Home Buyer Rescission Period | What You Need to Know

The Home Buyer Rescission Period (“HBRP”) came into effect on January 3, 2023 in British Columbia.

What is the HBRP?

This new legislation gives buyers the right to withdraw from a residential purchase agreement within 3 business days after an offer is accepted. For the purpose of this legislation, “business days” are Monday - Friday, excluding holidays.

A buyer can rescind their offer for absolutely any reason at all, there is no justification needed.

What Properties Are Subject to HBRP?

The HBRP impacts most residential real estate transactions. Those include:

• Detached homes;

• Duplexes and semi-detached homes;

• Townhomes;

• Apartments or other multi-unit dwellings;

• Manufactured homes affixed to land; and

• A cooperative interest that includes a right of use or occupation of a dwelling.

For sale by owner properties that meet the above criteria are also subject to the rescission period.

Are There Property Exemptions?

There are a few property types that are exempt from the HBRP. Those include:

• Homes on leased land;

• Leasehold interest in residential real property;

• Residential property sold at auction;

• Residential property sold under court order or supervision of a court; and

• Purchase of a pre-sale home as there is a separate rescission period that applies.

How Does the HBRP Work?

If a buyer exercises the right of rescission within the 3 business days, the buyer will be required to pay 0.25% of the accepted offer price to the seller. As an example, for a purchase price of $500,000, the fee would be $1,250.00.

In the case of an offer made with subjects, a buyer would not owe a rescission fee if they decided not to move forward with the transaction as a result of their due diligence (subjects), even if they backed out during the 3-day rescission period. For this reason, the HBRP is mostly going to affect subject free offers.

Under the HBRP, the buyers rights CANNOT be waived, even if all parties agree to it.

It’s important to keep in mind that while a buyer can exercise their HBRP rights for any reason, their obligation to make a good faith effort to remove subjects remains. Essentially, don’t include a subject just for the sake of having a “get out of offer free card”.

I have an Accepted Offer/ Backup Offer. When Does the HBRP Begin?

The rescission period begins on the next day following the final acceptance of the offer/ counteroffer. For backup offers, the rescission period would begin when the backup offer was accepted in the backup position, not when the backup becomes the primary offer.

Serving HBRP Notice

The buyer has until 11:59pm on the 3rd day to provide notice to the seller. A rescission notice is considered served when it is sent, not when it is received.

Additionally, if more than one buyer is listed on the contract, one buyer can rescind the offer without approval of the other buyers.

Collection of Deposits and Payment of HBRP Fees

Here’s where things get a bit complicated. In order to explain how this works, I’ll provide a brief explanation below of how deposits are typically held vs how they will function with the HBRP.

Deposits are typically held by a brokerage. When a deposit is held in trust, the brokerage does not hold the funds on behalf of either party, despite the brokerage likely representing one side of the transaction. The funds are held under a stakeholder provision, which means that a written signed release from both the buyer and seller is required in order to release funds.

However, if a deposit is held in trust, the HBRP Requlation requires that the 0.25% rescission fee be promptly paid to the seller with no written release required.

If the deposit is held by another party, or no deposit is held by a brokerage, the buyer is responsible to ensure the rescission fee is paid to the seller directly, without the involvement of any realtors or their associated brokerages. Legal advice should be sought if a buyer does not pay.

Summary

In my opinion, the full effects of the Home Buyer Rescission Period will not be felt until the real estate market heats up again. Offers with subjects are fairly typical in our current market and until subject free offers become more frequent, I do not see this new legislation impacting buyers or sellers in any significant way.

If you have any questions about the new HBRP, please don’t hesitate to reach out.