On Thursday, July 21, 2022, the British Columbia Provincial Government released details on its latest real estate consumer protection initiative – the Homebuyer Protection Period.
Effective January 1, 2023, purchasers of residential properties in British Columbia will be provided with a mandatory 3 business day 'Homebuyer Protection Period'. During this protection period, buyers may choose to walk away from an accepted offer to purchase a residential real estate property for any reason.
A similar protection period has already existed for some time in the context of pre-sale condominium purchases in British Columbia. However, Thursday's announcement marks the first time that a protection period will be broadly available on all purchases of residential properties in British Columbia.1
The 3 business day protection period commences the day after an offer to purchase a residential property is signed by both the buyer and the seller. Buyers and sellers are prohibited from waiving this mandatory protection period in their contracts.
However, exercising the right to cancel a contract during this protection period comes at a cost. Any buyer who exercises their right to walk away from an accepted offer during the protection period will be required to pay a seller an amount equal to 0.25% of the gross purchase price in the contract.2 This penalty can be withdrawn from any deposit paid by the buyers.
The Homebuyer Protection Period will mostly only be effective in circumstances where a buyer has an accepted subject free offer, as it provides a limited way for a buyer to walk away from a contract for a modest cost.
Importantly, the Homebuyer Protection Period does not prevent buyers and sellers from negotiating the inclusion of traditional subject conditions and removal periods in their contracts. If subject conditions exist in a contract and are not waived, buyers could potentially walk away from accepted contracts without needing to pay the 0.25% penalty.3
1 A few exceptions to the mandatory protection period are outlined in the legislation. Exempt properties include those located on leased land; properties where the interest being sold is a leasehold interest; and properties sold at an auction or in a court process
2 For example, on a $1,000,000 purchase price, the penalty will be $2,500.
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