Have you been browsing the Toronto MLS for listings and seen the initials “SCE”? Or maybe you found the perfect home only to call the REALTOR® and learn it is “Sold Conditionally…with an escape clause”.
SC stands for sold conditional, meaning the home has an accepted offer subject to conditions like financing or inspection. An escape clause (or the “E” in SCE) adds another layer; it allows the seller to keep marketing the property and, under certain circumstances, accept another offer. This protects sellers while still giving buyers a fair chance to firm up their conditions.
If you’re new to Ontario Real Estate, you’re likely unfamiliar with the term. However, an escape clause can be a powerful tool in both the Buyer’s and the Seller’s negotiation toolkit.
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What is an Escape Clause?
In simple terms, an escape clause means the property is conditionally sold but not committed to the current buyer. If another purchaser were to come forward with a bona fide unconditional offer (or an offer that meets certain criteria), the seller can invoke the escape clause. The original buyer then typically has a set timeframe (commonly 24–72 hours, with the 48-hour escape clause being most common) to remove their conditions. If they cannot, the seller is free to move on.
To better understand how they work, its important to remember some fundamental principals of Real Estate agreements in Ontario. Typically, conditions are incumbent on the Buyer to fulfill or waive. After signing a binding agreement, there is little wiggle room for the Seller to back out of the contract.
The Buyer however, could decide to terminate the deal, and have their deposit returned “in full without interest or deduction”. The Escape Clause converts these conditions into a two-way street. Just as the Buyer can choose to walk, the Seller, in certain situations, may be able to as well.
On first brush, it may seem like the Escape Clause is a tool used by unscrupulous sellers to renege on a deal. Why would a Buyer agree to invest in an agreement (Appraisal, Inspection, etc.) just to have the rug pulled from them at the last minute? However, Escape Clauses, when drafted correctly, can be beneficial to the Buyer as well.
SC vs SCE: Understanding the “E”
When browsing properties on the MLS or on Realtor.ca, it is common to look only for listings that are ‘available’. These listings may have certain statuses such as:
- Available (NEW)
- Price Change
- Extension
Listing search engines tend to exclude listings that are sold conditional. This is to avoid buyer’s falling in love with a property that is already committed but maybe not yet fully firm. However, the SCE indicator, with the escape clause, means the buyer could still have a chance at purchase. If the new buyer is able to submit an offer that meets certain conditions, it could be considered in place of the current conditional offer.
It’s important to note that courts have generally ruled escape clause particulars to be confidential to the deal unless both the current Buyer and Seller agree to disclose the terms. This is to avoid situations of ‘stalking horse’ bids; where a phony buyer appears in an effort to squeeze a purchaser into commitment or termination.
An Illustrative Example
Let’s suppose a buyer is desirous in purchasing a property on the market. The Buyer feels confident they will have the necessary financing to complete the transaction, but will not know for certain until completion of their prior project in 4 months. The Buyer could submit an offer with a 4 month financing condition. The Seller, however, would likely reject this offer. Why would the owner of a property wish to commit to the sale for 120 days, with the chance that they will be met with a mutual release and no recourse against the Buyer? The seller could have spent this time marketing the property and finding the correct buyer who is more qualified and financed.
It is in this situation that an escape clause could prove useful for both parties. For example, a clause in the agreement may read similar to:
“The Buyer agrees to allow the Seller to continue to market the property as available. If the Seller is presented with a bona fide, unconditional offer to purchase this property at a price not less than X, the Seller may choose, at their sole and absolute discretion, to render this agreement null and void and the deposit shall be returned in full to the Buyer without interest or Deduction.”
In this case, the Buyer has right to purchase the property unless a very specific better offer materializes. The Seller may be more obliged to accept this agreement, where their property is not tied in a contract during a hot selling season. The Buyer benefits by not allowing the rug to be unceremoniously pulled from underneath them…the criteria for the competing offer is clear.
It’s important to note that Escape Clauses do not need to have a unilateral termination component by the Seller. For example, you could modify the above clause to read “Conditional Period shall be twenty-four (24) hours following receipt of an offer”. In This example, the original Buyer would have 24 hours to waive conditions, or walk away from the deal.
Usage in Real Estate
Escape clauses are rare in Real Estate. It’s no surprise as the escape clause can only exist in specific scenarios. It requires a certain level of trust & “good faith” between Buyer and Seller. However, when used correctly, they can be a powerful negotiation tactic.
In recent years, escape clauses have been appearing more frequently in Ontario real estate agreements. As market conditions shift from overheated bidding wars to more balanced conditions, sellers are increasingly cautious about tying up their property under long conditional periods. An escape clause gives them confidence that they can continue marketing their home, even while under contract, and avoid missing out on stronger offers.
This trend is particularly visible when buyers submit offers with financing conditions or home-sale conditions. With higher interest rates and tighter lending rules, more buyers are making conditional offers. Sellers, in turn, are looking for ways to protect themselves from being locked into deals that may never firm up. The SC escape clause has become the tool of choice to strike that balance.
Ultimately, the growing prevalence of escape clauses shows how contracts adapt to market realities. Buyers still get the chance to secure a property, but sellers are not left vulnerable. It’s a balancing act—one that is increasingly becoming part of everyday real estate practice in Ontario.
Do you have questions about Escape Clauses? Contact Us for a free consultation.