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Contingent Liability

Learn about contingent liabilities in Canadian real estate — what they are, how they impact valuations, and why they matter to investors.

Contingent Liability

August 07, 2025


What is Contingent Liability?

A contingent liability is a potential financial obligation that may occur depending on the outcome of a future event.

Why Contingent Liability Matters in Real Estate

In Canadian real estate, contingent liabilities can arise from legal disputes, environmental remediation obligations, or pending property tax appeals.



Key points:
  • Disclosed on financial statements if probable and estimable
  • May impact property valuations and lending decisions
  • Can include guarantees or pending lawsuits



Understanding contingent liabilities helps investors and lenders evaluate potential risks.

Example of Contingent Liability in Action

The developer disclosed a contingent liability for potential soil contamination cleanup on the property.

Key Takeaways

  • Potential obligation dependent on future events
  • May affect property valuations and creditworthiness
  • Common in environmental, tax, or legal issues
  • Must be disclosed if probable and measurable
  • Key in risk assessment during transactions

Related Terms

Additional Terms

Common Area Maintenance

Common area maintenance (CAM) refers to the costs associated with maintaining and operating shared spaces in multi-tenant properties.. more

Clawback Provision

A clawback provision is a contractual clause that allows a party to recover previously granted money, benefits, or rights under certain conditions.. more

Change of Use Permit

A change of use permit is official authorization from a municipality allowing a property owner to change the property's intended or legal use.. more

Certificate of Compliance

A certificate of compliance is an official document issued by a municipality confirming that a property complies with applicable zoning bylaws and. more

Carrying Costs

Carrying costs, also known as holding costs, are the ongoing expenses incurred by property owners while holding real estate before it is sold,. more

Capitalization Rate

The capitalization rate, or cap rate, is a measure used to estimate the return on investment for an income-producing property, calculated as Net. more

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