On July 21, 2022, the Government of British Columbia announced a new homebuyer protection period in residential real estate sales. Amendments to the Property Law Act, which were passed by the Legislature in April 2022, give the Government authority to enact regulations which enhance buyer protection in the real estate market. A three-day cooling-off period will come into effect on January 1, 2023 and will 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.
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 business days after the date that the acceptance of the offer was signed. If a buyer decides to exercise their right of rescission and back out after completing their due diligence, the buyer will be charged a fee of 0.25% of the purchase price, or $250 for every $100,000.
No Effect on Presales
The right of rescission does not apply to a contract of purchase and sale to which section 21 of the Real Estate Development Marketing Act applies or if title to the residential real property has been transferred from the seller to the purchaser.
Potential Unintended Consequences – Seniors Housing and Apartment Buildings
The new provisions are intended to protect individual buyers of houses and condominiums, but uses the broad phrase “residential property”. The result may be that sales of apartment buildings and seniors homes are caught by the changes, which would be a strange and unnecessary result as such transactions are essentially business deals. If the regulations do not provide exemptions, commercial brokers and investors will need to be aware of the new provisions and build them into agreements.
Background to Changes: The BCFSA Report
The legislative changes are the first response by the Government to a May 2022 report from BC Financial Services Authority (“BCFSA”) which delivered several recommendations to BC’s Minister of Finance on the implementation of consumer protection measures in the Province’s residential real estate market. The Government has stated that it will continue studying the BCFSA recommendations which include:
- prohibiting buyers from waiving the cooling-off period in their offers to purchase;
- providing for certain exemptions to the cooling-off period;
- requiring buyers to disclose to sellers any other active offers they have made;
- establishing requirements for sellers to provide reasonable access to the property for professionals engaged by or on behalf of the buyer to perform due diligence inspections; and
- implementing a five-business day minimum time that properties must be on the market before an offer to purchase can be accepted.
Coming Into Force
As the legislative changes will come into force at the end of the year by government regulation, the full details – including, hopefully, exemptions for residential properties such as apartment buildings and seniors homes – are not yet known.
The Clark Wilson Commercial Real Estate Team will publish further details on the Province’s regulations to support real estate consumer protection in BC as they are announced.