A home inspection is supposed to give you peace of mind. But what happens when it does the opposite? If a home fails inspection before closing, you do not automatically lose your deposit or your right to walk away. What happens next depends largely on the wording of your inspection condition and the steps you take before the deadline. <\/p>\n\n\n\n
Here\u2019s what you need to know about how inspection conditions work under a standard Ontario Agreement of Purchase and Sale.<\/p>\n\n\n\n
In most resale transactions, the home inspection clause acts as a condition precedent<\/strong>, giving buyers a contractual off-ramp before the deal becomes firm. Ontario\u2019s standard OREA Form 100 Agreement of Purchase and Sale<\/a> sets out the conditions with a specific deadline. If you miss that deadline, the condition can expire, potentially taking your contractual protection with it.<\/p>\n\n\n\n How much room you have to walk away depends entirely on the wording of that clause.<\/p>\n\n\n\n Standard Ontario inspection clauses often make the deal conditional on a report being \u201csatisfactory to the buyer in the buyer\u2019s sole and absolute discretion.\u201d In Marshall v. Bernard Place Corp.<\/a> (2002 ONCA), the Ontario Court of Appeal confirmed that buyers have significant discretion to decide whether an inspection meets their expectations. It must still be exercised reasonably and in good faith.<\/p>\n\n\n\n\u201cSole and Absolute Discretion\u201d vs. Objective Thresholds<\/h3>\n\n\n\n