2023 has seen some new rule changes introduced when purchasing and selling real estate.
Under Section 42 of the Property Law Act, buyers of residential real property are now entitled to rescind, or cancel, a contract of purchase and sale by serving notice on the seller within 3 business days of the accepted offer.
If the buyer does excercise their right to rescind there is a penalty of 0.25% payable to the seller, so for a purchase of $750,000 this would mean $1,875 would be payable. This would either be paid to the seller from the purchasers deposit or the buyer would pay the amount directly to the seller or the seller would have to take the buyer to small claims court to claim the penalty if the buyer did not pay the penalty.
However, if the purchaser is collapsing the deal due to one of their subject clauses, then there would be no penalty payable. It is only if the buyer changes their mind and must be within 3 business days of offer acceptance. A business day is any day other than a Saturday, Sunday or a holiday in British Columbia.
It should also be noted that this does not apply to all transactions as the following are exempted:
- Residential real property that is located on leased lands.
- A leasehold interest in residential real property.
- Residential real property that is sold at auction.
- Residential real property that is sold under a court order or the supervision of a court.
It also does not apply to a purchase under the Real Estate Development and Marketing Act where Section 21 of the Act applies as there is already a 7 day rescission period applicable.
Here on the central Island area we are not really expecting this to make a huge inpact on the real estate transactions as it was aimed more at subject free offers where buyers were caught up in multiple offers as this would now give those buyers the opportunity to have a cooling off period. Although we saw this happen frequently here over the last couple of years our market has now changed and the majority of offers are now including subject clauses and buyers are less likely to be in multiple offers.
Foreign Buyers of Real Estate
On January 1, 2023 the federal prohibition on the purchase of residental property by non-canadians came into effect.
This effectively bans non-Canadians from directly, or indirectly, purchasing certain residential property in Canada for a period of two years.
(a) an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
(b) a corporation that is incorporated otherwise than under the laws of Canada or a province;
(c) a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and
(d) a prescribed person or entity. (non-Canadien)
Residential Property means any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is:
(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
(b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property or immovable owned, or intended to be owned, apart from any other unit in the building, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
(c) any prescribed real property or immovable.
Again we are not anticipating this will have a huge impact on our real estate market as nationally, provincially and more so locally the numbers of foreign buyers is actually quite small.
I hope you found the information on these two topics useful but please let me know if you have any questions on these or any other real estate query.