When buying a home, you want to make sure that you are protected. In a purchase contract a Subject Clause is a condition that the buyer or seller creates. Subject clauses add a barrier that protects you, the buyer, while you perform due diligence on the property.
Also referred to as an “escape clause”, your subject clauses allow you to draw up a purchase contract that you can escape if certain conditions aren’t met. Some scenarios that we’ve seen come up where subject clauses have saved our clients include:
At the end of the subject removal period, if the buyer is satisfied that they will be able to close on the purchase then they can remove their subject clauses. This is done by signing an addendum to the contract and issuing a deposit cheque.
Typically, the subject removal period is 7 days for a new home. This can be shortened if necessary during hot markets or when you, the buyer, needs to be competitive.
For rental properties, especially when held in a holding corporation, this number should be increased as the mortgage application usually goes to upper management for approval.
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