FAQ: Buying or Selling Rental Properties

Real estate rental properties can be a great investment. Many homeowners have been able to pay off their mortgage a lot quicker by renting out a basement unit.

Not every rental situation has to be adversarial. There are numerous cases when the homeowner and tenant become life-long friends or a student will return to the same rental unit for the entire duration of their studies.

Knowing and understanding your rights and obligations as a landlord and as a tenant will go a long way to an easy transition when you are ready to sell or purchase a rental unit.

Selling a rental property

If you are planning to sell a home that has a rental property, a good course of action is to start by advising the tenant of your plans to see if an early accommodating arrangement can be made.

Landlords have been known to assist tenants in finding alternate living situations before putting the home up for sale. This is probably the ideal solution and may require an incentive like a free month’s rent.

Without a tenant, the unit is freed up for improvements and making it presentable to potential buyers. It also allows the new home buyer the opportunity to engage with a tenant of their own choosing.

>>>> ASKING TENANTS TO VACATE:
There are property owners with rental units who think they can ask their tenant to vacate the rental unit as soon as the house is listed for sale.

This is false.

If a property is simply being listed for sale the landlord does not have the right to terminate a tenancy agreement. In fact, if the property is sold and the buyer does not require the premises for his or her occupation, or the occupation of an immediate family member as defined in the Residential Tenancies Act, the tenant has the right to remain in possession to the end of the lease.

Landlords cannot trick tenants into leaving either, pretending to move in so the tenant vacates and then immediately fixing the place up and renting it to another tenant. If that occurs, the tenant can sue which can include a claim for the tenant’s moving costs and higher rent paid elsewhere. The Ontario Landlord and Tenant Board may also add additional fines for breaking the law.

Timing the sale with the closing of the lease is probably the best solution, and follows the guidelines of  the Residential Tenancies Act of Ontario.

>>>>SHOWINGS:
The laws are pretty strict with regard to showings.

A tenant must allow access for buyers to look at the unit, as long as they are provided with 24 hours’ advance written notice, specifying the day and time of entry. The showings need to take place between 8AM and 8PM and the tenants can be on site.

If a tenant refuses to allow access for buyers after being given proper notice, the landlord can start eviction proceedings and potentially claim damages if the tenant’s actions prevent the landlord from selling the home in a timely manner.

Purchasing a Rental Property

Purchasing a rental property can be a great investment. But there are a few things to keep in mind.

If you are assuming a tenant as part of the purchase, be sure get all the details of the lease in advance, as you are obligated to honour all of the agreements.

>>>>HOW MUCH NOTICE IS REQUIRED?
The Residential Tenancies Act of Ontario stipulates that both the landlord and tenant must give at least 60-days notice in writing prior to the end of the termination date, which is the last day of the rental period. So, if your tenant pays rent on the first of each month, the termination date must be the last day of a month.

However, if the tenancy is for a fixed term, such as a lease the termination date is redefined as the last day of the fixed term. If you and your tenant signed a one-year lease, the termination date is the last day of the one-year period set out in the lease.

And note that email is not approved method of communication under the act..

>>>>HOW CAN I EVICT A BAD TENANT?
There are five ways you can evict a bad tenant:

• Non-payment/Late payment – By far, the most common cause of eviction is tenants being behind in their rent payments.
• Disturbing other tenants or the landlord, for example, with very loud parties late at night
• Damage – Causing “undue” damage, which is more than normal wear and tear
• Illegal – Doing something illegal on the property or in the unit, for example, dealing drugs
• Safety – Seriously risking the safety of other people in the building, for example

Do I recommend rental properties?

It’s successful for many, many homeowners. When both the landlord and tenants understand the rules of tenancy and co-operate, everyone wins.

Our team of real estate sales professionals is committed to finding you, your dream home. Whether you’re looking to buy or sell, the Karen Paul team is here to help with any questions.