Court Construes Contract’s Financing Clause

In this first-impression case, a Salem Circuit Court says inserting the handwritten phrase “subject to approval of financing” into a real estate contract’s clause on the closing date makes the purchase contingent on the buyer’s ability to obtain financing.

There are no reported cases in Virginia using the phrase “subject to approval of financing.” A search of other jurisdictions for the meaning of this phrase found the case of Manning v. Bleifus, 166 W.Va. 131 (1980). There the court opined that the phrase “subject to approval of financing” is simply a “subject to financing clause” and is an enforceable condition precedent in real estate contracts. This court agrees with that interpretation and holds that in Virginia, “subject to financing clauses” are valid contingency clauses in real estate contracts. The court finds the meaning of the phrase “subject to the approval of financing” as interlined in the parties’ agreement means the contract is contingent upon defendants being able to procure financing for the purchase of the apartment building.

Mildenhall LLC v. Higginbotham (Doherty) No. CL10-183, Aug. 15, 2011; Salem Cir.Ct.; James J. O’Keefe, Mark D. Kidd for the parties. VLW 011-8-151, 3 pp.