What is the Home Buyer Rescission Period?
In the new year there are changes coming to the way we buy and sell homes in British Columbia. Starting January 1, 2023 amendments to the Property Law Act will grant all residential purchasers a “Home Buyer RescissionPeriod” also referred to as the HBRP.
The HBRP is similar to what the Real Estate Development and Marketing Act (REDMA) currently has in place for presale purchases. All presale purchases governed under REDMA in British Columbia are entitled to a 7 day rescission period. This allows time for buyers to review the purchase contract, developer disclosure documents and complete other due diligence before going “firm” on their presale purchase.
For resale properties no rescission period has existed. The buyer is bound only by the subjects they have opted to write into contract eg. subject to financing, subject to inspection etc. and can only walk away if one of those subjects is not fulfilled. A buyer cannot simply “change their mind” and breach the contract.
During the pandemic, many buyers felt rushed into contracts with subject-free offers. There were multiple offers on most properties often with no chance of securing a home unless it was subject-free. This became a hot topic across Canada. Some argued it artificially hiked real estate prices and definitely left buyers feeling stressed and stretched. Those feelings when you’re buying one of the largest assets you will ever own is not a good feeling. Due to this, the provincial government decided to change the Act so buyers have more time to review the property, perform proper due diligence and decide whether this is the right purchase for them.
The HBRP will allow buyers to rescind a contract of purchase and sale up to three business days after an offer is accepted. A business day is considered Monday to Friday and excludes weekends and statutory holidays. The right of rescission cannot be waived by the buyer or the seller.
If a buyer chooses to exercise their right of rescission they must do two things. First, provide written notice to the seller within the three business day rescission period. Second, they must pay the seller a 0.25% penalty of the purchase price. For example a $1,750,000 home would carry a penalty of $4,375. The buyer does not need to disclose the reason for rescission to the seller.
There are exemptions to the HBRP if the property is located on leased land or a leasehold interest, sold at an auction, is an assignment or sold under court order.
Have questions on how this may impact your purchase or sale? Give me a call at 604-897-6971 to discuss.
*Written as of October 29, 2022. All information provided is deemed reliable, but is not guaranteed and should be independently verified.*
