The British Columbia Real Estate Association (BCREA) is speaking out against a set of proposed consumer protection measures recommended by the BC Financial Services Authority (BCFSA), saying they could "cause additional strain and confusion for buyers, sellers, and others involved."
On May 26, the BCFSA published a list of consumer protection recommendations that included, among other things, a five-day pre-offer period, a requirement of sellers to provide property disclosure forms up front, and a three-day cooling-off period. The BCREA was supportive of the pre-offer period, having recommended a similar measure themselves earlier this year. This new regulation would require listings to be on the market for a minimum of five days before accepting offers.
"We are pleased to see that the regulator agrees with our recommendations to introduce a pre-offer period and make key documents available upon the listing of a property,” says BCREA Chief Executive Officer Trevor Koot. “We all agree that protecting consumers in real estate transactions is extremely important, however, how the Ministry handles these recommendations next will determine the success of any changes.”
The issue the BCREA appears to have with the proposed measures is the cooling-off period which would give buyers three business days after their offer is accepted to carry out inspections, confirm financing, and seek legal advice. During this period, buyers can opt to rescind their offer if they are no longer able to or interested in going through with the sale. Buyers who rescind would be subject to a termination fee of 0.1% to 0.5% of the purchase price.
In a release, the BCREA raised issue with the notion that that Minister of Finance Selina Robinson announced plans for the cooling-off period in November "without prior research and consultation with the public or the real estate sector and before having its report from BCFSA." The real estate body goes on to say that the BCFSA was only asked to consider how, not if, a cooling-off period should be implemented.
“To implement any changes effectively and successfully, it is imperative that Ministry empower BCFSA to carry out the next steps," Koots said. "It is often referred to as an 'independent regulator,' yet BCFSA has been directed to research a pre-decided policy without being given latitude to determine whether a ‘cooling-off period’ is an effective mechanism to protect consumers. This is a critical step that has been missed and we consider it vital before moving forward. More time, research and consultation with all parties involved in the real estate transaction process -- including realtors -- is needed to ensure the nuances of such substantial changes are considered and unintended consequences on consumers are avoided.”
In its report, the BCFSA says that it consulted "key stakeholders and experts on the parameters of a cooling-off period," but does note that it "did not consult on the merits of a cooling-off period." The goal, the report says, is to protect buyers from the risks associated with unconditional offers and reduce the stress and pressure associated with the transaction.
The idea of a cooling-off period isn't entirely new to BC. The BCSFA notes that the Real Estate Development Marketing Act already provides a seven-day recession period for buyers who purchase pre-sale development units. And in other parts of Canada, cooling-off periods already exist. Manitoba, for example, provides a seven-day cooling-off period for all condo purchases.
In their consultations with stakeholders and industry experts, the BCSFA says there wasn't any consensus given on how long a cooling-off period should last, who could be exempt, and how much the termination fees should be. They also note that "participants from groups who were closest to the real estate transaction -- such as real estate industry associations and members of the real estate legal community -- were not supportive of implementing a cooling-off period." Meanwhile those who were less directly involved were more supportive or neutral.
Those who were against the cooling-off period noted several possible drawbacks such as potential harm to a seller's interest if they have to re-list in a cooler market, further price escalation as a result of reduced consequences for placing an offer, and a domino effect on other transactions that are part of a buying and selling chain.
This isn't the first time the BCREA has spoken out against a cooling-off period. In a press release issued in March, the agency stated that only 35% of BC residents support the new cooling-off period, as evidenced by a recent survey. “On behalf of the province’s eight real estate boards and 24,000 REALTORS®, the BC Real Estate Association (BCREA) supports the Government of British Columbia’s intent to introduce a ‘Homebuyer Protection Period.’ However, the BC Government’s cooling-off period fails to meet the needs of British Columbians,” reads the press release.