Changes to Real Estate Law in British Columbia Starting January 1, 2023
The Property Law Amendment Act’s Allowance for a New “Cooling-Off” Period
The Government of British Columbia announced a new homebuyer protection period on residential real estate sales that will come into force on January 1, 2023. This “cooling-off” period will provide buyers the benefit of three (3) business days after the acceptance of a contract of purchase and sale (the “Contract”) for a property, to rescind the Contract by providing a notice of rescission to the seller.
This measure was implemented as part of the recommendations made by the BC Financial Services Authority (the “BCFSA”) in May to protect British Columbia’s consumers, and after the BC Legislature passed amendments to the Property Law Act by way of the Property Law Amendment Act, 2022.
Below we answer some of the key questions about the “cooling-off” period and how it may apply to you.
What does the “cooling-off” period do?
The changes will permit buyers to rescind (cancel) the Contract by serving written notice to the seller within three (3) business days of the Contract being accepted by the seller. This period of time is known as the “Homebuyer Protection Period”. The effect of the “Homebuyer Protection Period” is to allow buyers to carefully consider their offers before they are final, by permitting the buyers to cancel offers that they may have made in haste due to pressures of the current real estate market in BC.
Buyers are permitted to submit written offers to purchase property that are “subject to” certain conditions, which typically include the following (summarized for ease of reading): subject to financing, subject to inspection, subject to due diligence of the property, etc. The new benefit, however, will likely not end the reality of the recent real estate market which has involved buyers submitting written offers to purchase property, that are subject-free, in order to compete with multiple offers on the property. The “cooling-off” period effectively operates to address this competition by granting buyers a period of time to research their means to finance the purchase of the property, obtain a home inspection, and, among other things, carefully consider their offer before being committed to a firm and binding deal.
Does the new cooling-off period apply to pre-sales?
Since similar protections already exist for pre-construction homes under the Real Estate Development Marketing Act, this new right will not apply to pre-construction sales.
Will I have to pay a fee to cancel the contract during the “cooling-off” period?
A rescission (cancellation) under the “Homebuyer Protection Period” will come at a cost to the buyer. That is, the buyer will be charged 0.25% of the purchase price, or $250.00 for every $100,000.00 of the purchase price. This cost, while not insignificant, is likely a much lower cost that a buyer might have to pay for stepping away from an accepted Contract before January 1, 2023.
I have accepted an offer to sell my property – what do I need to know about these protections?
Sellers do not benefit from the changes coming into effect January 1, 2023. Sellers should keep in mind that from the time they accept a contract from a buyer to purchase their property, the buyer has three (3) business days to terminate the contract in accordance with the new rules.
Why did the government implement this change?
The legislature advises that the inner-workings of this new proposed protection were informed by consultation by various players “on the ground” in the real estate industry, including the BCFSA (formerly the Real Estate Council of BC). In particular, the BCFSA published a report to the Minister of Finance titled “Enhancing Consumer Protection in British Columbia’s Real Estate Market” which contained, among other things, advice from the BCFSA directed to the Minister of Finance regarding:
the need to enhance consumer protection and transparency;
the impact of a proposed homebuyer protection period on a real estate transaction;
the proposed parameters (terms and conditions including termination fee) for a homebuyer protection period; and
how to implement a homebuyer protection period in the BC real estate market.
While the legislature’s initial consultation involved a range of organizations and individuals with an interest in the BC real estate industry, such as home inspectors, appraisers, realtors, academics, and representatives from legal and financial sectors, the new changes are likely highly influenced by the BCFSA’s report.
If you wish to obtain further particulars of the “cooling-off” period, we recommend seeking legal advice.