Our Federal and Provincial governments are making significant policy changes that will affect our real estate market for tenants, landlords, buyers, and sellers. One of them affecting strata restrictions is already in effect and three new rules are expected this coming January 2023: a rescission period for buyers, a ban on foreign home buyers, and a new anti-flipping tax rule.
BC's Age and Rental Restrictions to Strata Title Properties Lifted
Earlier this week, the B.C. government passed amendments to the Strata Property Act which removed rental and age restrictions in strata properties (not including short term and 55+ restrictions). In areas where the government has data through the Speculation and Vacancy Tax, there are approximately 2,900 empty condos that cannot be rented out because strata rules prevent them from renting out their condo. This amendment will enable owners to rent out these badly needed homes immediately. That was a huge step towards the province's goal of creating more housing.
BC's Home Buyer Rescission Period
The Property Law Amendment Act, 2022 will give British Columbia buyers of most residential properties a rescission period, informally known as a "cooling-off" period, where buyers can change their minds within a prescribed period and cancel a contract of purchase and sale for a residential property with few consequences. This period will protect buyers from the pressures that come with high-risk purchases and will allow time to receive feedback on home inspections, legal advice, and funding confirmation, similar to the cooling off periods already in place for pre-construction sales.
The Act and its regulations establish a buyer's right to rescind or cancel a contract of purchase and sale for residential real property within a three-business day period after final acceptance (starting on the next business day after an offer is accepted and excludes Saturdays, Sundays, and holidays in BC). If a buyer chooses to invoke their right of rescission within the rescission period, the buyer must pay to the seller 0.25% of the purchase price in compensation ($2,500 on a $1M purchase), meaning the right to rescind exists but comes with a fee. There is also a requirement that the buyer serve a written notice to the seller within this period if they seek to rescind the contract.
The BCFSA's mandatory cooling-off period is expected to be in effect as of January 3, 2023. It applies to "residential real property" which excludes:
- residential real property that is located on leased land
- 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
Canada's Foreign Buyer Ban
Starting January 1 2023, non-Canadians will be banned from buying homes across Canada, through the Prohibition on the Purchase of Residential Property by Non-Canadians Act. This Act prohibits non-citizens and non-permanent residents from purchasing residential property in Canada for two years.
The Act also restricts non-Canadians from avoiding the ban by using corporations or other entities to purchase residential property. Both the non-Canadian purchaser of prohibited property and any person or entity that knowingly assists in the purchase can be fined up to $10,000 and the property may be forced to be sold.
At this point, there is still a lot we do not know about the Act because details have not been announced through regulation. There may be exemptions for certain groups of people, types of residential property, and special circumstances, but these have not yet been established. The final regulations are intended to be published soon.
Canada's Anti-Flipping Tax Rules
The government of Canada's proposed anti-flipping rules are expected to come into force January 1, 2023 and are designed to reduce speculative demand in the market place and help to cool excessive price growth. The new tax law will disallow the use of the principal residence exemption to shelter the capital gain realized on the sale of your home if you've owned it for less than 12 months, allowing for certain exemptions such as death, disability, separation, and work relocation. Instead, the gain will be 100 per cent taxable as business income.
Not: This article is only intended to offer general information and does not cover every possible legal remedy or right. These materials should not be taken as legal advice or opinion due to the fact that laws may change over time and should be interpreted in the context of particular circumstances. For any specific advice, readers should consult a legal professional.