Real Estate Law Blog

In an effort to slow a then-frothy residential real estate market, the Province adopted amendments to the Property Law Act on April 25, 2022 to establish a new homebuyer rescission regime in B.C. These amendments provide buyers of residential real estate with a mandatory “cooling-off period” following execution of a purchase agreement, giving them more time to consider their offers, ensure financing, and conduct due diligence on the property (including obtaining a home inspection). On July 21, 2022, the Government of British Columbia announced the Home Buyer Rescission Period Regulation (the “Rescission Regulation”), which sets out further details regarding the cooling-off period. These new homebuyer rights will come into effect on January 3, 2023.

These amendments to the Property Law Act are a response to concerns about homebuyers in B.C. being unable to insert subjects/conditions precedent in their offers (i.e. financing, inspection, etc.) out of fear that sellers would simply not accept them in a highly competitive market. Industry representatives believe that more than 70% of the offers in B.C.’s most competitive markets in 2021 were made without conditions.^[1]

The Rescission Regulation provides homebuyers a statutory right to rescind their offer to purchase a residential property within three clear business days after the offer has been accepted by the seller.^[2] This right is available to buyers of “residential real property,” which is defined as: a detached house, a semi-detached house, a townhouse, an apartment in a duplex or a multi-unit dwelling, a residential strata lot, a manufactured home that is affixed to land, and a cooperative interest as defined in the Real Estate Development Marketing Act (“REDMA”).^[3] Other properties regulated by REDMA, such as presales for condominiums, are already subject to a seven day cooling-off period once the offer is accepted^[4], and are exempted on that basis. While there was some initial uncertainty about whether the cooling-off period would apply to apartment buildings or seniors’ homes, it appears these do not fall within the definition of residential real property.

Currently, the new cooling-off period applies to all contracts for the purchase of residential real property, not only to those that are made without conditions. However, the amendments leave room for future regulations to exempt a class of purchase and sale contracts from the cooling-off period.

The Rescission Regulation contains exemptions to the statutory right of rescission. The cooling-off period does not apply to residential real property that is located on leased land, that is sold at auction, or that is sold under a court order. In addition, the protection period does not apply to a leasehold interest in residential real property.

To prevent buyers from making multiple bids on various properties and then simply rescinding all of them, the Rescission Regulation requires that a rescinding buyer pay an amount equal to 0.25% of the purchase price to the seller for canceling the offer during the cooling-off period. For example, on a property purchased for $1 million, the penalty would amount to $2,500. The amount must be paid from the deposit, with any remaining deposit to be returned to the buyer. A homebuyer cannot waive its statutory rescission right.^[5]

To be clear, buyers and sellers are still free to negotiate additional conditions and to provide that the financial penalty is not applicable if the buyer does not waive those conditions, including the cooling-off condition.

It must be noted that the Rescission Regulation does not allow the buyer the right to have a home inspector or an appraiser access the property during the cooling-off period. The seller is under no legal obligation to permit a home inspection or appraisal during that period unless a term is added to the contract to that effect.

The Contract of Purchase and Sale published by the British Columbia Real Estate Association and the Canadian Bar Association have been amended to include cooling-off provisions.

Notably, B.C. would be the first province in Canada to implement a statutory rescission right for resale properties.^[6]

If you have any questions about the new cooling-off period, please contact a member of our Real Estate Group.

_{[1] “B.C. prepares to strengthen protections for homebuyers” (28 March 2022), online: The Province of British Columbia https://news.gov.bc.ca/releases/2022FIN0012-000424.}

_{[2] Property Law Amendment Act, s. 42; Home Buyer Rescission Period Regulation, s. 4.}

_{[3] Home Buyer Rescission Period Regulation, s. 2.}

_{[4] Real Estate Development Marketing Act, s. 21.}

_{[5] Home Buyer Rescission Period Regulation, s. 7.}

_{[6] “B.C. prepares to strengthen protections for homebuyers” (28 March 2022), online: The Province of British Columbia https://news.gov.bc.ca/releases/2022FIN0012-000424.}