Tag Archive for: Property Law

Can I Get Out of a Contract in BC?

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Can I Get Out of a Contract? Cooling-Off Periods and Contract Basics in BC

You’ve entered into an agreement with another party, and now you would like to back out of the contract. What are your options? This article will provide an overview of contract law in BC, including the general rule when it comes to trying to get out of a contract, when there are specified windows for cancelling a contract after signing, and how to get out of a contract when there is no specified window to do so.

The General Rule 

In Canada, the general rule is that once you sign a contract, you’re bound by the terms of that agreement. You cannot back out of the contract once it has been signed and becomes binding, regardless of whether you no longer wish to be a part of the agreement. Unless you can get out of the contract by relying on the terms of the contract itself or a statutory right to cancel the contract, you are liable to preform your obligations under it. There is no universal right to cancel a contract within a specified period after the contract has been signed. However, there are specific instances in which a “cooling-off period” may exist, which entitles a party to cancel the contract within a certain amount of time after it has been signed.

Where cooling-off periods DO exist in BC

A cooling-off period exists in real estate law. Under s.42 of the Property Law Act, BC has a 3-business-day Home Buyer Rescission Period, which was introduced in 2023. Meaning, a purchaser of residential property can cancel the contract of purchase and sale for the property by serving written notice on the seller within 3 business days after the date that the acceptance of the offer was signed. This cooling-off period does not apply to property that is located on leased land, a leasehold interest in residential property, property that is sold at auction, and property that is sold under a court order or the supervision of a court. If a purchaser cancels a contract of purchase and sale, they must pay 0.25% of the purchase price set out in the contract to the seller.

Direct sales (such as door-to-door sales) contracts and distance sales (such as online shopping) contracts also have a cooling-off period. Under BC’s Business Practices and Consumer Protection Act (the “BPCPA”), a consumer can cancel a direct sales contract by giving notice of cancellation to the supplier within 10 days of receiving a copy of the contract. A consumer can cancel a distance sales contract by giving notice of cancellation to the supplier within 7 days after they receive a copy of the contract, if the sales contract does not contain all of the necessary information, the supplier does not give the consumer the opportunity to correct errors in the contract, or the supplier does not give the consumer the opportunity to accept or decline the contract. A consumer has 30 days to cancel the contract, if the supplier does not provide the consumer with a copy of the contract.

Timeshares and continuing services (such as a gym membership) contracts also have specific cancellation rights under the BPCPA. Consumers can cancel time share contracts and continuing services contracts by giving notice of cancellation to the supplier within 10 days of receiving a copy of the contract. A consumer can cancel a time share contract within one year after the date that the consumer receives a copy of the contract, if the contract does not contain the information required under the BPCPA. A consumer can cancel a continuing services contract at any time if there has been a material change in the circumstances of the consumer or the services provided by the supplier.

Contracts with NO cooling-off period

Contracts which are not included as having a cooling-off period under the BPCPA, do not have a window designated by legislation for parties to cancel the contract. Common types of contracts which are not mentioned in the BPCPA include most retail purchases and service agreements. However, even if a contract does not have a cooling-off period, there may still be a way to back out of it.

Grounds to get out of a contract that has no cooling-off right 

Even if there is no cooling-off period, you may be able to get out of a contract if the other party has made a misrepresentation. A misrepresentation is a statement that a party to the contract represents as a fact but is untrue and misleading. If you have relied on a misrepresentation by the other party, you may be entitled to a remedy, potentially including the cancellation of the contract.

Another reason a contract may be cancelled is on the grounds of unconscionability. Under the BPCPA, if an unconscionable act or practice has occurred, that transaction is not binding on the consumer. An unconscionable act can happen before, during, or after the consumer transaction. A court will look at all the circumstances the supplier knew or ought to have known about. This includes whether the supplier subjected the consumer to undue pressure to enter into the transaction or if the supplier took advantage of the consumer’s inability or incapacity to reasonably protect their own interest.

There are also specific contract terms which are prohibited under the BPCPA, such as terms which prevent consumers from posting reviews online. The inclusion of one of these terms would void the contract. Frustration of the contract may also void the contract. Frustration is where circumstances the contract did not anticipate occur and carrying out the contract as it was intended is no longer possible. It should be noted that financial hardship or the inability to make payments under the contract are not sufficient to engage frustration.

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The Speculation and Vacancy Tax Act

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The Speculation and Vacancy Tax Act

The Speculation and Vacancy Tax Act (the “Act”) was enacted by the British Columbia provincial government on November 27, 2018. The purpose of the Act is to combat speculation in the residential housing market and turn empty houses into homes for BC residents.

General Information about the Act

Unless exempted, all owners of residential property in designated regions must pay the speculation and vacancy tax (the “Speculation Tax”). The designated regions include most of the Capital Regional District and Metro Vancouver, the Cities of Abbotsford, Chilliwack, Kelowna, West Kelowna, and Nanaimo, as well as the Districts of Mission, and Lantzville.
Every owner of a residential property on December 31 in those regions must make a declaration by March 31 of the following year, even if the owner no longer owns the property.

The Speculation Tax is calculated as follows:
Tax payable = (tax rate) x (owner’s interest) x (assessed value of the property)

For 2018, the tax rate for all owners is 0.5%. For the 2019 calendar year and beyond, the tax rate will be 0.5% for Canadian citizens and permanent residents who are not members of Satellite Families (defined below). Foreign owners and members of Satellite Families will be charged a tax rate of 2%. “Satellite Families” are households who declare less than 50% of their total income for the year on Canadian income tax returns.

Owners who owe taxes must pay by July 2 of the year following the assessed year. For the 2018 calendar year, the Speculation Tax must be paid by July 2, 2019. Failure to pay on time may result in interest and penalties.

Exemptions
If an owner qualifies for one of the following exemptions, they will not have to pay the Speculation Tax. However, failure to declare will result in being assessed at the highest tax rate (2%), even if the owner would have otherwise been exempt. Below is a list of some, but not all, of the exemptions under the Act.

1. Principal Residence
Owners are exempt if the residential property is their principal residence. If owners own multiple properties, they can only claim this exemption for the place they lived the longest in. Spouses cannot claim two different places unless there is a specific reason, such as work, medical leave, or divorce. Foreign owners and members of a Satellite Family cannot claim this exemption. If the owners do not live in the residence for the necessary time, they may still be able to claim the exemption if they were absent for certain reasons, such as medical leave or residential care.

2. Tenants
If the property is occupied by a tenant for periods of at least 30 days and for a total of 6 months (3 months for 2018), the owner can claim an exemption. There must be a written tenancy agreement, unless the tenant has a non-arm’s length relationship with the owner (e.g. close friend of family member).

3. Under Construction or Renovation
If the property is uninhabitable for a period of at least 90 days due to construction or renovations, the owner may be able to claim this exemption. The owner must demonstrate that they have taken reasonable steps to ensure that the building activity continues without undue delay, or that any undue delay was beyond their control.

Other Information
The Speculation Tax is completely separate from an owner’s other taxes, including income tax, property tax, and the Vancouver Empty Homes Tax.

The Speculation Tax attaches to the owner, not the property. This means that a new buyer does not have to worry about hidden liability when they buy a house and that the seller may be liable to pay the Speculation Tax even after they sell a house.

Owners may be able to claim tax credits against any Speculation Tax assessed. BC residents who are not members of a Satellite Family get tax credits of $2,000 per property and per person, which means that the first $400,000 of a property will usually be tax free.

If you have any questions about how the Speculation and Vacancy Tax Act may apply to you, please contact Heath Law LLP at 250-753-2202 or toll free: 1-866-753-2202.

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