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Landlord's, Tenants, and Real Estate Transactions

Posted on 14 February, 2018 at 2:15

One issue that comes up frequently in my practice with small landlords is how to deal with a tenant where the landlord intends to sell the house to someone else. Small landlords often do not know what to do when they decide for whatever reason to stop being a landlord, or to sell a rental property. What complicates the issue is that often the tenant in the property has been problematic. Real estate agents and lawyers manage the transaction of selling a home and they are the experts in relation to the transaction, but do not work with residential tenancies law on a regular basis. Landlords usually want help navigating the legal landmines associated with selling a property.



Residential tenancies in Ontario as noted by Section 18 of the Residential Tenancies Act “run with the land.” A residential tenancy transfers part of the interest in the land to the tenant, who is entitled to occupy the property within certain conditions such as payment of rent, and following other terms (such as outlined in a lease or in the Residential Tenancies Act). A residential tenancy gives what can legally be referred to as a subordinate interest in land. The owner of the property has the primary interest, but the subordinate interest still exists and has to be dealt with through the legal process. The transfer of ownership from one owner to another does not end the subordinate interest, and it continues under the new owner.



Unless otherwise negotiated, an Agreement of Purchase and Sale usually indicates that the seller will provide “vacant possession” to the purchaser. This means that the house will be provided empty for the other party to move in on the closing date. Of course, if there is a tenant, this cannot be done. If a seller has agreed to provide vacant possession and still has a tenant, they are in violation of the Agreement of Purchase and Sale and can be sued for breach of contract. Of course this is the worst possible scenario for the family moving in, which now finds themselves without their home.



One way to prevent this scenario is to tell the buyers that the tenants are there, and sell the house with the tenants that go along with it (that is to sell it with the idea that vacant possession will not be given). Of course, this means that the tenants become the new owners’ problem, and they may not want to do this unless they want the house for a rental property.



The second way to deal with this is to evict a tenant for the purchaser’s own use. This process requires confirmation of the intent of the purchaser to move in. Greanya Legal Services can assist with this process, but it is important also to make sure that this is negotiated up front by the real estate agent working on the transaction to avoid problems later. You will want to make the application early, since it can take up to three months or more to go through the legal process to evict a tenant. Be prepared for delays, the Board has the jurisdiction under Section 82 of the Residential Tenancies Act to delay an eviction if the tenant would suffer hardship.


The sale of a rental property can be navigated. It does however take a bit of special care to navigate the legal problems that may result.


DISCLAIMER: This article is intended as general information, and does not replace the advice of a Licenced Paralegal or Lawyer. For advice on your specific case, contact Greanya Legal Services directly.

 

 


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