To help protect buyers in the real estate market, the BC Government is enacting a mandatory three-day Homebuyer Protection Period (HPP). This process, previously called the three-day “cooling off period,” becomes effective on January 1, 2023.
Some people are unclear about how this works and the effect it may have on the housing market. If you have questions, contact the legal team at Bernard Lau and Co. to request a consultation.
Here is everything you need to know about the HPP/three-day cooling-off period.
What Is the New Three-Day Cooling Period?
The HPP, or three-day “cooling off period,” is a safety net for buyers to conduct their due diligence and re-consider their offer before their offer becomes binding. During these three days, potential homebuyers can perform due diligence such as scheduling inspections, confirm financing and decide whether to proceed with the purchase of the property.
However, to make things more fair to the seller, certain fees are payable if buyers make the decision to back out of a sale during the cooling period that is unrelated to any subject-clauses:
Buyers wishing back out of a sale must pay 0.25 percent of the purchase price, or $250 for every $100,000 of the price. This fee helps balance the interests of both the buyers and the sellers by compensating the seller in the event an accepted offer falls through, while preserving the buyer protection mechanism at a small cost to the buyer.
Backing Out of a Deal during the Cooling Period
Homebuyers who no longer wish to purchase the property during the three-day cooling period should serve the seller with a written rescission notice in at least one of the following forms:
- email with read receipt
- registered mail
- personal service
The rescission notice must include:
- names and signatures of buyer
- name of the seller(s)
- address and description of the property
- date of notice
Note: Buyers will still be able to make offers conditional on home inspections or financing at any time. 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.
Your Real Estate Lawyer in Richmond
The 3 day cooling period is still very new and has not been implemented yet. Accordingly, there will be more answers in the coming months as the cooling period comes into effect. This article is only for information and reference purposes. You should not rely on any information in this article before consulting a lawyer or other qualified professional. Bernard Lau and Co. and its principals will not be liable for any damages resulting from the use of the information and you should obtain independent legal advice prior to acting on the basis of any information in this article.
The accomplished legal team at Bernard Lau and Co. can help you with your next home sale or purchase. Our team has the real estate and litigation experience to guide you through all stages of your real estate transaction, from negotiating the terms of the Contract of Purchase to collapsing deals.