BCs COOLING OFF PERIOD

We are less than two months away from the Cooling-Off Period that the government hinted at in 2021. I’m going to break this down for you as of the beginning of November 2022 but as with many regulatory changes; it may take some time to figure out how this change will effect Real Estate practice and strategy moving forward.

The seller’s market of 2020 and 2021 was an awful time for buyers. Subject-free offers were the hot ticket for sellers and desperate Buyers were feeling pressured to remove their subjects in order to stay competitive. The BC Government aiming to protect those consumers introduced the idea of the cooling off period which we are now calling the Home Buyer Rescission Period (HBRP).

The HBRP comes into effect on January 1st, 2023 and will be applicable to most Real Estate transactions in BC. There are a few exemptions the notable ones being;
1)leaseholds
2)pre-sale homes which are regulated under the Real Estate Development Marketing Act (REDMA) and already allow buyers an automatic 7-day right of rescission period.

Okay so what is the HBRP?

The HBRP and amendment to the Property Law Act state that a buyer is allowed to rescind their offer at any point during a 3-business day period starting on the first business day after the offer is accepted. So if a buyer’s offer is accepted on Thursday and assuming there are no holidays; they have until 11:59pm on the following Tuesday to rescind the offer in writing. The penalty for rescinding an offer is 0.25% of the purchase price paid by the Buyer to the Seller. 

Currently, deposits are typically presented when the deal is firm (subjects are removed or the offer was subject-free).
Time will tell what new standards the HBRP will bring to the Real Estate transaction but I foresee a first 0.25% deposit along with the offer and the remaining deposit due upon a firm deal. The new amendment also allows a brokerage to release the 0.25% to the seller and any remaining deposit to the buyer within the rescission period. That way the seller feels comfortable that they will not have to chase down their 0.25% upon rescission as previously both parties had to agree in writing in order for the deposit to be paid out of the Trust account.

This rescission period does not replace the need for other subjects and subjects will run concurrently with the 3 business day window. In order to ensure access for an inspector or appraisal, the subject should still be written into the contract. But, unlike typical subjects which allow the benefitting party to back out of a deal for a specific reason (ie. failed inspection or financing/appraisal issue), the buyer does not need to provide a reason for exercising this right of rescission.

Most importantly; the buyer is not allowed to waive this option. This makes sense as to allow it would render this regulation completely ineffective. Buyers would feel pressured to waive it in order to compete in the next competitive Vancouver Real Estate market.

It may feel like too little too late but while new construction of condos dropped 46% in Metro Vancouver in the first half of 2022 compared to 2021 according to CMHC; we still have a supply issue on our hands and we have not seen our last Multiple Offer-Over Ask competitive market.

While there are ways an educated buyer and a prudent buyer’s agent can lessen the risks of a subject-free offer; I think subject-free offers should be the exception and not the rule for the average buyer. Time will tell how effective this regulation is but I support the government’s goal and hope buyers feel more protected in competitive markets moving forward.

If you have any questions about the new rescission period or buying process, reach out!

Kade Lacasse
Vancouver Realtor