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New Homebuyer Protection: 3-day Right Of Rescission – Real Estate



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On July 21, 2022, the Government of British Columbia announced
the creation of regulations that will enable a mandatory three-day Homebuyer Protection Period
(“HPP“)
, also known as a
“cooling off period” or “right of rescission”
starting on January 1, 2023. The new regulations can be implemented
directly by the government due to previously passed amendments to
the Property Law Act in April 2022.

Purpose

The HPP is unique to British Columbia, as no other Canadian
province has yet implemented a similar right for homebuyers. The
primary intent of the amendments is to afford homebuyers, who might
otherwise feel pressured to make a “no subjects” offer,
the opportunity to perform due diligence and make more informed
decisions about buying property. Previously, due to difficulty in
finding properties for sale, many potential homebuyers were
skipping home inspections to entice sellers into choosing their
offers.

The changes were made as a result of the 2022 B.C. Financial
Services Authority’s report on B.C. homebuyers.

Summary of Changes

The legislative changes add a right of rescission to the
Property Law Act in which a purchaser of residential real
property may rescind the contract of purchase and sale for a
property by serving written notice of the rescission on the seller
within three days (beginning on the first business day following
the acceptance of an initial offer). Nevertheless, buyers should
note that if they decide to exercise their right of rescission and
back out after completing their due diligence, they are charged a
fee of 0.25% of the purchase price, or $250 for every $100,000.

Scope

The HPP applies to a variety of different properties,
including:

  • detached homes;

  • semi-detached homes;

  • townhouses;

  • apartments in a duplex 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.

Exemptions

The HPP cannot be waived. However, the HPP does not apply in the
following situations:

  • sales of residential real property located on leased land;

  • sales of leasehold interest in residential real estate;

  • sales at auction; and

  • sales under a court order or supervision of a court.

The HPP also does not apply to pre-construction sales of
multi-unit development properties, as they are already subject to a
7-day rescission period under Section 21 of the Real Estate
Development Marketing Act

(“REDMA“).

Conclusion

While buyers can still make offers conditional on home
inspections or financing for any length of time, this minimum
protection period ensures an even playing field regardless of the
offer received. However, it does add an element of uncertainty to
sellers, and therefore sellers should not treat their sale as
“complete” unless this right-of-rescission period has
passed. Realtors will also be required to provide general
information on the HPP to all consumers at the time of signing
their contract of purchase and sale.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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