Can You Back Out of a House Purchase in BC After Removing Subjects?

Cold feet, a job loss or a financing problem after subject removal leaves many buyers asking whether they can still walk away. In most cases there is no free exit, but there are often more options than buyers realise.

This guide explains where you stand once subjects are off, what you could owe the seller if you do not complete, and the steps to take before you say anything.

The short answer: once subjects are off, the deal is firm

Subject clauses, such as financing, inspection or the sale of your current home, are the agreed ways out of a BC purchase. Once you remove them, the contract is unconditional. A change of heart, a better house down the street, a job loss or a lender that changes its mind after approval does not, on its own, give you a legal right to cancel.

That does not mean you have no options. It means the options are commercial rather than automatic: you fix the problem, negotiate with the seller, or understand exactly what walking away will cost before you decide.

Check the three-day rescission right first

Since January 3, 2023, section 42 of the Property Law Act has given buyers of most residential property a right to rescind the contract by written notice served on the seller. Under the Home Buyer Rescission Period Regulation, the period is three business days after the date the acceptance of the offer was signed, and the buyer must pay the seller 0.25% of the purchase price, normally from the deposit. The right cannot be waived.

The clock runs from acceptance, not from subject removal. If your subjects came off quickly, the rescission period may still be open, so check the dates before anything else. The right does not apply to property on leased land, leasehold interests, auction sales, court-ordered sales or pre-sale purchases covered by the Real Estate Development Marketing Act, which has its own rules. The notice must contain specific information and be served in a permitted way, so have it prepared carefully.

What walking away can cost

If you are past the rescission period and do not complete, you are likely in breach of the contract. The usual consequences are:

• Losing the deposit. In Tang v. Zhang, 2013 BCCA 52, the Court of Appeal held that a true deposit is generally forfeited when a buyer fails to complete, without the seller having to prove a loss, and that the standard wording applies the deposit against any damages. In Argo Ventures Inc. v. Choi, 2020 BCCA 17, a buyer who never paid the deposit was still ordered to pay an amount equal to it.
• Damages beyond the deposit. If the seller resells for less, the seller can claim the difference between your contract price and the resale price, less the deposit, subject to the seller's duty to take reasonable steps to limit the loss. Whether other losses, such as carrying costs, are recoverable depends on the facts.
• Legal costs. A lawsuit adds the cost of defending it, and a court can order you to pay part of the seller's costs.

Example only: you agree to buy for $1,000,000 with a $50,000 deposit and do not complete. The seller resells three months later for $930,000. The seller keeps the deposit and may sue you for the remaining $20,000 of the price difference, plus any other losses a court accepts. In a falling market, the gap can be much larger than the deposit.

Your options before completion day

• Get advice before you tell the seller anything. Telling the seller, or your realtor, that you will not complete can let the seller treat the contract as ended and start claiming damages straight away. A lawyer can help you work out what to say, and when.
• Try to rescue the purchase. If financing is the problem, ask the lender exactly why, and talk to a mortgage broker about other lenders or a different structure. Help from family, or a co-borrower, may close the gap.
• Negotiate a later completion date. A seller may agree to extend in exchange for an additional deposit or other terms. Any change must be in a written amendment signed by both sides.
• Negotiate a mutual release. Some sellers would rather keep part or all of the deposit and relist than litigate. A release should state clearly who gets the deposit and that neither side has further claims.
• Assignment. If the contract permits it, you may be able to assign it to another buyer. Many contracts require the seller's written consent, and an assignment can have tax consequences.
• Complete and sell. Sometimes completing and then selling costs less than defaulting. Before choosing that route, factor in closing costs, sale costs and BC's home flipping tax.

What not to do

• Do not go silent and let completion day pass. BC contracts usually make time of the essence, so missing the date can give the seller the right to end the deal and pursue you.
• Do not assume the deposit is the most you can lose.
• Do not sign a release prepared by the seller's side without having it reviewed.
• Do not stop paying a deposit instalment that is due. As the Argo case shows, an unpaid deposit can still be claimed.

If the deal has already fallen through

Once completion has failed, the questions change: who was in breach, who gets the deposit held in trust, and whether a damages claim follows. Our article on buyer and seller remedies when a BC real estate deal collapses covers that stage, including the deadlines to act.

Thinking of backing out? Talk to us before you tell the seller

Our real estate lawyers can review your contract and dates, check whether the rescission right is still open, explain your exposure, and negotiate an extension, release or assignment with the seller's side.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.