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BCFSA’s Guidelines provide a practical application of the information and give suggested best practice guidance to assist real estate professionals. These guidelines provide BCFSA’s interpretation of the Real Estate Services Act (“RESA”) and all other applicable legislation.
In addition, BCFSA’s Guidelines may be a useful information source for the general public looking for information about standards of conduct for real estate professionals.
These guidelines will assist you in understanding the provisions of the Home Buyer Rescission Period (“HBRP”) Regulation and the Property Law Act (“PLA”) which come into effect on January 3, 2023. This legislation, originally known as the “cooling-off period,” provides buyers in B.C. three business days to rescind/cancel a contract (in other words, an accepted offer) to purchase residential real property.
These guidelines will provide practical guidance on dealing with consumers and the HBRP:
- Ensure that your clients are provided with all the information relating to the HBRP at the outset of your agency relationship.
- Ensure that the Contract of Purchase and Sale reflects the needs of your client.
- Dealing with unrepresented parties.
- Ensure that you are calculating the correct amount on the rescission fee and that you are providing the correct dates to your client.
Ensure that your clients are provided all the information relating to the HBRP at the outset of your agency relationship
You have an obligation to disclose to your clients their right of rescission at the time of writing an offer. You also have an obligation to disclose the nature of the relationship you have with consumers. This is done by way of the Disclosure of Representation in Trading Services. As of January 3, 2023 this form will also include information on the HBRP.
It is important that you discuss the HBRP with your clients when you provide them with the Disclosure of Representation in Trading Services. Some points you may discuss with your client might be:
- That the rescission period is not waivable;
- That the rescission period is for a length of three business days after an offer is accepted ;
- How does a buyer rescind the contract;
- What are your client’s obligations under the legislation;
- What are your obligations under the legislation;
- The fee payable by the buyer to the seller if the right of rescission is exercised;
- How a seller collects their rescission fee;
- What happens if the brokerage is holding a deposit when the buyer rescinds the contract and who it is released to; and
- What transactions are excluded from the right of rescission.
It is important for you to ensure that your client understands their rights and obligations under the HBRP Regulation and the PLA and that you provide the appropriate disclosures as required. You are reminded that should your client ask questions that are outside your area of expertise you need to advise them to seek professional advice if necessary.
Often contracts of purchase and sale contain subject clauses that provide buyers and sellers with an opportunity to perform their due diligence. The right of rescission is separate from any subject clauses that may be in the contract.
It is important that you understand that the HBRP begins where an offer is accepted whether it is subject free or not. This means that the timing of any subject removal in the contract (example: inspection, finance) would run concurrently with the three-business day HBRP.
For example, a contract may provide for five days to remove a subject to financing condition. If your buyer client wanted to rely on that condition to get out of the contract, they would have to be able to show that, in good faith, they tried to obtain financing but were unsuccessful. However, if, on day two after offer acceptance, the buyer client decided that they wanted to walk away from the contract, whether or not they were successful in getting financing, they could exercise their right of rescission and pay the associated rescission fee.
It is important to have a discussion with your client to ensure that any subjects and terms you include in the contract accurately reflect the needs of your client. The HBRP is not a replacement for subjects and terms included in a contract that provide the buyer and seller opportunity to perform their due diligence.
For example, if you are working with a buyer client and they want an inspection on the property, make sure that the contract provides for this. Solely relying on the HBRP would not provide the buyer a guarantee that the seller would provide access to perform the inspection. It is important that the terms that are important to your client are clearly indicated in the contract so that both parties can be clear on what is required of each of them.
Early discussions with your client will help you to understand what is important for your client and it will enable you to protect their best interests.
You need to be careful to ensure that when you are dealing with unrepresented parties you are not giving them the impression that you are in an agency relationship with them. You could easily find yourself in an implied agency situation based on the actions and representations you make, and the impression that could give a consumer.
It is important to remember that the Disclosure of Representation in Trading Services provides unrepresented parties with information on the HBRP. Make sure that when you provide this disclosure to unrepresented parties that you are not providing them with advice on the HBPR and only are providing them with factual information.
The disclosure of rescission period that is required at the time of making an offer is only required to be provided to your clients, not to unrepresented parties. Providing the HBRP disclosure at the time that an offer is being negotiated may create implied agency with the unrepresented party. If an unrepresented party asks for advice on the rescission period when an offer is being negotiated, you should refer them to another real estate licensee and advise them to seek legal advice.
Ensure that you are calculating the correct amount of the rescission fee and that you are providing the correct dates to your client
You need to make sure that when you are calculating the rescission fee for the disclosure that must be provided to your client, that it is accurate. Much like the Disclosure to Seller of Expected Remuneration, the fee is based on the agreed upon price between the buyer and seller. The fee is 0.25% of the accepted purchase price. For example, if the purchase price is $400,000 the rescission fee would equal $1000 (400,000 x 0.0025 = 1000).
It is also important to ensure that you provide your client with the date on which the rescission period expires. Because the rescission period is three business days, the date on which it expires could be impacted by Saturdays, Sundays, and holidays as defined in the Interpretation Act. Three business days begins the day after acceptance of an offer is signed. For example, if an offer is accepted on a Monday, then the recission period will end at 11:59p.m. on Thursday, where there is no holiday falling into that period. If an offer is accepted on a Saturday, then the rescission period would end at 11:59p.m. on Wednesday, where there is no holiday falling into that period.
If there are counteroffers back and forth between the buyer and seller that change the price, then you need to make sure that you amend the amount of the recission fee if the purchase price changes. The original fee that is calculated on the first offer to the seller is quite often not the final price agreed upon by all parties. The date on which the rescission period expires can only be determined once the date of offer acceptance is known.
You must understand the provisions of the HBRP Regulation and how they affect deposits that are being held in your brokerage. Unlike the stakeholder provisions under RESA that require a written agreement by both parties in order to release deposits, the HBRP Regulation provides that a deposit held in a brokerage trust account must be withdrawn if a buyer rescinds a contract of purchase and sale. The HBRP Regulation states that upon a notice of rescission being received the 0.25% fee must be withdrawn and provided to the seller with the remainder of the deposit to be released to the buyer. This is unlike deposits held in any other circumstance, mutual written release is not required.
It is important for managing brokers to understand that despite what the contract of purchase and sale may stipulate (e.g., a non-refundable deposit) if a rescission notice is exercised by the buyer the brokerage must release the deposit as described above.Learn More About Deposits
You should be prepared to help licensees in your brokerage navigate what types of properties are captured by the HBRP Regulation and which are exempt.
If notices of rescission are prepared by a brokerage which is representing a buyer and are served on a seller, the brokerage must retain these notices. Conversely, if a brokerage receives notice on behalf of their client these also need to be retained by the brokerage. BCFSA will require brokerages to include information respecting retained rescission notices in their annual brokerage activity reports and BCFSA’s auditing team may ask to review these notices at the time of an audit. Brokerages will want to have procedures in place for retaining different types of rescission notices (i.e., email, fax, registered mail) and maintaining records that are sufficient to comply with annual brokerage activity reporting requirements.Learn More about the HBRP Regulation and to what it applies
Applicable section of Real Estate Services Act (RESA)/Real Estate Service Regulation/ Real Estate Services Rules/ Property Law Act/Home Buyer Rescission Period Regulation
- Section 26, Real Estate Services Act, Obligation to maintain a trust account
- Section 30(2)(c), Real Estate Services Act, Withdrawals from trust account
- Section 3, Home Buyer Rescission Period Regulation, Exemptions
- Section 4, Home Buyer Rescission Period Regulation, Length of rescission period
- Section 5, Home Buyer Rescission Period Regulation, Service of notice of rescission
- Section 6, Home Buyer Rescission Period Regulation, Amount payable on rescission
- Section 7, Home Buyer Rescission Period Regulation, Right of rescission not waivable
- Section 54, Real Estate Services Rules, Disclosure of representation in trading services
- Section 57.1, Real Estate Services Rules, Disclosure to certain clients of right of rescission
- Section 84, Real Estate Services Rules, Trading records
- Section 42, Property Law Act, Residential real estate – right of rescission
- Regulatory Statement RESA 21-003, Required Forms, Part 5 and 8
- Regulatory Statement RESA 21-004, Brokerage Reporting Requirements
Brokerage trust account: means, in relation to a brokerage, an account maintained by the brokerage under Section 26 [obligation to maintain trust account];
Business Day: means a day other than a Saturday, Sunday or a holiday;
Client: means, in relation to a real estate professional, the principal who has engaged the real estate professional to provide real estate services to or on behalf of the principal;
Cooperative Interest: means an interest that includes both
- a right
- of ownership, directly or indirectly, of one or more shares in the cooperative association, or
- to be a partner or member, directly or indirectly, in the cooperative association, and
- as a result of the right described in paragraph (1), a right to use or occupy a part of the land in which a cooperative association has an interest;
Residential Real Property: means any of the following:
- A detached house;
- A semi-detached house;
- A townhouse
- An apartment in a duplex or other multi-unit dwelling;
- A residential strata lot, as defined in Section 1(1) of the Strata Property Act;
- A manufactured home that is affixed to land; and
- A cooperative interest, as defined in Section 1 of the Real Estate Development Marketing Act, that includes a right of use or occupation of a dwelling.
Remuneration: includes any form of remuneration, including any commission, fee, gain or reward, whether the remuneration is received, or is to be received, directly or indirectly;
Residential strata lot: means a strata lot designed or intended to be used primarily as a residence;
Stakeholder: means a brokerage holding money as a stakeholder under Section 28 [money held as stakeholder];
Trade in real estate: means
- A transaction for the purchase or sale of real estate, for the leasing of real estate or for any other form of acquisition or disposition of real estate;
- An assignment of a contract for purchase, sale or lease of real estate, or a transaction in relation to such an assignment; or
- A prospective trade in real estate within the meaning of paragraph (a) or (b);
Trust account: means, in relation to a brokerage;
- a brokerage trust account maintained under Section 26 [obligation to maintain trust account] of the Act; or
- a commission trust account maintained under Section 31 [payment of licensee remuneration] of the Act;