Amidst a Sea of Change:  New Challenges and Opportunities for a New Year #557

2023 marks another year of regulatory changes in the real estate profession. Some of the most notable adjustments include:

1. Changes to the BC Strata Property Act effective November 2022 removing rental restrictions and age restrictions- with the exception of 55+ rules for strata properties (see the Legally Speaking issue on this topic from December 2022 #556);
2. The expansion of BC’s speculation and vacancy tax to several new areas in January 2023- Lions Bay, Squamish, North Cowichan, Duncan, Ladysmith, and Lake Cowichan;
3. The implementation of the Federal property anti-flipping rule where those who purchase a residential property and sell it within 12 months of that purchase may be deemed to have flipped and profit may be taxed as business income;
4. The Federal Prohibition on the Purchase of Residential Property by Non-Canadians Act (“Foreign Buyers Ban”) which came into effect on January 1, 2023; and,
5. BC’s Home Buyer Rescission Period (“HBRP”) rules that came into effect on January 3, 2023.

This piece focuses on the HBRP with an overview, my two cents on where claims may arise, and my thoughts on how to avoid those claims.

Make a New Year’s Resolution:  Know the HBRP

Much has already been written by the BCFSA and the BCREA to assist licensees in navigating the HBRP launched and established under the Real Estate Services Act and the Real Estate Services Rules (and related Regulations and amendments to the Property Law Act).

For example, there are new and revised standard forms referencing the HBRP for use by REALTORS^®, guidelines, FAQs, blogs and a new course to assist:

• BCFSA Guideline, FAQs, Information sheet
• BC’s Home Buyer Rescission Period: Your Questions Answered
• To Rescind or Not to Rescind...
• The Home Buyer Rescission Period: What REALTORS^® Need to Know Course Now Live!

Similarly, there is an excellent introductory piece to the HBRP in Legally Speaking from November 2022 #555.

The Cole’s Notes Version of the HBRP

The HBRP came into effect on January 3, 2023, and it provides buyers with an opportunity to rescind a contract to purchase of residential real property for up to three clear business days after an offer is accepted.

If the buyer exercises their right of rescission during the rescission period, they must pay the seller 0.25% of the purchase price.

The rescission period applies to many forms of residential property. However, there are exemptions for property located on leased land, a leasehold interest, property sold at auction, property sold under court order or supervision of the court – as well as where other legislation applies such as for presale condominiums and strata titled properties under the Real Estate Development Marketing Act.

To inform clients and unrepresented parties alike, two disclosures are required. The first is made to all consumers in the Disclosure of Representation in Trading Services form, which touches on general information on the HBRP and where to go for more information. The second is made only to clients at the time of preparing or presenting an offer, this detailed information on the HBRP includes that the rescission period cannot be waived, provides information about the period during which a buyer can rescind, details the calculation of the rescission fee and when it must be paid, explains how deposits are dealt with, and highlights the exceptions to the right of rescission.

Where Do I See Claims Against Licensees Coming From…?

I do not have a crystal ball, but if I did, I think it would tell me that the following areas may generate claims:

1. not knowing the HBRP exists (impossible, right, given all the coverage?), its application, exemptions, that waiver is not allowed;
2. providing incorrect information or simply getting it wrong when it comes to describing the HBRP, when it applies or the exemptions;
3. not disclosing general information to consumers or explaining the detailed disclosure to clients in a transaction where the HBRP applies or failing to use the required forms;
4. making mistakes with respect to the mandatory mechanics of giving a rescission notice for a buyer or when receiving notice as a seller;
5. disputes between multiple buyers where only one wants to rescind and a conflict arises;
6. calculating the amount of the rescission fee incorrectly;
7. making mistakes in the calculation of the three clear business days for the rescission period; and
8. disputes on the rescission fee and its payment, on deposit releases generally and where there is no deposit in hand.

How to Avoid Claims

Get the Knowledge - To avoid these possible claims, it is of utmost importance to know all the details of the HBRP, its exemptions, and its application. Use the resources provided and take the courses available.

Use the Tools - Practically, it will be key to ensure that the disclosure forms are used, explained, and received by your clients as well as unrepresented parties while not crossing the line into implied agency by providing advice to unrepresented parties (See Legally Speaking #503 on Implied Agency).

Document the Discussion - Documented discussions must take place between the licensee and their client. Where there is any uncertainty, legal advice should be recommended in writing.

As part of those discussions, licensees acting for buyers must be clear that the rescission period does not necessarily assist with due diligence a buyer may want completed on the property. The rescission period and the time for removal of subject conditions run concurrently but the period itself does not mandate access to the property while certain conditions or terms added to the contract may provide for that. For example, the rescission period allows a buyer to rescind the deal during the rescission period for any reason, or for no reason, and does not require any explanation. However, after the period expires, if a buyer requires financing, wants a professional inspection, oil tank scan or water/septic testing, for example, the buyer must have conditions in the contract allowing them to do so.

Calculate Carefully - Care must be taken in both calculating the rescission fee and ensuring buyers are aware of the cost of rescinding the contract.

Further, careful attention must be taken in calculating the time that the rescission period runs and expires.  Consider what is defined as business days and holidays and that the day the offer is accepted contract does not count.  Be sure to use the BCREA day calculator provided for the HBRP (BCREA Access login required).  Written diaries and computer diaries should be kept for those important dates. 

Use Care & Follow-Up – Send the rescission notice by the method chosen by the seller which may be by email (with read receipt), fax, or by registered mail.  Consider that buyers, or their real estate professionals on behalf of the buyers, may prove service of notice by sending an email with a requested read receipt (can their/your email service send read receipt requests, can you evidence the read-receipt request was sent?).  Consider further, whether the seller received actual notice of that email or of a registered mail (which is deemed received when sent even if not received yet). Consider still further, the practicalities where a buyer makes a last-minute decision late on day 3 of the rescission period- can you serve the notice on time?  Lastly, what if you are representing a seller who has a back-up offer or wants to accept another offer and wants to know if the rescission period has expired with no notice delivered- can you be sure a rescission notice by registered mail is not on the way.  Better attempt to check with the buyer’s agent (in writing) and you may wish to tell the seller to get legal advice. 

The HBRP and its notice requirements mean you must confirm, confirm, and confirm…

Document the file –Great care must be taken in providing the rescission notice with the appropriate information, to the appropriate person and by the method set out in the contract.

Careful instructions must be taken and well documented for any rescission. This is particularly so when only one buyer is delivering the notice of rescission but not all.  You may act for multiple buyers and have conflicting instructions.  That conflict may need to be resolved with the buyers obtaining legal advice.

When no deposit has been paid, sellers may need legal advice to assist them in taking steps to claim the rescission fee through the courts.

Concluding Thoughts

As always, knowing the HBRP rules beforehand, having detailed and documented discussions with your client, and finally, recognizing your own limitations and recommending the appropriate expert advice is essential.

Hopefully, these New Years’ challenges drifting in the sea of change throughout 2023 do not cause you or your clients to drift into rough waters.

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