BC Real Estate Association and Canadian Mortgage Brokers Association – BC Identify Significant Issues with Changes to Residential Tenancy Act
July 25 2024 - 10:11AM
The BC Real Estate Association (BCREA) and the Canadian Mortgage
Brokers Association – British Columbia (CMBA-BC) are calling upon
the BC Government to amend and refine recent changes to the
Residential Tenancy Act (RTA). Both organizations published open
letters outlining concern around unintended consequences and the
high potential the changes will negatively impact homebuyers,
rental-property owners, and tenants in the province.
Changes laid out in Bill 14, which amends the RTA and is
intended to protect residential tenants from tenancies terminated
in bad faith, came into effect on July 18, 2024. However, in their
letters to government, BCREA and CMBA-BC noted a number of concerns
and points of confusion that will create difficulties when using
the rules in real-life transactions.
BCREA noted the following concerns, among others, in its letter
to government:
- The new requirement of providing four months' notice – instead
of the previous two months' notice – for evictions due to personal
or caretaker use is posing a major hurdle. While this is a problem
for all buyers, it's particularly problematic for high-ratio
buyers, including first-time buyers, who generally need mortgage
default insurance to secure their financing.
- The new legislation makes no distinction between a buyer of a
tenanted unit who just wants to move into their new home and a
landlord who might be using a bad-faith eviction as a tool to raise
rents beyond the allowable limit.
- Combining a four-month eviction notice with a 30-day dispute
notice produces an effective five-month period in which a buyer
can't take possession of their new home. This is impractical for
buyers moving from one home to another and is too long a period to
wait between completions.
- Without default mortgage insurance, lenders require a minimum
down payment of 20 per cent for rental properties. First-time
buyers typically do not have the financial capacity for such a
significant down payment. Furthermore, a default-insured mortgage
holder must receive vacant possession to qualify for a
default-insured mortgage and cannot close on a purchase where the
former tenant has not vacated the home.
- A home must be owner-occupied to be eligible for homeowner
insurance and also for mortgage insurance from Canada’s largest
providers of mortgage insurance, including CMHC.
- Using a new web portal, landlords will be required to provide
personal and confidential details about the persons moving into the
home, which will then be shared with the tenant. This new
requirement is raising serious implications for the privacy and
security of owners.
For its part, CMBA-BC pinpointed several other concerns,
including:
- Mortgage Approvals Timeline: The four-month
notice period creates a misalignment with the typical 90 to 120-day
rate hold period for mortgage approvals. Buyers, especially those
with less than 20 per cent down payment, may face significant
challenges in coordinating the vacancy of the property with their
mortgage approval timeline, potentially leading to funding denials
or increased costs for buyers. These changes will impact first-time
homebuyers the most as these are the most typical buyers of
previous rental properties.
- Increased Financing Risks: Buyers may be
forced to remove financing conditions from their offers without a
guaranteed mortgage approval due to the extended notice period.
This leaves them vulnerable to interest rate fluctuations and other
factors that could impact their ability to qualify for the
mortgage, heightening their financial risk.
- Legal and Liability Concerns: The new timeline
could increase the risk of purchase contract cancellations, as
buyers may struggle to secure financing within the extended period.
This could lead to legal disputes or lawsuits, adding stress and
financial risk for all parties involved.
In light of these and other concerns, the two organizations have
offered the following recommendations to government:
- Adjust the notice rules for conventional mortgage buyers to
allow for vacant possession within no longer than a three-month
time period.
- Allow high ratio insured buyers (including first-time buyers)
who will be occupying the property to continue to have a two-month
notice period because of the financial hardship caused by a longer
delay in them taking possession of their property, and the
likelihood of them running afoul of financing restrictions.
- Require that the privacy of new buyers be protected. Use
existing, publicly accessible systems as the source of information
on new buyers to be reported by landlords to former tenants.
Contracts of Purchase and Sale are confidential documents and
should not be shared with tenants. A standard Statutory Declaration
form should be developed to carry out any necessary
disclosures.
- Eliminate the reporting requirement for buyers who intend to
occupy their own unit. The buyer’s intent could be documented by
use of a Statutory Declaration or as part of the Property Transfer
Tax return process. An early sale of the unit could be tracked
through the Land Titles or BC Assessment systems.
BCREA also reiterated its past call for the BC Government to
create a permanent housing roundtable comprised of housing policy
experts and other representatives from organizations across the
housing sector in BC. Such a group, the association said, would be
able to provide early advice to government in the creation of new
or updated housing policy, such as changes to the RTA.
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Quotes:
Trevor Hargreaves, Senior Vice President of Government
Relations, Marketing & Communications, BCREA –“We
appreciate the efforts to protect tenants from bad-faith evictions
and the need to provide more rental supply, but are concerned the
policy changes appear to have been crafted without adequate
consultation with related sectors in terms of the multitude of
related issues they will cause. These changes are inadvertently
making it more difficult for all buyers, but especially first-time
buyers, many of whom are currently tenants, to enter the housing
market.”
Rebecca Casey, President, CMBA-BC –“The
Canadian Mortgage Brokers Association of British Columbia firmly
believes that the amendments to the Residential Tenancy Act will
exacerbate housing unaffordability and availability of rental units
in our province by hindering purchase transactions for buyers with
less than 20 per cent down payments, narrowing the eligibility of
purchasers for properties that are currently tenanted. We
appreciate the BC Ministry of Housing's commitment to addressing
housing challenges and protecting tenants' rights. However, while
we await accommodations or changes to the Act, we are concerned
that these amendments will worsen these issues rather than
alleviate them, potentially compromising the stability and
affordability for current and prospective tenants and home
purchasers.”
Learn More:
To read BCREA's full open letter to the BC Government, click
here.To read CMBA-BC's full open letter to the BC Government, click
here.
About BCREABCREA is the provincial association
for BC REALTORS®. As a champion for the real estate sector, BCREA
advances REALTOR® professionalism and ensures the REALTOR® voice is
heard, for the benefit of consumers and communities, across BC. By
working in collaboration with the province's real estate boards and
associations, our mission is to provide professional development
opportunities, advocacy, economic and policy research, and standard
forms so REALTORS® are trusted, respected, and proud of their
profession.
About CMBA-BCAs the voice for BC's mortgage
brokers, the Canadian Mortgage Brokers Association – British
Columbia (CMBA-BC) represents the province’s mortgage industry.
Incorporated in 1990, the Association exists to support and enhance
professionalism and ethical standards within the mortgage industry.
Our members support housing affordability measures and CMBA-BC is
committed to working with government and financial regulators to
create mortgage and housing policies with solutions to help more
British Columbians own homes.
- BCREA Letter to Government
- CMBA-BC Letter to Government
Craig Battle
British Columbia Real Estate Association
604.742.2790
cbattle@bcrea.bc.ca
Sajjid Lakhani
Canadian Mortgage Brokers Association – BC
778.387.4647
sajjid@impactcanada.com