As a result of the latest changes to the Ontario Residential Tenancies Act, you need to have the right strategy when selling a home occupied by a tenant.
Here are 5 things you need to know:
- First review any lease
You cannot terminate a tenancy until the end of the lease. So if the tenant lease extends for another 6 months, they cannot be evicted before the lease ends. In addition, check to make sure the tenant does not have the right to renew the lease for an extra year. If so, then they cannot be evicted until the end of their renewal period.
2. You cannot evict just because you want to sell your home
Even if the lease has ended, you cannot evict a tenant just because you want to list the home for sale. This means that you first have to sign a buyer to an agreement BEFORE you can send the eviction notice to the tenant. This also means no home staging without the tenant agreement.
3. Once agreement signed, you need to give the tenant 60 days’ notice
Once the Buyer signs the offer, then you have to give the tenant the 60 days’ notice using form N12, You should schedule your closing date to match the notice date or to occur shortly after this date to insure you can deliver vacant possession on closing. A penalty of $25,000 could be payable if the buyer or their family do not stay in the property for at least 12 months after closing. As such, the following clause, contained in my Ontario Guide for Landlords, should be considered:
- “The buyer agrees that they or their immediate family intends to move into the property on closing. In this regard, the seller agrees to provide the applicable 60 days’ notice to the tenant using Form N12 under the Residential Tenancies Act, on behalf of the buyer. The buyer agrees to provide whatever support information may be required to demonstrate that the buyer or their immediate family will in good faith be moving into the property on closing and to indemnify the seller for any damages the seller suffers if the buyer does not remain in the property for at least one year after closing. In the event that the tenant disputes the notice as given, then the parties agree to extend the closing of this transaction to a period not more than 30 days, in order to effect the eviction of the tenant.”
4. Monitor the situation carefully
It is extremely important to monitor the situation if you are trying to evict a tenant before closing.
In a transaction I completed on October 2, 2017, the agreement was signed in July and the tenant was on a monthly tenancy. Notice was given by the seller/landlord for the tenant to leave on September 30, 2017, as required. However, the tenant indicated that they intended to challenge the notice. As such we arranged for a hearing before the Landlord and Tenant Board in late August, at which time the buyer attended as well and convinced the adjudicator that they in good faith intended to move in on October 2, 2017. The Adjudicator granted the eviction order for September 30, 2017 and with that order, the tenant moved out on that date and the deal was closed in time.
5. Practical advice
If possible, try and arrange a new place to live for the tenant before you even put the property up for sale. You will not have any issues with home staging, notices or providing vacant possession on closing.
It is important to understand all of your rights and responsibilities when selling a home occupied by a tenant when your buyer wants to move in on closing.
Written By: Mark Weisleder, LLP
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