On January 3, 2023, the BC government implemented the Home Buyer Rescission Period (HBRP) for residential real estate transactions. Also known as the “cooling-off period”, this measure will give homebuyers up to three (3) business days to rescind an offer on a home after the offer has been accepted.

Purpose

The Property Law Amendment Act, 2022 (the “Act”) and its regulations establish a buyer’s right to rescind or cancel a contract of purchase and sale for residential real property within a three-business day period after final acceptance (sections 42 and 43 of the Act). If a buyer chooses to invoke their right of rescission within the rescission period, the buyer must pay to the seller 0.25% of the purchase price in compensation, meaning the right to rescind exists but comes with a fee. There is also a requirement that the buyer serves a written notice to the seller if they seek to rescind the contract. The notice must include the property address or legal description, the name and signature of the person exercising the rescission right, the name of all sellers in the contract of purchase and sale, and the date the right of rescission is being exercised. The right of rescission cannot be waived by the parties. In other words, if the Act applies, the parties cannot agree between themselves that the right to rescind will not apply to a given contract. It is imposed by legislation.

Residential Properties Eligible for the HBRP

Not all properties are included in the HBRP legislation. The rescission period applies to the following types of residential properties:

1. A detached house.
2. A semi-detached house.
3. A townhouse.
4. An apartment in a duplex or other multi-unit dwelling.
5. A residential strata lot, as defined in Section 1(1) of the Strata Property Act.
6. A manufactured home that is affixed to the land.
7. A cooperative interest, as defined in Section 1 of the Real Estate Development Marketing Act, that includes a right of use or occupation of a dwelling.

Residential Properties Not Eligible for the HBRP

The following property types are excluded from the HBRP:

1. Residential property that is located on leased land.
2. A leasehold interest in residential property.
3. Residential property that is sold at auction.
4. Residential property that is sold under a court order or the supervision of a court.

Important Information for Buyers

A buyer has the right to rescind a home offer within three (3) business days after the offer is accepted, regardless of whether a real estate licensee is involved in the transaction or not. The three-day rescission period excludes weekends and holidays.

Only buyers can rescind a contract under the HBRP. If a buyer chooses to rescind their offer, they must:

1. Notify the seller in writing before the rescission period expires; and
2. Pay the seller a rescission fee. The rescission fee is 0.25% of the offer price.

A buyer has the right to rescind a home offer within three (3) business days after the offer is accepted, regardless of whether a real estate licensee is involved in the transaction or not. The three-day rescission period excludes weekends and holidays.

Important Information for Sellers

The right of rescission cannot be waived by the buyer or the seller. The seller will receive a disclosure of the buyer’s right of rescission when an offer is made. The disclosure may be on a separate form or included in the Contract of Purchase and Sale (CPS).

If a buyer chooses to rescind their offer and their brokerage is not holding the deposit, the seller is advised to seek legal advice for options on how to pursue the buyer for the money owed.

Buyers do not need to provide a reason to sellers if they choose to rescind the contract.

Conclusion

The idea appears to be that buyers may use this cooling-off period to complete due diligence activities that will assist them in making an informed decision about a purchase. The state of the real estate market at various times in certain regions is such that those activities may be difficult or at times not possible to effectively perform prior to submitting an offer or to include as subjects, which can lead to conflicts, expense, and regret.  Due diligence activities can include confirming financing, reviewing relevant documents regarding the property, and undertaking inspections. It should be noted, however, that there is no requirement that a buyer show unsatisfactory results of due diligence efforts or even that they performed any such efforts before they can exercise their cancellation right under the Act. A buyer can simply change their mind, pay the fee, and cancel the contract; no explanation is required.

It should also be noted that conditions should still be included in the contract of purchase and sale to provide access to the property in question and to obtain other information required to perform the due diligence a buyer chooses to undertake. The fact that a cooling-off period now exists does not render due diligence conditions in a contract redundant.

This proposed cooling-off period is not an entirely new concept and is consistent with the current regime under the Real Estate Development Marketing Act, SBC 2004, c.41 (“REDMA”). The existing REDMA regime provides a mandatory seven-day cooling-off period for presale developments in which a buyer can cancel a presale real estate purchase without consequence.

It bears watching to see whether the protection period and compensation amounts get amended once their real-world impact has been tested. The regulations, which are where all these details are specified, can change quickly and easily so this is something that the industry will be monitoring closely to keep up with changes.

source: REBGV, BCREA, BCFSA

Disclaimer: The above information is from sources believed reliable but should not be relied upon without verification. The publisher assumes no responsibility for its accuracy. You are encouraged to get independent legal advice before commencing any transaction.