Questions and Answers Presale Contract Clause

This is a follow up to our last email regarding a development in Maple Ridge that has a price escalation clause.  A number of you had follow up questions and I do not have time to return each question.  Below is a summary of the questions along with my answers.



  1. Is this legal? We did a poll in our office of our senior lawyers and the opinion of the majority is that it is enforceable.   Although there may be an adjustment to the price, the adjustment is objective and the contract clearly sets out how and when the price may be increased.  Obviously a court has not ruled on this, but our opinion is this is an enforceable term.


  1. If prices drop by 4%, will they reduce the price by 4%? There is no provision in the clause that we have that allows for a price reduction.   Realistically, when does the cost of construction go down anyway?


  1. Does the wording have to be in the contract or is this a change in rules across the board? It has to be in the contract!


  1. Is there recourse for purchasers? Since we believe the price adjustment is enforceable, we do not believe there would be recourse for the buyers, other than to challenge the calculations.  They entered into the contract knowing this was part of the transaction.  We could be wrong on this, and we are sure some litigation law firm will challenge if a buyer is willing to pay for the litigation.


  1. What developments have you seen these clauses with so far? Who is developer? We have only seen this one project, but we know other developers are looking at this.   I would rather not mention names, and we have a screenshot on our Facebook page!


  1. Was it shown on the actual purchase contract or the disclosure? Do you know if this has to be in a contract for it to be binding, or could they put it in the disclosure statements or future amendments to the disclosure and the buyer would have to accept that?   It was part of the contract.   Further it cannot be part of a future amendment.


  1. Can you offer advice on what happens when a Buyer has removed the subjects, paid the deposit but cannot complete? Not now, this is a totally different issue.


Turns out a few of our partners have seen a clause like this before.  Keep your eyes open !


Thanks as always for the support, all the best.


Tony Spagnuolo, Barrister & Solicitor

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