Tenants Have Rights! How Not To Sell a Rental Property

Toronto rental agreement

It takes a little planning, but why would someone selling their rental property box themselves into a corner.

Recently I had a friend of mine tell me that the house he and his family were renting was being put up for sale.  They had a heads up from the owner as for the previous 6 months she had been working to get the  house ready for an busy spring housing market.   With all this time preparing the house , so as to maximize the potential selling price, the seller and their realtor gave absolutely no thought to the legal rights of the existing tenants.

Yes, tenants have defined rights as outlined in the Residential Tenancies Act, 2006.  If you presently own a rental property, thinking about buying a rental property or a Realtor working on buying or selling a rental property this is required reading.  I mean read it!  This is the law.  So relying on:

  • what I think
  • what I’ve heard
  • I read it in a newspaper
  • I talked to my brother-in-law who knew a guy who rented his place once

You wouldn’t tell your teenager not to bother reading the Driver’s Handbook before heading out on the highway and the same goes with the Residential Tenancies Act, 2006.  For those who decide to venture out either uniformed or ignorant of the rules then be prepared for whatever fate is yours to come.

Back to the sale of the house.  After 6 months of getting the house ready, the owner informs the tenant that on May 15th the house is going on the market.

The house is a detached bungalow and in this buyer’s market it attracts 6 offers is sold $55,000 over asking with no conditions in 4 days.  However, there is one wrinkle the buyer wants possession in 45 days and remember they have tenants.

The seller is ecstatic about the great sale and then approaches the tenants to inform them that they have to leave on July 1st.    Then tenants, knowing their rights, say “you have to give us 60 days notice therefore the earliest we have to leave is August 1st”.

You would think that the seller and their agent in the months leading up to this sale that it might just  be a good idea to give notice to the tenants.  But now they have a big problem.   If the house is not vacant on May 1st the  new owners would certainly taking the seller to court, as they should for being an idiot.

So the tenant said they would agree to leave on May 1st, however they wanted to be reimbursed for two months rent…about $4,000…it should be known that one of tenants is a lawyer.  After some negotiations they were able to reach an agreement for $3,000 for their early departure.   But if you think about, this whole silly situation could have been dealt with a some forethought.

The first thing the seller and their agent should have done is give their tenants notice, since they are no longer tied to the lease by giving them 60 days notice you get them out.  Then what you have is now that it is listed you don’t have to be concerned with:

  1. Giving 24 hours notice for showings
  2. Worried about what the tenants might say about the property to buyers
  3. Having to show with the tenants crappy  furniture…you can not stage it
  4. You are not tied to any possession date so you can accept the best deal for you

What If The Tenant Still Has a Lease?

Two years ago one of my clients needed to sell her investment property so as to purchase an inn in Southwestern Ontario.  She need to sell quickly and needed the cash so as to close the deal, but the tenants had 4 months remaining on their lease.  The solution was easy.  We offered the tenants one free month’s rent on the condition that they vacate the house within 30 days…and they took the deal.  With the house now vacant we were able to:

  1. paint,
  2. fix a couple of things
  3. show the house anytime we wanted
  4. did have to worry about what the tenants might say to potential buyers
  5. be open to whatever the best deal was

 

In the end we did sell the house for about $30,000 than we expected and with fewer headaches.   All due to a little foresight and getting the tenants out.