You have a new client with a rental property they are looking to sell. What do you do at this stage?
In our previous article “BC Tenancy Act: What Landlords Should Know Before Selling The House” we looked at the Do’s and Don’ts of maintaining a good relationship with the tenant during this process.
Let’s look at maintaining a good relationship with the owner as well!
HERE ARE THE BASICS:
- You can’t evict a tenant to sell a property
- tenancy laws overrule the real estate contract (when it comes to vacant possession)
- follow proper protocols for providing notice for showings
- be aware of the proper notice required for eviction (and notice required by buyer, notice to evict tenant form)
start off on the right foot with the tenant
When is the best time to tell the tenant the home is being sold?
- Best practice is to tell them up front so there are no surprises – like a for sale sign suddenly goes up or strangers start wandering the property
- Have clear communication on what each party will do to respect everyone’s privacy, access and showings
- Ask the tenants: is there anything that needs to be fixed up? This is a good time to see if landscaping, painting or any repairs could be done are addressed
- Remember: this is going to be stressful on the tenant too but you can minimize it!
TYPES OF TENANCY AGREEMENTS
When it comes to a BC tenancy agreement, here are the two most common types:
Month to Month Tenancy:
- The buyer and seller are required to give two months notice to end tenancy if it’s a month to month tenancy and the buyer plans to live in the property.
- A written notice is required.
- The landlord must serve the Two Month Notice to End Tenancy so that it’s received:
- At least two months before the effective date of the notice, and
- Before the day that rent is due
Fixed Tenancy Agreements:
- This type of tenancy is in the form of a lease
- the new buyers of the property cannot move in until the lease expires, unless otherwise mutually agreed to by both parties.
- The new buyer will have no power over to whether or not the tenancy will end early
sHOWING A PROPERTY
The tenant has a legal right to peace and quiet while the tenancy continues. The landlord or their agent must provide written notice to the tenant or have their permission to enter and show the unit to prospective buyers or to conduct an open house.
The notice must provide the:
- Reason for entering the rental unit
- Date and time of entry – which must be between 8 a.m. and 9 p.m., unless the tenant agrees to another time
- Ideally, a tenant and landlord can agree in writing on a schedule for viewing times. If not, the landlord must give the tenant 24 hours written notice of each showing of the unit (these showings may be on the same day or on a reasonable number of other days).
When the landlord has given proper notice, they can show the rental unit even if the tenant isn’t home.
During showings of the rental unit, the landlord or the landlord’s agent is required to ensure the safety of the tenant’s possessions.
A standard showing of a rental unit requires the landlord or the landlord’s agent (Ex. a Realtor) to accompany any prospective purchaser. With open houses, multiple prospective purchasers or agents may attend the property at the same time with varying levels of direct supervision by the landlord’s agent. Landlords should be aware of the tenants’ right to quiet enjoyment and avoid holding multiple open houses in a short period of time as these have the potential to be disruptive.
TENANT RIGHTS AND RESPONSIBILITIES
When the landlord has given proper notice to enter the rental unit, the tenant must not prevent the landlord’s access (or access by the landlord’s agent).
The tenant, or a representative of the tenant, may be present at the time the rental unit is entered. The landlord cannot require that a tenant leave when the rental unit is shown. Tenants who are concerned about their possessions may be present.
When a rental unit is being shown to prospective buyers or prospective tenants, the landlord or the landlord’s agent must be present.
Can a tenant refuse entry that’s unreasonable or unlawful?
Unreasonable entry could be all-day showings every Saturday for several weeks. Unlawful entry could be where the landlord or the landlord’s agent has not provided proper notice of entry.
If a tenant unreasonably refuses access to show the unit or provides misleading or inaccurate information to prospective buyers, the landlord could:
- Discuss the situation with the tenant
- Invite them to contact the Residential Tenancy Branch
- Serve a One Month Notice to End Tenancy for Cause
It’s SOLD! Now what?
Once a property is sold, the buyer becomes the new landlord and the tenancy continues under the same terms. The buyer and the tenants don’t need to sign a new tenancy agreement, but may do so if they both agree.
The buyer must serve notice to end the tenancy in good faith if they plan to occupy the unit or use it for other purposes – the tenant has 15 days to dispute that notice
How to give legal notice
Sudden tenancy eviction notices can happen but in BC you can not just randomly evict a tenant, you have to serve proper legal notice.
EXAMPLE: if rent is due on the 1st of every month and you receive a firm deal on March 15:
- You would give notice prior to September 1st.
- If the tenant as acknowledges it received by August 31st then the two months notice is now effective September 1st.
- The entirety of September & October would constitute as two months notice.
- The buyer could move in as of November 1st.
**Keep in mind any holidays when serving notice**
What if the buyer is doing demolition, renovation, repairs or a conversion?
“Renoviction” is a term used in British Columbia to describe an eviction that is carried out to renovate or repair a rental unit.
Effective July 1, 2021, under new legislation, if a landlord wants to end a tenancy for extensive renovations or repairs, they need to apply for an Order of Possession from the Residential Tenancy Branch.
- Four months notice is required
- Learn more about the new legislation
When serving a Two Month Notice to End Tenancy or a Four Month Notice to End Tenancy, the landlord must compensate the tenant with an amount equal to one month’s rent – paid on or before the effective date of the notice period. Compensation is owed even if the tenant gives notice to leave earlier. The tenant may choose to not pay rent in the last month of the tenancy instead of taking a payment from the landlord.
Security and Pet Damage Deposits
When a tenant moves out, the person who owns the property at the time is responsible for the tenant’s security deposit or pet deposit. This may make the buyer responsible for a tenant’s security deposit or pet damage deposit, even though the deposits were held in trust by the seller. The buyer and seller may wish to address the transfer of deposits in trust in their contract of sale or the closing settlement.
If the tenant owes money to the seller, it’s important that the parties to the sale – the buyer and seller – address these debts clearly in the contract of sale and purchase. Landlords should seek independent legal advice if they’re unsure how to do this.
What if the buyer wants to move in? What kind of paperwork is required?
- Does the Buyer want the home to be vacant at the time of possession?
- on the contract of purchase and sale in the “possession” section of the contract they would add ‘vacant’ in addition to their move in date and time.
- the buyer must serve written notice to the tenants that they are moving in, which would be provided by the buyer’s agent to the buyer to sign off on and then deliver to the seller’s agent.
What if the Buyer wants to take over the tenancy instead?
- Yes, absolutely the buyer can take over the tenancy!
- the new buyer can arrange a new agreement to be drafted with or without amendments to the terms and conditions already stipulated.
- if the buyer takes title of the property later than the 1st of the month, the rent for that month is typically adjusted and split between the buyer and the seller.
- the security deposit originally collected is typically credited to the buyer upon completion.
Final Tips & Suggestions
- Do not break any tenancy laws
- give tenants lots of advanced notice on your plans with selling
- if looking for vacant property incentivise the tenant to sign a mutual agreement to end tenancy by offering free rent or financial compensation
- work around the tenants schedule for showings – not the other way around, you need cooperation!