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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

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Lease Surrender Agreement

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