homebuyer protection period
Cooling-off period could turn up the heat for sellers BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
THE BIG CHILL THE PROBLEM
A couple finally locates one of the few properties on the market that suits them, they make an unconditional, well above the asking price, outside of their financial comfort zone offer. They think this is necessary to compete with other interested buyers. They win the prize – the seller accepts their offer. What now? A little buyer’s remorse sets in. Was the next best offer way lower than theirs? Will they be able to get a mortgage for the amount they need to close the transaction? Will their due diligence disclose property defects that will significantly add to their cost of ownership or make potential lenders balk at lending (such as soil contamination, mould or foundation damage)? Will their lawyers identify something on title that makes the property problematic for them (such as building restrictions)? If they do not close the deal, will they be sued for breaching their purchase contract? This couple’s circumstances are far from unique. Many homebuyers face remarkably similar pressures and concerns.
GOVERNMENT RESPONSE Governments have been targeting housing affordability – arguably ineffectively and sometimes in a misguided manner. For example, the federal government’s housing plan provides some assistance to first-time buyers, but it is insufficient to remove the substantial hurdles for those who cannot get into the market in the first place (see: “Liberal Government Housing Plan – A Home for Everyone” Canadian Mortgage Broker, Winter 2022, p.30). At best, it will slightly help those on the fringe of affording a purchase. Likewise, the B.C. government’s intention to address money laundering, while important for other reasons, proved to be misguided as a step in making housing more affordable. The Cullen Commission’s final report to the B.C. government (see: “Cullen Commission recommends major changes to mortgage brokering” p.12 of this issue) concluded at p.959: … money laundering activity is not a significant contributing factor to housing unaffordability. It seems that fundamental factors such as supply and demand, population, and interest rates are far more important drivers of prices. And at p.960: …. Anti-money laundering measures should not be considered a “silver bullet” that will somehow fix housing unaffordability in the province. On November 24, 2021, the B.C. government announced – in an effort to control housing prices and otherwise protect real estate purchasers – it would be introducing legislation requiring 22
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a cooling-off period for residential real estate purchases. That legislation has the potential to dramatically change the process of buying and selling residential properties. It would adjust the power balance between buyers and sellers, possibly overly so, and put the seller at a significant disadvantage. In addressing a set of problems for the buyers, the government may very well be creating a fresh set for the sellers. Other provincial governments are undoubtedly watching.
B.C.’S ‘COOLING-OFF’ LEGISLATION The B.C. government is in the process of putting legislation into place to protect buyers from circumstances that cause them to overpay (in relation to what the next highest bid would be) or take unreasonable risks (such as not making offers conditional to due diligence regarding the state of the property and the availability of financing). The Legislature on April 25 passed Bill 12-2022 Property Law Amendment Act, 2022. If brought into force, the amendment would: n apply to residential real estate sales only; n apply to private sales (that is those not involving real estate agents) as well; n give buyers a right to rescind a purchase contract by serving notice on the seller within a prescribed number of days after the date on which the offer was accepted (Note that the sellers are not given any right to rescind an agreement); and n give Cabinet the right to make regulations
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