“Cooling-Off Period” for Residential Real Estate Sales and Purchases

By Douglas Conolly & Zahra Tahsili

As of January 3, 2023, homebuyers in British Columbia can cancel a contract to purchase a residential property by serving written notice of the rescission on the seller within three business days (the “Rescission Period”) following the signing of the contract under the Home Buyer Rescission Period Regulation (“HBRP Regulation”), B.C. Reg. 175/2022 and the Property Law Amendment Act (“PLA”), S.B.C. 2022, c. 12 (Bill 12), (collectively, the “HBRP Legislation”).    

A hypothetical example can better illustrate the HBRP Legislation.

• A seller offered to sell his residential property to a buyer for $1,500,000 on Monday, March 6, 2023 (the “Offer Date”) in the standard form Contract of Purchase and Sale (“CPS”) of BC Real Estate Association (“BCREA”). The offer was open for acceptance until 12:01 pm on Wednesday, March 8, 2023.
• The buyer accepted the offer at 11.00 am on March 8, 2023 (the “Acceptance Date”).
• The CPS contains a subject removal clause for the sole benefit of the buyer. The CPS is subject to the satisfaction of making a mortgage available to the buyer on or before March 20, 2023.
• The buyer is considering cancelling the CPS as he found a better option in the market. However, the purchase price of the second property is around $1,800,000, and the buyer may not have sufficient funds to complete the purchase of that property. The buyer requested the lending institution increase the mortgage, but the lending institution will inform the buyer about approving the mortgage increase no sooner than March 15.

Rescission Period

The homebuyer’s Rescission Period, also known as the “Cooling-Off Period”, cannot be waived by either the seller or buyer.¹ During the Cooling-Off Period, homebuyers can legally withdraw from the purchase without justification and for any reason.

The Rescission Period is three business days, beginning the next day after the final acceptance of an offer to sell a residential property is signed.² Business days are Monday through Friday and do not include Saturdays, Sundays or holidays. To calculate the Rescission Period, “holidays” are those days defined in Section 29 of the Interpretation Act, [RSBC 1996] CHAPTER 238. This list differs from the “statutory holidays” list commonly used for employment purposes.

In our scenario, the rescission date is Monday, March 13, 2023. It should be noted that the Rescission Period does not begin after subject removal. So even if the CPS contains the subject removal clause until March 20, the buyer is entitled to cancel the CPS until 11:59:59 p.m. on March 13.

Rescission Fee

Suppose a homebuyer wants to exercise their rescission right. In that case, they must pay the seller a rescission fee as a financial penalty equal to 0.25 percent of the purchase price set out in the contract as soon as possible. Where a buyer has made a deposit held in a brokerage trust account, the 0.25% rescission fee must be paid directly to the seller from the deposit, with the remainder of the deposit returned to the buyer.³

If the buyer in our scenario decides to cancel the CPS during the Cooling-Off Period, he must pay $3,750 as a penalty as follows:

($1,500,000 x 0.0025 = $3,750)

Buyer and seller cannot agree to a higher or lower recission fee.⁴ If there are counteroffers back and forth between the buyer and seller that change the price, then the rescission fee is calculated based on the last agreed purchase price.

Rescission Notice

The buyer must serve a rescission notice on the seller by registered mail, fax or email to the seller’s contact details in the CPS. The notice must include the following:

• The address, the parcel identifier (PID) or a description of the property;
• The name, and the signature or electronic signature, of the buyer;
• The name of each seller who is a party to the CPS; and
• The date that the right of rescission is being exercised.⁵

Residential Real Property

HBRP Legislation defines residential real property which includes as follows:

• a detached or semi-detach house;
• a townhouse;
• an apartment in a duplex or other multi-unit dwelling;
• a residential strata lot designed or intended to be used primarily as a residence;
• a manufactured home that is affixed to the land;
• a cooperative interest, which is a right of use or occupation of a dwelling by a corporation or entity.⁶

However, the following types of residential real property are exempt from the right of rescission:

• residential real property that is located on leased land;
• a leasehold interest in residential real property;
• residential real property that is sold at auction, under a court order or under the supervision of a court.⁷

The right of rescission also does not apply to any purchase and sale where Section 21 of the Real Estate Development Marketing Act, [SBC 2004] CHAPTER 41 would apply.⁸ Essentially, if a purchaser of a pre-sale development unit is provided with a disclosure statement, they would not be able to rescind a CPS using the homebuyer’s Cooling-Off Period, as they are offered other rescission rights, which is seven days rescission right from signing the pre-sale contract.

Moreover, float homes and manufactured homes on leased pads used as residences are not subject to the HBRP Legislation.

The Effects of Contract’s Assignment on Rescission Right

In our scenario, since the buyer should wait until March 15 to see if his request to increase the loan amount is approved, he is considering assigning the CPS to his company, believing the rescission period may restart from the date of assignment. Now the question is whether the CPS’s assignment restarts the Rescission Period. The answer is no. If the buyer (the “Assignor”) transfers his rights and benefits under the CPS to his company (the “Assignee”) based on a contract (the “Assignment Contract”), the Assignee does not have a new right of rescission under the Assignment Contract.

Non-Inclusion of HBRP Disclosure Provisions in CPS

As of January 3, 2023, BCREA’s standard CPS forms were updated and now contain the new HBRP disclosure provisions. If contracting parties use the older BCREA’s standard CPS or non-standard CPS, which does not have HBRP disclosure provisions, such an issue does not affect the validity of CPS. In other words, the HBRP disclosure provisions cannot be contracted out, and they apply even if they are not in the CPS.

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¹ Section 7 of the HBRP Regulation.

² Section 42(1) of PLA and Section 4 of the HBRP Regulation.

³ Section 6 of the HBRP Regulation.

⁴ Source: BC Financial Services Authority: https://www.bcfsa.ca/industry-resources/real-estate-professional-resources/knowledge-base/frequently-asked-questions/home-buyer-rescission-period-frequently-asked-questions

⁵ Section 5 of the HBRP Regulation.

⁶ Section 2 of the HBRP Regulation.

⁷ Section 3 of the HBRP Legislation.

⁸ Section 42(2) of PLA.

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