Important Things to Know When Buying a Tenanted Property
Are you planning to buy a condo in which tenants are already living? Are you interested in buying a house in which the 1st floor has tenants, but you want the whole property for your family? Do you want a property with 3 units where you can have different tenants? Well, you are not alone in this. There are many reasons you may want to consider buying a property with tenants, however it is crucial you understand the rules and regulations around purchasing said properties. It is important that you are aware of the all legal rules and regulations because that is the only way you can become the new landlord of the tenanted property. Here we have a few important things you have to consider if you are planning to invest in tenanted property. Please check out the BC Government website here for more information.
Disclaimer: The content on this web page is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Please contact us to discuss any questions or concerns you have.
If the tenant has a lease
When you are buying the tenanted property the first and most important thing you have to consider is the lease agreement of the property. It should be noted up front, per the British Columbia Gov’t, that
That being said, if, according to the lease, the tenants still have 3 months in the house, you cannot evict them even if you have a family and want to move into the house immediately. You cannot even ask the previous landlord to evict the tenants because it is against the law. In order to make things possible, and ensure you are following the law, it is better that you inform the tenants that once their lease agreement is over they will have to find another place because you are planning to move into the property. In this condition, it is better that you wait until the lease agreement of the tenants is over and then you pay the complete price of the property.
Give a 60 days notice
If you have noticed that the tenants are living on a month to month basis and they have not signed any kind of lease agreement then you will have the complete ownership of the property and authority to move in any time you want. However, there is a completely legal process. You have to ask the previous landlord of the property to issue a two-month Notice to End Tenancy to the tenants to assure that they can clear the place out while simultaneously giving them sufficient time to find a new place to live. Do note that the tenant does have 15 days to dispute the notice. Also, when a landlord opts to end a tenancy for their own use of the property (or a close family member), the landlord must give the current tenant the equivalent of one’s months rent on or before the effective date. See: https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/ending-a-tenancy/landlord-notice/two-month-notice
Also, It is a good idea to ask for a copy of the 60-day notice. The reason being, you will have to deal with legal actions if they do not send the notice to the current tenants (more on this in the next section). The reason you have to ask the previous landlord to send the notice is that you are still not the owner of the property, and the current tenants will also most likely be unaware of the change in ownership. Having a good real estate agent who knows how to navigate complex issues is a must-have in situations like this.
Legal notices are required
There are some people who have noticed that old tenants are not paying enough rent and they would like to rent the property to a new tenant who can pay more rent. This is particularly common when the housing market “heats up” – i.e. house prices and rents rapidly increase in value.
The Surrey, B.C. market, for example, has been red hot for years and is only now starting to cool down. The only issue in this situation is that old tenants still have the time left in the house according to the lease agreement. Even if you are planning to evict them you cannot do it until the agreement ends.
If it is getting hard for you to wait, the only thing you can do is send the legal notice for eviction because you have to move into the property. One of the most important things you need to remember is that once the tenants are evicted, regardless of their agreement, you will have to live in the house for at least one year.
Basically, you have to move in and you can’t take on new tenants for at least a full year. This prevents unscrupulous owners from evicting current tenants because they think they can find new tenants that will pay higher rents. As the legal requirements, restrictions, and consequences in these situations can get very complex, it is generally a good idea to speak to a knowledgeable real estate agent who can help guide you through these, and other, related issues.
Include the lease in agreement of Purchase and Sale
There are some situations in which people like to keep the old tenants in the house because they are paying enough rent. In this situation, you have to check the lease agreement of the tenant and accordingly, you have to get it included in the agreement of purchase and sale for the property.
Once the property is legally yours, you can start collecting the rent and any other related fees from the tenants. Do keep in mind that once the previous lease of the tenants is over, they will automatically move to a month-to-month rent payment basis. You can decide whether you want to sign another agreement with the tenants or simply keep it on a month to month basis.
Know the date on which old tenant is leaving
It is important for you to understand that you have to arrange your closing date according to the date on which previous tenants are going to move out. Remember that you should not make the mistake of assuming anything on behalf of tenants, as it can cause serious problems for you. Always request copies of all paperwork, especially eviction notices, as mistakes and misunderstandings can cause huge issues down the road for both would be buyers, sellers, and tenants. Consider speaking to a knowledgeable Real Estate Agent prior to entering into any contracts.
While you are buying the tenanted property make sure that you check the lease of the tenants before making any decisions. It is important that you get complete information related to rules and regulations that you will have to follow to invest in the property. Do not take any shortcuts. If you decide you want to move in, and want to remove the current tenants, speak to your Realtor about your plans prior to any purchase.
Mistakes, even when well-intended, can result in legal and enforcement issues that you don’t want to deal with. That is why working with a reliable real estate agent is a better option.
They are aware of all the rules and regulations and will assure that everything is legally managed. They will help you get complete control over your house.