Cooling Off Period BC
The Home Buyer Rescission Period Explained
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
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The Cooling Off Period BC, also commonly referred to as the Home Buyer Rescission Period, is a new period for buyers that is effective as of January 3, 2023 that gives the buyer a right to rescind (“cancel”) their contract of purchase and sale within a three business day window from final acceptance of residential real property . In the event that the buyer exercises their right to rescind, then a .25% fee based on the sale price of the home is payable to the seller as damages.
In this blog, we go through what the cooling off period is in more detail, as well as frequently asked questions about the home buyer rescission period such as what types of properties does the cooling off period apply to, what type of properties are exempt, how the rescission fee is calculated and paid, when the period starts, and more.
Keep reading for everything you need to know about the cooling off period in BC and how it impacts both sellers and buyers!
What is the Cooling Off Period BC?
The “Cooling Off Period” in BC, also knows as the Home Buyer Rescission Period, is a new 3-day period that provides the buyer an opportunity to rescind (aka ‘cancel’) their contract of purchase and sale after an offer is accepted with a financial penalty. This is effective in British Columbia as of January 3, 2023.
Here are a few of the highlights of the rescission period:
- Is a three day period in which a Buyer can back out of a purchase after signing a contract.
- If the buyer backs out during that three day period (NOT related to subject removal) then they owe the seller .25% of the agreed upon sale price of the home as a rescission fee.
- Rescission rights are not waivable by the buyer
What type of properties does the cooling off period apply to?
The rescission right applies to residential real property defined as the following:
- Detached homes
- Semi detached homes
- Townhouses
- Apartments in a duplex or mult-unit/family dwelling
- Residential strata lots (ie condos)
- Manufactured homes that are affixed to land
- Cooperative interests that include a right of use or occupation of a dwelling
What type of properties are EXEMPT from the cooling off period?
The following properties are EXEMPT from the three day cooling off period:
- Leasehold land (ie SFU, TFN, parts of False Creek, etc)
- Property sold at auction
- Foreclosures or under court order/supervision of a court
- Presales or properties under Section 21 of the Real Estate Development Marketing Act (REDMA)
It is important to note that presales and properties under REDMA will still have their own 7 day right of rescission.
When does the three-day cooling off period start?
The home buyer rescission period is for a total of three business days after final acceptance.
Therefore, the three day home buyer rescission period count starts the first day after the accepted offer, and does not include weekends or recognized holidays.
Example Timeline of the Cooling Off Period BC
Wednesday: Accepted Offer at 3pm
Thursday: Cooling off period starts – day 1
Friday: Cooling off period day 2
Saturday & Sunday: Weekends (N/A)
Monday: Cooling off period day 3 and notice is due no later than end of day (11:59:59pm)
Furthermore, if Monday was a holiday then the cooling off period would not end until Tuesday in the example above.
How much is the rescission fee for the cooling off period?
If the buyer exercises their right of rescission by backing out within the three day period, the fee for breaking the contract is .25% of the agreed upon sale price of the home.
In the event no deposit has yet been given, the buyer must pay the seller directly in a prompt matter and no later than 14 days after exercising the right of rescission. If a deposit was given with the accepted offer, then the fee is paid out of the deposit by the holding brokerage before being returned to the buyer.
How is the rescission fee paid to the seller?
If the buyer exercises their right of rescission during the rescission period and the buyer has paid a deposit (ie subject free deposit in hand), then the seller will be paid by the brokerage holding the deposit their portion of the rescission break fee (.25% of the purchase price) and the remainder will be given back to the buyer.
If the buyer exercises their right of rescission during the rescission period and the buyer HAS NOT yet paid a deposit, then the buyer is required to pay the rescission amount to the seller promptly, and in any event, within 14 days after the buyer exercises their rescission right.
How does the cooling offer period impact me?
AS A BUYER:
If you have a subject free offer, or have a subject removal period of less than 3 days:
In the event you have written a subject free offer or have a subject removal period that is less than three days, then you will have an automatic right to a full 3 business days to consider the purchase after acceptance.
This period is not waivable, and an automatic right of rescission. This will allow you time to do your due diligence if not already done (ie try to arrange financing) but it DOES NOT grant you automatic right to access the property within that 3 day window. If you’d like to view the property during your cooling off period then there must be a term included in the contract that the seller agrees to.
If you have an offer that includes subjects that is more than 3 days:
Because the subject removal period allows you an alternative opportunity to back out of the contract with relation to subjects listed (ie financing, inspection, etc), the three day cooling off period is largely redundant. If you back out with relation to a subject during the three day cooling off period, you will not owe the rescission fee. Therefore, if you have a contract with a subject removal period that is longer than three days then the rescission period will likely not affect you.
AS A SELLER:
As a seller, the cooling off period will impact your ability to accept subject free offers as all buyers will have an automatic right to a 3 day rescission period.
In a cooler or more balanced market where contracts have subjects, most subject removal periods will extend past the 3 day rescission period (a standard subject removal period is ~7 days) so the rescission period will not greatly impact properties that have accepted offers with subjects of less than 3 days.
What happens if I have a subjects on my contract, and don’t remove subjects? Do I still owe the rescission fee?
No. If you have subjects on a contract (ie financing) and are backing out with regards to not being able to satisfy a condition on a contract, then you DO NOT owe the rescission fee to the seller even if you are backing out within the three day cooling off period.
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