7 Day Rescission Period BC
Presale Rescissions in Real Estate
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
If you want a realtor to represent YOUR best interest & not the developer’s, call me today!
In real estate, there are a number of different types of properties that you buy, but at the most basic level it comes down to presale vs resale. We cover the definitions of each type of purchase, and important things to know when purchasing a presale.
The 7 day rescission period BC is a period of time where a presale purchaser can do their due diligence on the presale property that they are purchasing.
This blog goes through the key differences between subject removal (resale) and the 7 day rescission period (presale), and frequently asked questions regarding the rescission.
For everything you need to know about the 7 day rescission period in BC, read on!
Presale vs Resale
A presale property is one that is sold by a Developer to a Buyer before that property is built or completed. Ultimately, the Buyer is purchasing the right to a property that the Developer is promising to complete in the future.
Presales are an alternative to resale properties (tangible, already built, sold by a non-developer), and while presale and resale are both types of purchases, the process of buying them is very different.
Because presales are a complex and often riskier process, it is just as important in presales as it is in resales to make sure that you are working with a realtor that is experienced in presales to help you purchase. Many people believe that the developer’s sales staff are there to help them, but they are there to SELL the homes and are hired to work in the b
est interests of the developer. Just like you would in a resale situation, make sure you hire a realtor to help you with your presale too!
Subject Removal vs 7 Day Rescission Period BC in Real Estate
In addition to differences in tax, tax exemptions, and deposit schedules, the period of time in which the Buyer is given to do their due diligence is referred to and regulated in different ways. In resale situation this due diligence time is referred to as subject removal, and in presale situations this due diligence is referred to as the 7 day rescission period.
One of the main differences between the subject removal period in resale properties and the 7 day rescission period with presales is that with subject removal if you back out it should be with relation to the subjects.
For example, let’s say that you put an offer in on a property and it is subject to financing. If that’s the only subject you put in then the only reason why you can back out is if you can’t obtain financing. Therefore, if you decide that you don’t like the flooring colour or you’re not happy with the overall maintenance of the property that is not enough of a reason to legally be able to back out of subject removal.
In the Province of British Columbia, Pre-Sales are regulated by the Real Estate Development Marketing Act (REDMA) and this act states that the purchaser has the right to walk away from the contract for ANY REASON within their 7 day rescission period.
Beware: The Rescission Period AUTOMATICALLY Goes Through
It is EXTREMELY important to know that with the 7 day rescission period developer’s consider “no news as good news” because the purchase going through is automatic as soon as the 7 days passes if no notice is given.
Therefore, if you have an accepted offer on a presale but you decide you are NOT proceeding with the purchase, but forget to provide written notice within those 7 days and the week passes, then it is automatically assumed that you are purchasing the property and you are contractually obligated to provide the deposit.
This is the exact opposite as subject removal, because in a resale subject removal if the buyer does not given any notice then it is automatically assumed that they are not going through with the purchase. For more details on a typical resale subject removal, you can read this: Subject Removal 101 for Resale Properties
When Does the Rescission Period Start
Often times it takes a while for the developer and buyer to work out details, and the final contract can take a few days to receive. Many buyers have the question: when does the 7 day rescission period technically start? This is a great question, and in order for the rescission to start two steps must both be complete:
- The purchaser has received the Disclosure Statement and any Amendments to the Disclosure (if applicable), and signed a form acknowledging this.
- The final accepted contract of purchase and sale is signed by all parties (the buyer and the developer). The 7 days don’t begin until there is a legally binding accepted offer (all offers and counter offers complete), and both parties have agreed to all associated terms or addendums to the contract.
What Should be Done During the 7 Day Rescission Period
While subject removal can provide more guidance with the exact subjects that need to be fulfilled and what needs to be done for rescission isn’t as crystal clear, there are still a lot of things to think about during the 7 day rescission period. Working with a realtor will help to make sure that all your due diligence is done and that you’re prepared, and they will most notably guide you through the following steps that should be done during the 7 day rescission period in presales:
- Talk to a mortgage broker about financing
In a presale, because the completion date is often 2-5 years away from the actual contract date it is not possible for a mortgage broker to give you a commitment at the time of writing. You’ll want to get pre-approved and make sure your mortgage broker is confident in your financing for the long term.
- Read through the disclosure statement(s)
The Disclosure Statement will have all of the important info about the property you are buying and who you are buying from. The disclosure statement will include information on the developer, their financing, their history with building, and a number of details about your new home. If it’s a strata property, they’ll also include details on the bylaws and estimated strata budget.
- Review the final contract with your realtor and lawyer
You’ll want to make sure that you understand all of the commitments, risks, and your obligations when purchasing a presale. Presale contracts are all different as they are typically written by each developer’s lawyer, so make sure you are aware of all the terms and review them with your own representative to make sure you are educated about your purchasing decision.
- Talk to your accountant and make sure you understand the tax implications
With presales you have to factor in GST on top of the purchase price, and you’ll want to make sure that you report everything property on your tax returns. Make sure you talk to an accountant, specifically if you’re purchasing a presale as an investment.
- Get your deposit ready
All deposits paid by the Buyer of a Pre-Sale are held in a lawyers trust account. This money stays in the account until the building is either built or the Developer fails to meet the time deadline to have the building built. The Developer cannot use this money and does not have access to this money until the building is complete. If the Developer goes under, the money in the trust account is not part of the bankruptcy and has to be returned to the Buyer.
Make Sure YOU’RE Protected
It is so important when purchasing a presale to make sure that your best interests are protected.
The sales staff are there to sell you on the property, and their sole responsibility is to represent the developer and work in their best interests – NOT yours.
From knowing the good and bad about the location, to the ins and outs of the contract and disclosure statement, and so much more, a realtor is there to work in your best interests, disclose everything to you, and make sure that you are educated when it comes to what you are purchasing.
A lot of work goes in to preparing for the 7 day rescission period and also making sure proper due diligence is done during that time to ensure a safe purchase and completion when the time comes. As realtors specializing in presales, if you are considering purchasing a presale property and want to make sure your best interests are put first, then call us today!
**We don’t work for the developer, we work for YOU**
If you’re thinking of purchasing a presale property, it’s important that you have a realtor working in your best interest and not the developer’s.
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