposit paid to a brokerage sits in its trust account, held for both parties under the Real Estate Services Act. Any change to an offer, even a small one, is a counter-offer that the other side can accept or reject. And when you remove subjects, do it in writing, by the deadline, only once you’re satisfied. I keep track of every date so nothing lapses by accident.

Questions people ask

Can I remove one subject and keep the others?

Yes. Each subject is usually removed separately by written notice. Many buyers remove inspection first and financing last, once the lender has signed off.

What happens if a subject date passes?

It depends on the contract. The usual BC wording says the contract ends if the benefiting party hasn’t waived or declared the condition fulfilled by its date, and the deposit is returned. Ask your lawyer before any deadline, not after.