Finance Condition
A finance condition is a protective provision in a purchase or lease agreement that permits the buyer or tenant to terminate without penalty if adequate credit or loan financing is not approved by a lending institution within an agreed timeframe. This safeguard prevents the purchaser from being bound to a transaction when financial institutions deny the required funds.
Typical elements include:
- A maximum interest rate threshold
- Deadline for loan application and approval
- Minimum and maximum loan amount and term
- An obligation to seek financing in good faith and on reasonable commercial terms
The seller and buyer define the precise conditions under which the finance condition is satisfied or waived. Failure to secure written finance approval by the agreed closing date typically voids the transaction without breach liability.
