BC government introduces “cooling off” period for home sales
On July 21, the provincial government introduced a home buyer protection period, the details of which are outlined in a new regulation that allows home buyers to back out of a residential purchase up to three business days after signing a contract.
The government will begin to enforce this regulation starting January 1, 2023.
The province claims this three-day cooling off period will help ensure all homebuyers have an opportunity to conduct their due diligence, such as securing financing or arranging home inspections.
The homebuyer protection period basics
- The period will be effective January 1, 2023.
- Buyers will have three business days to back out of a residential purchase after signing the contract.
- This applies to all contracts, regardless of subjects. We’re asking the government for clarity on what constitutes a “rescission” (cancellation).
- The period is mandatory and can’t be waived.
- Buyers who back out of a contract within this three-day period will have to pay a rescission fee of 0.25%. For example, if the purchaser exercises the right of rescission on a $1-million home, they’d be required to pay the seller $2,500.
- The rescission fee is paid to the seller.
- The enforcement mechanism for the rescission fee, and for any deposits that may need to be returned, is unclear at this time.
- Realtors must provide general information on the period to all clients through the Disclosure of Representation in Trading Services.
- If a deposit is held in trust, brokerages may release it upon rescission.
- If there’s a balance, it’s returned to the buyer, regardless of what’s provided in the contract.
Exemptions and waivers
While the period can’t be waived, there are narrow exemptions, including sales:
- Subject to section 21 of the Real Estate Development Marketing Act.
- Of residential real estate located on leased land.
- Of leasehold interest in residential real estate.
- At auction.
- Under a court order or supervision of a court.
Residential real estate defined
The homebuyer protection period will apply to:
- detached homes;
- semi-detached homes;
- apartments in a duplex, triplex or other multi-unit dwelling;
- residential strata lots;
- manufactured homes that are affixed to land; and
- cooperative interests that include a right of use or occupation of a dwelling.
The new period doesn’t apply to presale properties, which already subject to a rescission period under the Real Estate Development Marketing Act.
The notice of rescission
- Homebuyers must serve rescission notice to the seller through registered mail, fax, email with read receipt, or personal service.
- The notice must contain the address, PID or description of the property, the names and signature of the buyer(s), name of the seller(s), and the date of notice.
Realtors must also provide an additional mandatory disclosure when presenting an offer to a client, outlining:
- that the protection period can’t be waived,
- the rescission period,
- the dollar amount of the rescission fee,
- deposit handling, and
- the homebuyer protection period exemptions.
- Brokerages must retain a copy of any rescission notices it prepares or receives for auditing and reporting purposes.