Closing conditions are the specific events, approvals, or circumstances that must occur (or be waived) before either party is obligated to close the transaction. They convert a signed LOI or purchase agreement from a conditional promise into a completed deal. Typical buyer closing conditions include: satisfactory completion of due diligence, financing approval (BDC or bank), assignment of the premises lease by the landlord, transfer of critical licenses or permits, absence of material adverse change (MAC) in the business, seller reps and warranties being true at closing, and delivery of all closing deliverables. Typical seller closing conditions include: receipt of the purchase price, releases from personal guarantees, and regulatory approvals. The negotiation of closing conditions is critically important because each condition is a potential walk-right — a condition the buyer can point to if they want to exit the deal. Buyers should resist removing conditions prematurely. The financing condition in particular should remain open until financing is formally approved in writing. In BC real estate parlance, this is analogous to the 'subject-to' period in residential purchases.
An LOI for a Port Moody flooring company includes four buyer closing conditions: BDC financing approval, landlord consent to lease assignment, transfer of the WorkSafeBC account in good standing, and no material adverse change. When the landlord refuses to assign the lease, the buyer exercises the closing condition and recovers the full $20,000 deposit.
Process knowledge is what separates buyers who close on good terms from those who pay too much or miss problems. Ali applies 17+ years of Canadian acquisition experience to every step.