Real estate investing expands much further than just condos. Ontario investors often expand their portfolio by investing in single-family homes. Why? Because these investments are often considered less-risky, they can charge more for rent, and they appreciate in value much faster than other types of properties. This means that when it comes time to sell their single-family home, they'll be very pleased with their return on investment (ROI).However, things can get a little tricky when the home is a tenanted property. This begs the question: what rights do tenants have when the house is being sold?
Ontario landlord's rights when selling a tenanted property
To answer in short, yes it is acceptable and possible to sell a tenanted property in Ontario, but like most things, there is a right way and a wrong way to go about doing so. A landlord does, at any point, have the right to put their rental property up for sale, but the landlord must do one of the following:
- Send a written notice (Form N12 - Notice to End your Tenancy Because the Landlord, a Purchaser or a Family Member Requires the Rental Unit)
- Ask the Landlord and Tenant Board to evict them with Form L2 - Application to End a Tenancy and Evict a Tenant - and send the tenant a copy, as well as the date of the hearing with the Board
- Offer the tenant another acceptable rental property to move into
- Pay the tenant at least one month's rent
- Provide 24 hours' notice to tenants before showing any potential buyers the home
- Give tenants 60 days' notice from the first month that their tenancy will be ending
- Wait until the lease agreement is over in order to sell the home
- Attending every hearing with the Board
Ultimately, maintaining a good relationship with the tenants is one of the best things a landlord can do. It can definitely be awkward between tenants and the property owner when it comes to selling the property, but having a good or bad relationship can be what makes or breaks the process. By maintaining a good relationship, keeping the tenants up to date with what's going on with the sale, being honest with them, and even helping them find another rental property can really make all the difference in the world.
Ontario tenant's rights when their landlord is selling the property
Just as a landlord has their own rights, so do tenants. While the landlord may be able to sell their rental property, it must be in good faith and done according to the rules laid out by the Landlord and Tenant Board.
The tenant's rights include:
- The right to stay if their fixed-term lease agreement hasn't ended yet
- The right to stay if they believe the landlord is not selling the property so a family member can move in (aka, they're tricked into leaving which is also referred to as a bad-faith eviction)
- Signing a new lease agreement with the new property owners
- Attending hearings with the Board
- Send landlord ten days notice to let them know they are moving after receiving a notice for a few different reasons
- Being given a 30-day window to move out after the home is sold if the original lease states a lease termination due to sale clause
- Knowing they are not legally obligated to leave the property during showings (and also ensure their landlord gave them the proper 24 hours' notice
What is a "bad-faith eviction?"
This is a term used for landlords who give a tenant an N12 Form but who don't actually end up using the rental home like the form states.
Unfortunately, not every landlord follows the rules and in some cases, tenants are left having to scramble for answers. In the case of a bad-faith eviction, tenants should turn to the Landlord and Tenant Board and submit a T5 form and describe their situation. The Board will ask the tenant why they believe the landlord is acting out of bad faith in which the tenant can respond with evidence supporting the fact that the landlord's family member did not move in or has no intention of moving in, or that the landlord is not using the property themselves. If the landlords also evicts them just to put up another "for rent" ad with an increased rental price, tenants can sue as they were wrongfully evicted. The eviction or act of sending any notice must have a good reason and be backed by evidence on the landlord's part.
This is why it's always important for both tenants and landlords to always document any conversations between them and keep any receipts or proof of rent payments in case legal action needs to be taken. If a landlord is found guilty, they can be fined up to $25,000 and may also be ordered to pay the following:
- All or any portion of a rent increase for one year after they vacated the property
- Out-of-pocket moving costs
- Any other charges the Board decides
Can a tenant be evicted before their lease is up in Ontario?
Other than if landlords have a legal reason to terminate a lease agreement early, no, a tenant cannot be evicted in the middle of their fixed-term lease. If the landlord is selling the home, they must wait until the lease is over to close on the sale. The tenant can be negotiated with if the landlord would like a sooner closing date.
Once the lease is up, a tenant can be evicted, but they must be provided with 60 days' notice as mentioned above.
Tips on getting the most ROI on an investment property
It can be tough to sell a tenanted property, especially if tenants aren't cooperative or keep the home as clean as the landlord would like. That's why, when a landlord is selling the home they've been renting for investment purposes, they should consider the following the maximize their ROI:
- Working with an agent who actually specializes in selling a tenanted property, especially to lean on them for expert real estate advice. The more experience and knowledge they have on the matter, the better. They also know how to advertise to the right potential buyers.
- Making upgrades and renovations, like appliances, paint colour, flooring, the landscape, or even adding additions if necessary. If upgrades or renovations aren't something the landlord wants to do, they should at least make any necessary repairs.*
- Ensuring the market is stable and it's a good time to sell the property in the first place. While this is another good reason to work with an actual real estate professional, landlords should also know how to read the market and stay on top of investing or selling trends in their area.
- Consider the location of the rental property and even look at homes around the neighbourhood to see what trends are emerging and what is attracting buyers
*Side note: A landlord cannot proceed with upgrades or renovations without sending at least 60 days' notice to the tenant. Depending on what is being done to the property, a tenant cannot be evicted for minor repairs like the dishwasher needing to be fixed or replaced. They can only be evicted for renovations that would actually require someone to move out. The landlord may have to provide them with one to two month's compensation and help them temporarily relocate.
What to know when buying a tenanted property
If a tenanted property is purchased, there are a few things that can happen depending on the situation.
If the purchasers are purchasing the home as a place to live themselves, they will still have to wait until the lease is up and the tenants have moved out before they can move in.
If the purchasers want to continue to rent to the tenant (or a new one if the current tenant is leaving), the agreement should be included in the purchase and sale agreement so the lease terms, form of payment etc., can be transferred to the new landlords. If the tenant is in the middle of a lease agreement, it will continue over until the lease is up and they are not legally required to sign a new one until then. The new landlords cannot increase the rent unless 12 months have passed since the last rent increase, and they must adhere to the rent increase guidelines.
If the tenant is currently renting month-to-month and the house has been sold, the purchaser can get the current owner/landlord to file a 60-day notice on their behalf if they can provide proof that they or a family member wants to move in.
How much notice does a landlord have to give when selling the property in Ontario?
There comes a time when a landlord wants to sell the property they have been renting in order to maximize their investment property, or just retire from being a landlord. Can it be a bit awkward when a landlord sells? Yes, but as mentioned above, being honest with tenants and maintaining a good relationship with them can make a huge difference. Even if a lease isn't up yet, a landlord has the right to sell their property whenever they want, but they must follow the proper protocol so they don't get in trouble (otherwise, the fines can be pretty hefty!).
If a landlord is selling, they must provide the tenant with the proper form, which they can print out from the Board, outlining the reason they would like the tenant to leave the property. This can be because they want to now use the home for themselves, or a family member wants to move in and they must let the tenant know 60 days from the first month that their tenancy will be ending, or providing a 30-day window to move out after the sale has closed (if the new purchaser is not looking to become the new landlord). If the landlord sells to a purchaser who does still want to use the property as a real estate investment, they will need to make sure the lease agreement and other important information are in the sale and purchase agreement.
Navigating through the waters of real estate investing can be tough, but it doesn't have to be if both the landlord and the tenant become familiar with the rules laid out by the Board.
