British Columbia Introduces Statutory Cooling-Off Period for Residential Property Contracts

In an effort to both curb a hot residential market and protect purchasers, British Columbia has implemented a three-day cooling-off period for buyers who have signed contracts of purchase and sale for residential property. As of January 3, 2023, buyers of certain types of residential real estate in British Columbia now have additional protections as the Home Buyer Rescission Period (“HBRP”) has taken effect. This new homebuyer protection regime comes after the provincial government adopted amendments to the Property Law Act on April 25, 2022 (the “Statutory Amendments”), and announced the Home Buyer Rescission Period Regulation on July 21, 2022 (the “Regulation”). Both the Statutory Amendments and the Regulation form the framework of this new regime. Similar statutory rescission rights have been enacted in foreign jurisdictions, such as Australia and France, but B.C. is the first Canadian province to implement such protections for both resale property and newly constructed homes.¹

What Is the HBRP?

The HBRP, which effectively acts as a “cooling-off” period, is a statutory right to rescind a contract of purchase and sale within three business days after the seller’s acceptance. For those who decide to cancel the transaction, they must pay a rescission or cancellation fee of 0.25 per cent (the “Rescission Fee”) of the purchase price to the seller. For example, if the buyer rescinds their offer on a $1-million home, they must pay a penalty of $2,500 to the seller.

When counting the three business days, it should be noted that “business day” refers to a day other than a Saturday or “holiday.”  A “holiday” includes Sundays, statutory holidays, and December 26, according to the B.C. Interpretation Act.

What Transactions Does the HBRP Apply To?

The HBRP applies to all residential real estate sales (including private sales), which include:

• detached houses;
• semi-detached houses;
• townhouses;
• apartments in a duplex or other multi-unit dwelling;
• residential strata lots, as defined in section 1(1) of the Strata Property Act;
• manufactured homes affixed to land; and
• co-operative interests, as defined in section 1 of the Real Estate Development and Marketing Act (“REDMA”), that includes a right of use or occupation of a dwelling.

Exceptions

The limited exceptions, of which the HBRP does not apply to, include:

• any contract of purchase and sale of property where section 21 of REDMA applies;
• residential real property that is located on leased land;
• a leasehold interest in residential real property;
• residential real property that is sold at auction; and
• residential real property that is sold under a court order or the supervision of a court.

How Does a Buyer Exercise the Right of Rescission and How Is the Rescission Fee Paid?

If a buyer decides to rescind the contract of purchase and sale, the buyer or their real estate licensee (on their behalf) must give notice to the seller within three business days of the seller’s acceptance of the contract of purchase and sale in one of the following ways:

• by registered mail to the seller’s address that is set out in the contract of purchase and sale;
• by fax to the seller’s fax number that is set out in the contract; or
• by email, with a requested read receipt, to the seller’s email address that is set out in the contract.

Section 5 of the Regulation states that the notice of rescission, which is effective on the date it is sent by registered mail or transmitted by fax or email, must contain the following:

• the address, the parcel identifier, or a description of the residential real property in respect of which the contract of purchase and sale is being rescinded;
• the name, and the signature or electronic signature, of the buyer who is exercising the right of rescission;
• the name of each seller who is a party to the contract; and
• the date that the right of rescission is being exercised.

If the buyer exercises their rescission right, they must promptly pay the Rescission Fee to the seller. If a deposit was received under the rescinded contract of purchase and sale by or on behalf of the seller, the amount of the Rescission Fee must be paid to the seller from the deposit, and the remainder of the deposit must be paid promptly to the buyer.

Takeaways for Buyers and Sellers

A protection period akin to the HBRP already exists for pre-construction sales of multi-unit development properties, such as residential strata properties, under section 21 of REDMA. However, the implementation of the HBRP is one of the key actions undertaken by the B.C. government following the recommendations by the B.C. Financial Services Authority (the “BCFSA”), the province’s financial service sector regulator whose role includes supervising real estate professionals. The BCFSA published a detailed report in 2022 seeking to strengthen consumer protection in the residential real estate market.²

The HBRP is intended to respond to concerns about the province’s competitive real estate market, which can put buyers at risk if they are pressured to submit offers in high-pressure situations without basic conditions. According to the provincial government, more than 70 per cent of offers in some of B.C.’s highly competitive markets throughout much of 2021 were made without conditions, which can lead to increased costs of renovation later on.³

The three additional days provided for by the HBRP are meant to provide an opportunity for buyers to secure financing, conduct additional due diligence, or to simply ensure they are making a sound decision and have time for second thoughts. To note, the buyer cannot waive the HBRP, and this period does not create a right to do a home inspection, on-site appraisal, or any other physical or on-site due diligence. The HBRP does not impose such legal obligations on the seller.

For more information or to discuss a matter regarding the foregoing, please contact a member of the Aird & Berlis Real Estate Group.