This is new regulation initiated by the BC Government which gives all home buyers the chance to “sleep on it”.  Basically, it grants every home buyer the right to back out of a purchase contract for three business days following an offer acceptance, but not without penalty.  Exercising your right to rescind an offer will cost you 0.25% of the purchase price as agreed in your offer.  Note: This new regulation does not affect the 7-day rescission period which is still granted to all buyers on new and pre-sale homes.

Most transactions will not be affected by this regulation assuming they have subjects longer than three business days.  Nothing has changed regarding contract law and subject clauses.  Buyers will still be able to back out of contracts, if their subject clauses are not satisfied by the subject removal date, without penalty. 

Subject-free (cash) offers and offers with subjects less than three business days will be most affected by this new change.  Any offers that are rescinded within 3 days of an acceptance will likely be under careful scrutiny by any prudent seller to determine if a penalty is owed to them. 

Obviously, there is no requirement to exercise the option to rescind, but it should also be noted that this right cannot be waived or amended.  This means that no buyer can gain an upper over their competition by either waiving their right to rescind or by increasing the potential penalty associated with a potential rescission.  That being said, there are still many ways to submit an “ultra-competitive” offer without altering the terms of the rescission rights and obligations.  One example, which is commonly practiced in commercial real estate but rarely in residential, is to make a deposit upon offer acceptance.  Now, this is the case for cash/no-subject offers anyways, but not necessarily for offers with subjects.  This is not a recommendation; it is merely an idea or option.  Another example of an aggressive offer tactic is to provide a non-refundable deposit.  This would mean that, if you had and did not remove subjects on an offer, the seller would still be entitled to your non-refundable deposit.  Understandably, this is a risky proposition for the buyer and is not recommended, but again, just an idea or option at your disposal.

If you are working with an agent, they should explain the home buyer's recission period to you when they are explaining agency, as required, and also at the time of preparing an offer.  You can also ask your agent if you have any further questions or require any additional details. 

GST can be a very complicated issue.  At 5%, GST would be the largest tax you would pay as a Canadian citizen or Permanent Resident on a real estate purchase.  There are obvious situations where it does apply.  Commercial sales, commercial rentals, new residential sales, and substantially renovated residential housing sales are the most obvious cases where GST applies.  You pay the GST and move on.  What you need to be aware of as a consumer, is that there are situations where you might not expect GST to apply.  The worst thing that can happen is that you discover it after you have signed a contract of purchase and sale and it was never accounted for.  Let's explore a few situations to better appreciate the nuances. 

Aside from use as a primary residence or long-term rental, changing the use of a property can trigger GST.  For example, let's say you purchase a townhouse that someone was renting out as an Airbnb.  You may very well be subject to paying GST on the purchase of that townhouse, whether or not you knew it was used as an Airbnb.  Some of the factors that may affect the GST status include what percent of the property was being used for commercial purposes and whether or not ITC's were claimed.  

What about that pristine condo that's only a couple of years old?  The determining factor will be whether or not the CRA considers that condo as having been lived in or not.  The fact that you are buying it from someone else who previously purchased the unit from the developer doesn't matter.  If the CRA makes the decision that no one legitimately lived in that property, they can apply GST to the transaction, even after it completes.  If you are purchasing a property that is in new or like-new condition, it should raise the question as to whether or not that property has ever been lived in.

What if the property is only 50% renovated, but the seller was claiming ITC's over the course of construction?  You would need the seller to accurately disclose the GST status, but even then, they might not know.  Even with the appropriate clauses in the contract, you could still find yourself on the hook for the GST owing. 

For all of the above cases, you will want to speak with your accountant to advise you as to whether or not GST would in fact apply or not.  Your realtor should recognize the flags that could trigger GST and should give some direction on how to proceed and what your options are.  It is important for both buyers and sellers to be certain as to whether or not GST applies and whether or not it is included in the purchase price.  Don't assume that it doesn't apply to your transaction, find out if it does.  The cost of an error, when it comes to GST, would be substantial in both time and money.

Here are a few things that should raise a flag for GST concerns:

- The owner is a corporation

- The property is in new or like-new condition

- The property is advertised as "never lived in"

- The seller is taking a loss on a property that they have renovated

- The property has been "gutted"

- The seller has not owned the property for more than one year

- The strata allows short-term rentals

- You suspect that the owner did not live in the property themselves

Any of the above cases warrant further investigation into GST status as well as appropriate clauses on your contract.  This is not an exhaustive list.

By Michael Dee, May 2022