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Selling or Buying a Property with Tenants: What you Need to Know
Having a tenant has many advantages: it can be a great way to create passive income, help offset mortgage payments, accelerate a mortgage paydown and help you qualify financially to purchase a property. However, when you decide to sell or buy a tenanted property, whether it’s a condo, basement suite, or a single-family house, there are some important facts about the process that you need to know.
Two Types of Residential Tenancies in BC
Fixed-Term Tenancy
A fixed-term tenancy agreement is one that specifies a specific start and end date for the tenancy, after which the tenancy ends unless the landlord and tenant agree to renew the agreement. This means that both the landlord and tenant are bound by the terms of the agreement for the entire duration of the fixed term, and the landlord cannot end the tenancy before the end date without cause. Similarly, the tenant is obligated to pay rent for the entire term, even if they choose to move out before the end of the tenancy. Landlords are not allowed to simply terminate a tenancy, raise the rent, or replace the tenant using a fixed-term tenancy agreement.
Month-to-month Tenancy
A month-to-month tenancy agreement is one that does not have a fixed end date. This tenancy agreement automatically renews at the end of each month, as long as both the landlord and tenant do not give legal notice to end the tenancy.
Rules on Giving Notice to a Tenant
If a tenant is on a month-to-month tenancy, the seller/landlord must give them two full months’ notice to end the tenancy and provide compensation equal to one month’s rent.
If a tenant is on a fixed-term tenancy and the buyer wants vacant possession at the end of the term, the Two Month Notice to End Tenancy can be served at the end of the 10th month of the term.
The Two Month Notice to End Tenancy form must be given to the tenant no later than 72 hours before the rent due date. This 72-hour timeframe will cover all methods of notice, including posting on the door of the rental unit and delivering it in person. It’s important to note that sellers cannot use the Two Month Notice to End Tenancy to end a fixed-term tenancy agreement.
Who gives notice?
When a property is sold, after all the conditions on which the sale depends on have been satisfied, the buyer is required to provide the seller and their agent with the Buyer’s Notice to Seller for Vacant Possession form. Once the seller receives a copy of the form, they can complete the Two Month Notice to End Tenancy form. The seller must then deliver both forms to the tenant to initiate the official legal notice. This process ensures that the tenant is aware of the upcoming end of the tenancy and has sufficient time to make arrangements to vacate the property.
The Buyer for the property can only initiate a Two Month Notice to End Tenancy notice for the following two reasons:
- Landlord’s Use of Property (Principal Residence)
- Landlord’s Immediate Family Member Use of Property (parents, spouses, and children only)
IMPORTANT TO REMEMBER
A tenant’s rights are protected and they do not have to move out because there is a change of ownership or the seller decides to sell.
A month-to-month tenant who receives a Notice to End Tenancy has the right to give the seller a 10-Day Notice which will result in a loss of rent until the date of completion.
BEST ADVICE
Sellers and their agents should be aware that the rental market is highly competitive, with high rental rates in comparison to average incomes. For tenants, the property being sold is/was their home and they may struggle to find another place to live, especially at a comparable rental rate. It’s important for sellers and their agents to approach this situation with sensitivity and empathy, and to communicate clearly with the tenant throughout the process. Leaving the task of breaking the news to the tenant solely to the realtor should be avoided.
A good realtor will meet with the tenant in person, be compassionate and understanding of their situation, and provide them with information and resources to help them find a new home. Be careful to respect the tenant’s schedule for showings and provide them with ample notice before any showings take place.
It is important to communicate to the tenant that the seller cannot guarantee that the new buyers will not provide notice for vacant possession. It is recommended to advise the tenant to start looking for a new rental as soon as possible, as this is the only way to ensure they have a secure place to live in case they need to move out.
