HOME BUYER RESCISSION PERIOD
HERE’S AN IMPORTANT REAL ESTATE HEADS UP FOR YOU
A NOTABLE CHANGE THAT YOU SHOULD KNOW ABOUT IS ABOUT TO HAPPEN WHEN BUYING & SELLING REAL ESTATE IN B.C. Realtors are endeavouring to learn more details about the change and the related logistics. We’ll keep you informed.
On January 3, 2023, the B.C. government implemented changes to the Property Law Act to make the Home Buyer Rescission Period-or HBRP-mandatory in residential real estate transactions.
This new measure allows homebuyers to cancel, or rescind, an accepted offer to purchase real estate within the set period, even if the offer does not include conditions.
While cooling-off periods are already in place for condo resales in other jurisdictions and pre-construction sales of condos in this province, B.C. is now the first Canadian jurisdiction to legislate a broader cooling-off period for residential real estate sales.
Three Business Days to 'Cool Off'
The Home Buyer Rescission Period, sometimes referred to in media as the cooling-off period, will begin the next business day after the final acceptance of an offer. The cooling-off period will be in effect for three business days and cannot be waived by either the seller, buyer, or their representatives.
During the cooling-off period, homebuyers can still legally withdraw from the purchase without justification at the cost of a modest rescission fee. The cooling-off period is intended to protect buyers from being pressured to purchase a home when market conditions favour the seller.
Where Do Subject Conditions Come in with HBRP in Place?
The HBRP is distinct from the use of subject conditions in a real estate contract. The HBRP and any subject conditions in the contract of sale begin counting down at the same time. They also run concurrently if subject conditions have been included in the contract of sale. In other words, the three-day HBRP is included in - not added onto - the date of subject removal. If the subject conditions are not met, a buyer who refuses to remove the conditions would not need to pay the rescission fee, whether that happens during the three-day HBRP or after it has ended.
What Does the Cooling-Off Period Mean to Someone Who Is Selling Real Estate?
To encourage serious offers from buyers, the HBRP will include a modest rescission fee to be paid by any buyer exercising their right to rescission, which is an amount equal to 0.25 per cent of the gross purchase price. The rescission can be withdrawn from any deposit by the buyer in order for them to meet this obligation and pay it to the seller. If there is insufficient deposit and a buyer refuses to pay the rescission fee, the seller should seek legal advice to recover the fee.
If you are the seller in a real estate transaction, you are not obligated to grant the buyer access to the property during the cooling-off period, unless the contract of purchase and sale is subject to inspection or has a term that allows the buyer to access the property.
As the seller, your real estate licensee must make two disclosures to you regarding the HBRP: the initial Disclosure of Representation in Trading Service of general information about the HBRP, and a second, more detailed disclosure that includes the dollar amount of the rescission during the presentation of an offer of purchase. If you are representing yourself in the sale, these disclosures will not be made to you.
Advice to Buyers
To protect buyers from the risks of making an unconditional offer, the HBRP provides additional time for buyers to finalize their due diligence. BC Financial Services Authority ("BCFSA") recommends that homebuyers speak with their real estate licensees to understand the requirements of the HBRP. Real estate licensees are obligated to act in their clients' best interests and BCFSA will be delivering various information materials to licensees to ensure they are well-informed on the HBRP leading up to January 1, 2023.
Consumer guides will also be available for buyers and sellers to supplement their understanding if they are not represented by a licensee in a real estate transaction.
As with sellers, a buyer's real estate licensee must make two HBRP disclosures during a transaction. These disclosures must be made in the initial Disclosure of Representation in Trading Services and, for buyers, a second, more detailed disclosure that includes the dollar amount of the rescission fee during the preparation of an offer to purchase.
In the coming months, BCFSA's role as the provincial regulator for the industry will be to provide licensees with the details, they need to navigate this new process, while creating resources to help buyers and sellers.
BCFSA is developing materials to be released this fall that will inform buyers, sellers, licensees, and the general public about how the cooling-off period will work and how it might impact you.
Updated regulatory information, practice guidelines, and FAQs will accompany newsletter articles, e-mails, and targeted webinars for real estate licensees so they can help consumers to be informed during a sale.
The creation of tools, including updated buyer and seller guides, to help buyers and sellers understand how a cooling-off period will impact home sales is also underway-and will be made available to improve consumer awareness.
For more information, please visit the BCFSA website at: www.bcfsa.ca