Published 11 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
A lease review condition runs in the opposite direction from the conditions you use every day. LEASE/APP-1 (Condition – Buyer’s Right to Review Leases) and LEASE/APP-2 (Condition – Inspection of Leases and Real Property) are drafted as conditions subsequent: the buyer must speak up by the deadline to get out, and if the buyer says nothing the agreement stays alive. On a financing or inspection condition, silence kills the deal. Here, silence binds your client. The other thing agents miss is that LEASE/APP-2 contains three separate dates — delivery, notice of dissatisfaction, and termination — and filling in only one of them produces a clause that does not work.
The failure mode: a buyer who is bound and did not know it
An investor buyer puts an offer on a small mixed-use building. The schedule includes a lease review condition. The buyer’s accountant is away, the rent roll arrives late, and everyone assumes the deal will quietly die on the condition date the way deals do.
It does not. The condition was a condition subsequent, the buyer never delivered notice of dissatisfaction, and the agreement became unconditional on its own. Now the buyer is committed to a building with two tenants in arrears and a lease with a renewal option at a rent nobody would sign today.
I have had this conversation more than once, and the agent’s answer is always the same: I have written a hundred conditions, they all work the same way. They do not. Read the mechanics of the clause you are using rather than the shape you expect.
Condition precedent, condition subsequent, and why it matters to you
Strip away the vocabulary and there are two designs.
In the design you know, the buyer has to deliver a notice — of fulfilment or of waiver — by a deadline, and if nothing arrives the agreement ends and the deposit comes back. That is how financing and inspection conditions are normally built, and it is how the severance and servicing conditions in the development category are built.
In the design used for lease review, the agreement is alive from acceptance and stays alive unless the buyer serves notice that they are not satisfied, or notice terminating, by the deadline. No notice means the buyer is deemed to have waived and the agreement remains binding.
Both are legitimate and each suits a different commercial reality. A seller of an income property does not want their building tied up in a deal that expires by default; the structure puts the onus on the buyer to act. Your job is to know which one is in the schedule in front of you and to diarise accordingly — because on a condition subsequent, the calendar entry is not “condition expires,” it is “last day to get my client out.”
The short version
On a lease review condition, write the reminder as a deadline to terminate, not a deadline for the condition to lapse. If your client wants out and you serve nothing, they are buying the building.
LEASE/APP-1: the simple version, and its one weakness
LEASE/APP-1 does three things. The seller agrees to produce copies of the leases on the property once the offer is accepted. The buyer reviews them. If the buyer does not like what those leases say, judged in their own discretion, they can terminate by written notice delivered by the stated deadline and recover the deposit without deduction.
It is clean and it is appropriate on a small residential income property where the lease package is thin. Its weakness is what it does not say. It does not fix a date by which the seller must produce the leases. The obligation is tied to acceptance, which is not the same as a deadline, and a seller who takes ten days to assemble the package has eaten ten days of your buyer’s review period.
If your buyer needs a hard delivery date, that has to be drafted. On my files, if the review window is short, the delivery obligation gets a date and a consequence, and both go to the lawyer to settle. Otherwise you are relying on goodwill to protect a deadline that binds your client.
LEASE/APP-2 has three dates and most schedules fill in one
LEASE/APP-2 is the fuller commercial version and it reaches the land and the improvements as well as the tenancies. Because it does more, it needs more dates.
- A delivery date. The seller supplies the leases in force at acceptance, and the offers to lease where a lease is not available, plus as-built plans for the site if the seller has them. That last qualifier matters: the obligation is to hand over what the seller has, not to create documents.
- A dissatisfaction date. The buyer must notify the seller by this date that they are not satisfied with the inspections. Miss it and the buyer is deemed to have waived and the agreement remains valid and binding.
- A restoration date. Where the buyer’s inspections disturb the property, the buyer has to put it back to its pre-existing condition by a stated time. On a commercial file with invasive testing, this is not a formality.
- A termination date. After notice of dissatisfaction the seller may elect to remedy. If the seller does not remedy to the buyer’s satisfaction, the buyer may terminate by written notice by this date and get the deposit back.
That is a sequence, not a set of independent boxes. The dissatisfaction date has to leave the seller real time to decide whether to remedy, and the termination date has to fall after that. I have reviewed schedules where the two dates were identical, which makes the seller’s right to remedy meaningless and gives a seller an argument that the clause was never operable as written.
LEASE/APP-2 also gives the buyer two things worth understanding. It obliges the seller to allow inspection of the land and improvements at mutually convenient times, and it authorises governmental and other authorities with jurisdiction to release their files on the property to the buyer. That second one is genuinely useful on a commercial file — work orders, permits, fire inspections — and it is the sort of provision a buyer’s agent should be actively using rather than treating as boilerplate.
“All leases” is narrower than your buyer thinks
The clause obliges the seller to produce leases, and where a lease is not available, offers to lease. Neither of those captures the things that most often blow up an income purchase.
Side arrangements do not appear in a lease. Neither do arrears, inducements already given, a verbal agreement to hold rent flat, a tenant who has quietly sublet, or an assignment the landlord approved years ago and never papered. A rent roll that does not reconcile to the leases is the single most common finding on a small commercial file, and it is a finding the review condition is designed to surface.
So use the period for what it is for. Ask for the leases, the amendments, the renewals and the assignments; ask for the rent roll; ask for the deposits held and what they are attributed to; ask whether any tenant is in default. Then hand all of it to the buyer’s lawyer and accountant. Your client’s lawyer will usually want direct confirmation from the tenants themselves rather than the landlord’s summary, and how that is obtained is their call to make, not yours.
One regulatory point that catches residential agents moving into small income property: a rental operation can fall within the definition of a business under TRESA, which brings delivery obligations for financial information that do not arise on an ordinary residential sale. Check with your brokerage which form applies on your file before you write the offer, not after.
“Sole and absolute discretion” is not a free option
Both of these clauses give the buyer a discretionary judgment. Agents read that as a get-out-of-jail card, and tell buyers they can terminate for any reason or no reason at all.
Be careful. In Marshall v. Bernard Place Corp. (ONCA, 2002), a discretionary inspection condition was held, as reported, to have both objective and subjective elements, and a buyer was entitled to rely on genuine deficiencies found through the inspection. The lesson agents take from it is the one worth repeating: a discretion clause is not the same as an unrestricted option to walk away, and how far it goes on any particular wording is a question for the lawyers.
The practical consequence is about file management rather than argument. When a buyer terminates on a lease review condition, the notice should be capable of being supported by something real that came out of the review. Keep the rent roll, the lawyer’s comments, the engineer’s report. If it ever gets tested, a file with contemporaneous findings is a different file from one with a one-line email.
The short version
Serve the notice, serve it the way the agreement says, and have something in the file that explains why. Three sentences of housekeeping that make the difference between a clean termination and an argument about the deposit.
Notice, delivery and the deposit that does not move
Everything in this category turns on a notice, which means everything turns on the agreement’s delivery provisions. In High Tower Homes Corp. v. Stevens, 2014 ONCA 911, a waiver delivered by fax where the agreement called for personal delivery was reported to be ineffective. The parties’ chosen method governs. On a commercial file where the seller is a corporation with a registered office and a lawyer, confirm who the notice goes to before you need to send one.
Two counterweights are worth knowing so you do not panic on a file. In VanderMolen Homes Inc. v. Mani, 2025 ONCA 45, subsequent conduct kept an agreement alive despite an acceptance of an extension arriving a day late — a missed technical step is not automatically fatal. But that is a rescue, not a plan.
And when a lease review condition is properly triggered and the deal ends, the deposit does not move by itself. A brokerage may disburse trust money only on a written direction signed by all parties to the agreement, or on a court order. The condition failing ends the agreement; it does not release the money. Get the direction signed while the parties are still on speaking terms. The deposit clause post covers the mechanics in full.
Comparing the two clauses
| Feature | LEASE/APP-1 | LEASE/APP-2 |
|---|---|---|
| Structure | Condition subsequent — buyer terminates by notice or the deal stands | Condition subsequent — buyer is deemed to have waived if no notice of dissatisfaction |
| Scope | The leases only | The land and improvements, plus the tenancies — leases, or offers to lease where no lease exists |
| Seller delivery obligation | Copies of leases, tied to acceptance rather than a fixed date | Leases and offers to lease in force at acceptance, plus as-built plans if the seller has them, by a stated date |
| Inspection rights | None expressed | Access at mutually convenient times, plus authority for government bodies to release their files |
| Seller’s right to remedy | None — the buyer terminates or does not | Yes — the seller may elect to remedy before the buyer’s termination right is exercised |
| Buyer obligations | Review at the buyer’s own risk and cost | Pay for its own consultants, restore the property after inspection, keep results confidential |
| Best used for | Small residential income property with a thin lease package | Commercial and mixed-use purchases where physical condition and tenancies both need work |
Your exposure, including the one nobody mentions
LEASE/APP-2 lets the buyer keep the results of their inspections confidential and does not compel them to hand the findings to the seller. That protects your buyer’s money — they paid for the report — and it is a sensible commercial term.
It does not do anything about you. If that deal dies and the same property is later listed with you on the seller’s side, what you learned does not disappear. Where a seller’s agent knows of a latent defect that renders a property unfit for habitation or dangerous, the duty from case law is to disclose it to every interested buyer, use best efforts to obtain an acknowledgement from each, and give each a copy. Those duties come from case law, not from the regulations, and a confidentiality provision in someone else’s dead agreement is not an answer to them.
The other live exposure is scope creep. Investor clients ask their agent what a cap rate should be, whether a lease renewal option is enforceable, and what the arrears are worth. The first is a conversation you can have. The second is a legal question. The third is an accounting question. Answer the wrong one and you have given advice you are not insured to give.
And if the seller of a small income property is unrepresented, the usual discipline applies with force: confirm they intend to proceed without representation, deliver and explain the RECO Information Guide and the Information and Disclosure to Self-Represented Party form, make clear you act for the buyer, seek written acknowledgement of that form — and do not advise them on price, terms or clauses, however much they ask.
How I run a lease review condition
- Identify the structure before anything else. Write “condition subsequent — client is bound unless we serve” at the top of the file.
- Diarise the termination date as the controlling date, with reminders at minus seven and minus two, and note the required delivery method on the reminder.
- Put a hard date on the seller’s delivery obligation, and if the schedule does not have one, have the lawyer add it.
- Request the full package in writing on the day of acceptance: leases, amendments, renewals, assignments, rent roll, deposits held, arrears.
- Arrange access early, and sequence it around the tenants rather than around your own calendar.
- Send everything to the buyer’s lawyer and accountant, and stay out of the legal and accounting conclusions.
- Where the clause gives the seller a chance to remedy, serve the dissatisfaction notice with enough runway that the remedy period is real.
- Keep the findings in the file. If the buyer terminates, the file should show what the review turned up.
The short version
Two clauses, one design, three dates. The design binds your client if you do nothing, the dates only work in sequence, and the notice only counts if it travels the way the agreement says it must.
Questions agents actually ask
What is the difference between a condition precedent and a condition subsequent here?
On the conditions you use daily, the buyer must deliver notice of fulfilment or waiver or the deal ends. On a lease review condition the agreement is alive from acceptance and stays alive unless the buyer serves notice of dissatisfaction or termination by the deadline. Silence ends a condition precedent and binds your client under a condition subsequent. Diarise the termination date as the controlling one.
Does LEASE/APP-1 give the seller a deadline to produce the leases?
Not a fixed date. The obligation is tied to acceptance of the offer, which is not the same thing. A seller who takes a week to assemble the package has consumed a week of a review period that binds your buyer when it expires. If the review window is short, have a hard delivery date and a consequence drafted into the schedule by the lawyer.
Can my buyer terminate a lease review condition for any reason at all?
Do not promise that. Marshall v. Bernard Place Corp. (ONCA, 2002) is reported to have held that a discretionary inspection condition has both objective and subjective elements, and that a buyer may rely on genuine deficiencies found through the inspection. How far a particular discretion goes is a legal question. Serve the notice properly and keep in the file whatever the review actually turned up.
The rent roll does not match the leases. What now?
That is exactly what the condition period exists to find, and it is a question for the buyer’s lawyer and accountant rather than for you. Gather the underlying documents — amendments, renewals, assignments, deposits held, arrears — and pass them across. Side arrangements, inducements and informal rent concessions never appear in the lease package, so ask about them in writing.
Does the confidentiality provision in LEASE/APP-2 protect me too?
No. It governs what the buyer must share with the seller. If the deal dies and you later act for the seller of the same building, what you learned still sits with you. Where a seller’s agent knows of a latent defect rendering a property unfit or dangerous, the duty from case law is to disclose it to every interested buyer, obtain acknowledgements and provide copies.
The condition failed. When does the deposit come back?
Not automatically. A brokerage may release deposit money only on a written direction signed by all parties to the agreement, or on a court order, and the brokerage has no discretion of its own. The condition failing ends the agreement but does not move the money. Prepare the direction immediately and get it signed while both sides are still cooperative.
The clause checklist I make my own agents use
A one-page pre-submission check for conditions and schedules — the dates, the notice route, and the eight things that get missed. Built for Ontario agents. Free, and there is no drip campaign behind it.
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Moving from residential into small investment deals?
The first commercial file is where a residential agent discovers that conditions do not all work the same way. At RE/MAX Quantum every investment schedule is read before it goes out, and I will tell you which date actually controls the deal. That is the part nobody teaches at licensing.
Book a 15-minute call or call or text 833-330-1925.
If the honest answer is that your current brokerage is fine, I will tell you that.
Related reading
- New Home Clauses in Ontario: Builder Registration, Completion and the Tarion Schedules
- Self-Represented Parties and Mere Postings: The Remuneration Clause Under TRESA
- Swimming Pool Clauses in Ontario: Bylaw Compliance, Working Order and Winterization
- Cannabis Clauses in Ontario Real Estate: Grow Ops, Disclosure and the Acknowledgement Trap
- Franchise Conditions in Ontario Commercial Deals: Approving the Documents and Being Approved
- Every clause and condition guide in one place
- OREA, Guidelines for Residential and Commercial Clauses, revised 19 May 2026 (OREA member resource)
- Marshall v. Bernard Place Corp. (Ont. C.A., 2002)
- High Tower Homes Corp. v. Stevens, 2014 ONCA 911
- VanderMolen Homes Inc. v. Mani, 2025 ONCA 45
- RECO Bulletin 7.4, Facts a seller has a legal obligation to disclose
- RECO Bulletin 2.4, Assisting a self-represented party
Jatin Dua is Broker of Record and co-founder of RE/MAX Quantum Realty, Brokerage, Unit 101, 799 The Queensway, Etobicoke. Four-plus years in the GTA and more than $100M in sales volume. He reviews the agreements his agents write.
This is professional commentary from a Broker of Record on drafting practice for lease review and inspection conditions on investment purchases. It is not legal, accounting or tax advice. Lease enforceability, tenant rights and the effect of any particular condition wording are questions for the client’s lawyer. This is general professional commentary from a Broker of Record on drafting practice. It is not legal advice, it is not a substitute for your own brokerage’s policies, and it does not create any professional relationship. Clause codes refer to OREA’s Guidelines for Residential and Commercial Clauses, an OREA member resource — the clause wording itself is OREA’s and is not reproduced here. Always work from your brokerage’s approved forms, and send your client to a lawyer for anything turning on interpretation, enforceability or remedy. Legislation, regulator guidance and case law all change; verify anything you are relying on.