The cooling-off period will fundamentally change the way real estate contracts will work, real estate lawyer Michael Drouillard warned REALTORS® at an REBGV-hosted discussion on August 16 about the upcoming regulation.

“In my opinion, it’s an unprecedented change to real estate contract law,” Drouillard said to the nearly 700 members in attendance.

Drouillard stressed that this regulation is uncharted territory and may see further refinements both before and after it comes into place on January 1, 2023.

• Buyers have three days from the acceptance date to exercise their right to rescission in a residential real estate transaction. If they do, the seller is entitled to 0.25 per cent of the agreed upon sale price of the home as a rescission or “break” fee.
• The buyer must provide notice of rescission via registered mail, fax, or email to the seller within the three-day period.
• The rescission fee will be taken from the deposit held by the brokerage and will be given directly to the seller if the buyer rescinds. If there’s no deposit, the amount is considered as debt and the seller will have to take civil action to claim it.
• The right to rescind, if applicable, can’t be voluntarily waived or “contracted” out of - this regulation supersedes anything written into the contract. Unless covered by the exemptions, all contracts are subject to the period regardless of subjects or representation.
• Exemptions are limited to residential properties:
  • subject to section 21 of the Real Estate Development Marketing Act,
  • located on leased land,
  • of leasehold interest,
  • sold at auction, or
  • sold under a court order or supervision of a court.
• The regulation considers residential property as a(n):
  • detached house;
  • semi-detached house;
  • townhouse;
  • apartment in a duplex or other multi-unit dwelling;
  • residential strata lot, as defined in section 1 (1) of the Strata Property Act;
  • manufactured home that is affixed to land; and
  • 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.

• Realtors will need to make two written disclosures to all clients around the cooling-off period – one at the start of offering trading services, and one when any offer is presented.
• Brokers must return the buyer’s deposit regardless of internal policies if the buyer gives a notice of rescission, minus the rescission fee of 0.25 per cent of the accepted sale price. That fee must go directly to the seller.
• To help protect their clients, Realtors should start requiring a deposit on acceptance rather than subject removal. This would make collecting the rescission fee much easier for the seller if the buyer rescinds the contract.
• Subject periods, if included, should be longer than the cooling-off period. That way, if your buyer is looking to cancel a contract due to subjects, they can do so after the cooling-off period to avoid ambiguity and possible civil action by a seller looking to collect a rescission fee.
• Realtors should be clear with acceptance dates when creating counteroffers. If an offer is “accepted” contingent to a counteroffer, the cooling-off period starts when both parties agree to the final price. Updating the acceptance date when countering will help clarify the start date.
• The cooling-off period isn’t a substitute for subjects – the buyer has no right to inspection, financing etc.
• The seller must include their contact information, like an email address, mailing address, or fax number.

• Strata lots are considered residential property and bare land isn’t under this regulation. What will bare-land strata lots be considered?
• Will mixed-use properties be subject to the regulation? For example, what if a detached home is effectively being used as a business?
• Is acceptance considered when the contract is signed, or when the signed contract is delivered?
• What's considered an “auction”?
• What does “waived” mean? Can you add contradictory contractual terms or additional restrictions and requirements around deposits?

• When interpreting the law, the courts will look at the intent. One could argue that a multiple offer scenario is an “auction”, but there’s very little chance the court will see it that way.
• The regulator will likely frown upon looking for loopholes or ways around the cooling-off period. The best thing you can do for your clients is keep them informed of it and how it may affect them.

Should I collect two deposits? One for the potential rescission fee, then one for the remainder?

No. The mechanism to collect the fee from the deposit is clear and simple. Collecting two deposits may make this process needlessly complicated.

Is the break/rescission fee subject to GST?

It’s unclear at this point. Most services are subject to GST, and this is defined as a fee and not a deposit. But you’ll need to consult an accountant or a tax lawyer to be sure.

What if your buyer wants to back out due to a subject? Does the rescission fee still apply?

If it’s due to a subject, the rescission fee won’t apply. However, to make things clear, it would be better to back out due to subjects after the cooling-off period.

Would it be possible for a buyer to put offers on multiple properties, sign the contracts, then rescind all contracts save for the one most attractive to them?

Yes. But they’d have to pay the rescission fee for each contract.

How are the three days defined? Is it 72 hours? Three calendar days?

It’s the three calendar days after acceptance. So, for example, if you sign a contract on August 16, the buyer must send the notice of rescission on August 17, 18 or 19.