Navigating tenanted real estate sales

I decided to take a bit of a break from small towns this week and speak about the changes just made in the ever-evolving real estate landscape of British Columbia.

Selling a home with tenants presents a unique set of challenges and considerations. With recent changes to the notice to end tenancy requirements for home purchasers in B.C., selling a property with a tenant has become more of a challenge.

I’ll focus on the selling and buying aspect of these changes. Requirements may be different in other circumstances so always check with a lawyer if you are unsure of how things will work for you and your situation.

Understanding the legal landscape

The Residential Tenancy Act in British Columbia provides tenants with significant rights, which must be respected during the sale of a property. If you're planning to sell your tenanted home, here's what you need to know:

Notice for showings: Tenants must be given at least 24 hours written notice (text messages don’t count) before any showings and the showings should be scheduled between 8 a.m. to 8 p.m., unless the tenant agrees to something different. That ensures tenants' privacy and comfort are maintained.

Ending a tenancy as of Aug. 21, 2024: If the buyer plans to live in the property, a three-month Notice to End Tenancy must be served. The proper form to use is a generated form, RTB-32L. (Always check for the latest forms. Note, if anything other than the proper form is used, it is not legally enforceable.)

This notice must be received at least three months before the intended move-out date and before the day rent is due. If the tenant wants to dispute the notice, they have 21 days to do so. However, if the buyer intends to keep the property as a rental, the tenancy continues under the new owner. (Make sure you make arrangements with the security deposit)

Compensation: If the notice to end tenancy is served in good faith but not fulfilled (e.g., the buyer doesn't move in), the landlord could be liable for compensation up to 12 months' rent to the tenant. It is also important to note the landlord is required to pay the tenant one month’s rent as compensation regardless.

Strategic selling with tenants

Communication is key: From the moment you decide to sell, open communication with your tenants is crucial. I suggest asking if your tenants are interested in purchasing your property. It’s a great way to simplify things. If that doesn't pan out, then make sure you explain your intentions, the process and reassure them of their rights.

Marketing the property: Highlight the property's potential rather than its current state. While tenants might not move their personal items out, ensure the property is clean and staged as best it can be. That could mean working around the tenants' schedules for professional cleaning or staging. It is important to know you need the tenants’ permission to stage.

Showings: Schedule showings at times convenient for tenants. Tenants, or their agents, have the right to be present during showings or open houses. They do not, however, have the right to give misleading or inaccurate information to prospective buyers. For example, saying bad things about the property or the landlords. Actions, such as those, could lead to a tenant being served with a one-month notice to end tenancy for cause (RTB form 33) The landlord or landlord’s agent must be present for all showings. If you are thinking of having an open house, consider offering the tenants lunch at a local restaurant during that time.

Legal documentation: Always ensure all notices are in writing and follow the legal requirements using proper forms etc. If a buyer claims they'll occupy the property, consider having a clause to that effect written into the agreement to purchase. Speak with your agent as that may protect against potential legal issues later.

If you are thinking about buying a rental property and then moving in understand that if the tenant does not move out, it can take two to three months or longer to come to a resolution. Be prepared if this happens as it can be costly. Also, make sure your contract to purchase has clauses to protect you from possible financial loss. A hold back for possible property damage may be prudent. Again, speak to your agent.

Market sentiment and challenges

There's a noted trend where buyers are increasingly wary of properties with tenants due to the extended notice periods for eviction, which can complicate financing and moving timelines. This has led some buyers to completely avoid tenanted properties, as noted by realtors dealing with new buyers in Vancouver, where the new tenancy laws have created significant hurdles.

If you are planning on selling your home and need to move before it sells, proceed with caution if you are thinking about renting it in between. It has the potential to seriously complicate things.

Tenant cooperation: Your relationship with your tenants can make or break the sale. Keep them informed and cooperative. It may ensure a smoother sale.

Stay updated: Legislation can change. Always keep abreast of any new rules or court decisions that might affect your sale or purchase.

If you have suggestions for write-ups of real estate related articles or small towns in B.C., please email me at [email protected].

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.