DV Capital: Mortgage Broker & Private Lender Services.
British Columbia | Home Buyer Rescission Period.
What is the British Columbia HBRP?
What is the British Columbia Rescission period?
Different from the already existent cooling off period for pre-construction real estate, generally speaking, a cooling-off period provides someone that is considering to enter, or has entered into a contract with a time-period to rescind their contractual obligation. In other words, the individual has the right to change their mind for any reason whatsoever and walk-away. The British Columbia Home Buyer Rescission Period (HBRP) has been implemented to provide homebuyers the privilege to rescind on a contract to purchase residential real estate within a set period regardless of whether the contract includes conditions. It has been determined that the cooling-off period will begin the next business day after the final acceptance of an offer to purchase residential real estate. The rescission period will be in effect for three business days and cannot be waived by either the seller, buyer or their real estate representatives. It’s important to note that the homebuyer can legally withdraw from the purchase for any reason at the cost of 0.25% of the purchase price. For example, on a purchase price of $1,500,000, the rescission fee would be $3,750.
Is the Rescission Period Working?
It was noted in a ‘Business In Vancouver’ article that a senior management personnel of a real estate brokerage indicated that they are witnessing people take advantage of the BC | Home Buyer Rescission Period program. It was said that in a time of limited inventory, purchasers are making offers to purchase on multiple properties. In other words, it is alleged that homebuyers are making multiple offers on multiple homes knowing that in the back of their mind, they only stand to face a 0.25% penalty, per house. So in other words, say a purchaser made an offer to purchase 3 properties for $1,500,000 each. Should the purchaser decide to only proceed with 1 of the purchases, they would need to pay 2 rescission fees equal to $7,500, which evidently is not much of a deterrent for someone looking to circumvent the system in order to aggressively bid on their desires home(s). ‘
What is the Role of the Real Estate Professional?
According to the BCFSA’s website, real estate professionals are required to make two disclosures to their clients in respect of the BC | Home Buyer Rescission Period. The initial disclosure must accompany the Disclosure of Representation in Trading Services (DORTS) prior to engaging a client. Secondly, a greater detailed Disclosure of Buyer’s Right of Rescission must be made when you prepare an offer to purchase on behalf of your client or when you present an offer to purchase to your client which must include the following:
- The rescission period cannot be waived.
- Accurate calculation of the rescission period and when it expires.
- Accurate calculation of the dollar amount of the recession fee.
- Information about the return of the deposit held in the brokerage trust account.
- Exemptions to the right of rescission.
Residential Properties Eligible for the HBRP.
According to the BCFSA’s website, the rescission period applies to the following types of residential real estate:
- A detached house
- A semi-detached house
- A townhouse
- An apartment in a duplex or other multi-unit dwelling
- A residential strata lot, as defined in Section 1(1) of the Strata Property Act
- A manufactured home that is affixed to land
- A cooperative interest, as defined in Section 1 of the Real Estate Development Marketing Act, that includes a right of use or occupation of a dwelling.
Residential Properties Excluded From the HBRP.
According to the BCFSA’s website, the rescission period does not apply to the following types of residential real estate:
- Residential property that is located on leased land.
- A leasehold interest in residential property.
- Residential property that is sold at auction.
- Residential property that is sold under a court order or the supervision of a court.