BC Government to Implement Homebuyer Protection Period in January 2023
Homebuyer Protection Period (HPP)
Sources: https://news.gov.bc.ca/, https://www.bcrea.bc.ca/
A new homebuyer protection period will protect people in B.C. looking to buy a home from being pressured into high-risk sales.
The period is the first of its kind in Canada and marks the first key action the Province is taking based on the B.C. Financial Services Authority’s (BCFSA) report on ways to offer homebuyers better consumer protection in the real estate market. The mandatory three-day period will give homebuyers an opportunity to take important steps, such as securing financing or arranging home inspections, as they prepare to make one of their biggest financial decisions.
“Too many people have been faced with giving up an inspection in order to buy a home,” said Selina Robinson, Minister of Finance. “This is a major step toward providing homebuyers with the peace of mind they deserve while protecting the interests of people selling their homes – for today’s market and in the future.”
The homebuyer protection period will come into effect on Jan. 1, 2023. It includes a recission (cancellation) fee of 0.25% of the purchase price, or $250 for every $100,000, for those who choose to back out of a deal. For example, if the purchaser exercises the right of rescission on a $1-million home, they would be required to pay $2,500 to the seller.
Buyers still may make offers conditional on home inspections or financing at any time. The protection period will offer homebuyers the opportunity for due diligence at times when conditions are not in place.
The homebuyer protection period is informed by the results of consultations that the BCFSA completed this year with a wide range of real estate industry stakeholders, including home inspectors, appraisers, realtors and academics, as well as representatives from the legal and financial services sectors.
The Province will continue studying the BCFSA’s advice and its potential effects to further strengthen public confidence in the real estate market.
Quotes:
Blair Morrison, CEO, B.C. Financial Services Authority –
“Buying and selling a home are the most significant financial transactions in most people’s lives. The parameters to implement a homebuyer protection period, as well as other potential consumer protection enhancements, set forth in BCFSA’s advice to the government, are designed to give British Columbians appropriate time to exercise due diligence. Our advice is based on consultations with over 140 stakeholders, including industry experts and public-interest organizations. We want to promote confidence in real estate transactions and our advice is aligned with that outcome.”
Jonathan Sheppard, president, Home Inspectors Association BC –
“Home inspections help to eliminate some of the potential costly risks involved in purchasing while helping to make an informed decision. Home Inspectors Association BC members are proud that the B.C. government has recognized these risks and again leads the country in consumer protection.”
Andy Yan, urban planner and director of the city program, Simon Fraser University –
“The homebuyer protection period is something that is long coming and much needed as a modernization package for how homes are purchased in British Columbia and for the stability, accountability and transparency of the entire market.”
Tsur Somerville, senior fellow, UBC centre for urban economics and real estate –
“It is important to balance the interests of buyers and sellers. A key objective is to level the playing field and allow buyers to avoid having to make decisions under unreasonable time pressure. It addresses the very important goal that buyers feel trapped into buying a property without an inspection.”
Elaine Spilos, B.C. homebuyer –
“The homebuyer protection period guarantees time for the homebuyer to get the necessary information to make a wise decision.”
Quick Facts:
- BCFSA is responsible for the supervision and regulation of the financial service sector, including real estate professionals, mortgage brokers, insurance, pensions, trusts, credit unions and the Credit Union Deposit Insurance Corporation.
- B.C. will be the first province to implement a homebuyer protection period for resale property and newly constructed homes.
- Cooling-off periods for pre-construction sales of multi-unit development properties, like condominiums, are in place under the Real Estate Development and Marketing Act.
While there remain many unanswered questions, here are the details of the HPP upon the announcement:
Deposit
- if a deposit is held in trust, brokerages may release it upon rescission
- rescission fee amount is provided to the seller
- the balance (if any) is returned to the buyer, despite what may be provided in the contract.
Exemptions and waivers
The HPP cannot be waived. Narrow exemptions include:
- sales subject to a 21 of the Real Estate Development Marketing Act
- sales of residential real property located on leased land
- sales of leasehold interest in residential real estate
- sales at auction
- sales under a court order or supervision of a court
Defining residential real estate
The policy will apply to the following types of structures:
- detached homes,
- semi-detached homes,
- townhouses,
- apartments in a duplex or other multi-unit dwelling,
- residential strata lots,
- manufactured homes that are affixed to land, and
- cooperative interests that include a right of use or occupation of a dwelling.
The HPP does not apply to presale properties already subject to a rescission period under the Real Estate Development Marketing Act.
To read the report to the province, called Enhancing Consumer Protection in B.C.’s Real Estate Market, go to: bcfsa.ca/media/2861/download.
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