Selling Tenanted Properties
DISCLAIMER: While the following information is deemed to be correct, rules and rates change frequently so Buyers and Sellers must consult a professional accountant and lawyer for up to date information and should not base their decisions on this material.
Selling tenanted properties can be complex and difficult. It's something best left to an experienced realtor who has undertaken specific education on this topic and who has experience in this area. Shaun is a condo specialists who has undertaken special education and who deals with the sale of tenanted properties regularly.
Info Regarding the Residential Tenancy Act
The Residential Tenancy Branch is a good place to find information regarding tenancy issues. The Residential Tenancy Act is a robust piece of legislation that empowers tenants with significant recourse. It behooves landlords to know their rights and to employ a competant Realtor to handle the sale of their tenanted property.
A few things to consider for Landlords
**We strongly recommend that landlords consult their lawyer and accountant for more information on tenancies and their tax implications.
- Tenants can negatively affect the sale price of your property if your they are untidy and/or uncooperative.
- You can only give notice to tenants for specific reasons and a sale to someone wanting to occupy the property is one of them. See Section 49 of the Residential Tenancy Act for details.
- You can not give notice to a tenant prior to the end of a fixed period tenancy so if you are part way through a one year lease, you can sell the property with the tenancy intact or you should wait until closer to the end of the tenancy so you can provide vacant posesseion to a buyer.
- It is possible to sell a property as a turn-key investment (with the tenancy) if the rental rate is attractive to investors, so it is important to maximize your rental rates. See the following link for info on Rent Increases.
- You must remit a tax return for any rental income you generate from your rental property. If you are a non-resident, this is accomplished by filing a section 216 tax return.
- The best way for non-residents to manage the complexities of Canadian tenancies is to hire a reputable Rental Management Agency. Please see our Rental Management page for a list of local management agencies.
The Process of Selling a Tenant Occupied Property and Ending a Tenancy
- The property is listed as normally would be done with a vacant property
- Landlord informs the tenant that the property has been listed and advises the tenant that they'll hear from the listing Realtor.
- The listing Realtor arranges a meeting with the tenant to speak with the tenant about the process. It's crucial that this step is handled delicately. If it isn't, it can make for a very challenging scenario.
- The property is shown to prospective buyers and their realtors inkeeping with the requirements of the Residential Tenancy Act as it relates to a landlord's right to enter a tenanted unit.
- When an offer is received it is negotiated with posession dates in mind that reflect the requirements for giving the tenant Notice to End Tenancy within the constraints of the Residential Tenancy Act. Standard notice for a month-to-month tenancy requires 2 months starting at the end of the current month. For example: Notice given Sept 15th would be for a termination as of Nov 30th and a vacant posession for a buyer of December 1st.
- Notice to end a tenancy can not be served to the tenant, in the case of a sale, prior to the Landlord/Owner receiving a firm offer to purchase the property and a written request from the Buyer stating that the Buyer intends to occupy the property and is therefore requesting that the Landlord provide written notice to the tenant thereby ending the tenancy in time for possession date. **Note Once notice has been served to the tenant, the Landlord is legally required to provide a cheque in the amoutn of 1 month's rent, to the tenant on the last day of the tenancy. **Note
- Once the tenancy has been terminated, the Landlord returns the tenant's security deposit (assuming no damage) and must then deliver to the tenant a cheque in the amount of 1 month's rent.
- The listing Realtor should coordinate the gathering of all keys and entry FOBs for the unit prior to possession and should be available to monitor a timely departure by the tenant on behalf of the Landlord.
- The listing Realtor then coordinates the handover of the property to the Buyer as usual.
Key points to remember
- Notice to end tenancy must be drafted on a prescribed form.
- You cannot legally give notice to end a tenacy, in the case of a sale, prior to receving a firm offer to purchase your property and a written request to do so from a Buyer who intends to occupy the property.
- Standard notice is 2 months beginning at the end of the current month
- Once notice is served, in the case of a sale, the Landlord owes the tenant 1 month's notice on the last day of the tenancy.
- Once you serve the 2 moth's notice, the tenant can provide 10 days notice in return and leave. In this case, the Landlord is still owes the tenant 1 month's notice on the last day of the tenancy.
- If the tenant serves the Landlord 10 days notice, after receiving a Notice to End Tenancy from the Landlord, the Landlord risks vacancy and loss of income from that date until the date of the possession agreed to in the Contract of Purchase and Sale.