What Do Buyers Need to Know About Purchasing a Tenanted Property in BC?
Buying a property that already has tenants involves more than reviewing the condition of the home and arranging financing. You are also purchasing a property with an existing legal relationship attached to it.
Whether you plan to continue renting the property or move into it yourself, it is important to understand the tenancy before removing your subjects and choosing a completion date.
The Tenancy Usually Continues After the Sale
The sale of a property does not automatically end a tenancy. When ownership changes, the buyer generally becomes the new landlord, and the existing tenancy continues under the same terms.
The tenant does not have to sign a new tenancy agreement simply because there is a new owner. Existing terms relating to rent, including utilities, parking, storage and other arrangements may remain in effect.
Before purchasing, ask for copies of:
- The signed tenancy agreement
- Records of rent payments and lawful rent increases
- Details of the security and pet damage deposits
- Any written agreements regarding parking, storage or utilities
- Inspection reports and relevant notices
- Information about unresolved disputes or Residential Tenancy Branch proceedings
Reviewing these records can help you understand the responsibilities you will assume after completion.
Decide Whether You Want the Tenant to Stay
If you are purchasing the property as an investment, an established tenant may provide immediate rental income. However, you should confirm the current rent, the date of the last increase and everything included in the tenancy. A change in ownership does not allow the buyer to immediately increase the rent to the current market rate. Rent increases must follow the limits, timing and notice requirements established by the Province of British Columbia.
Buyers should also determine whether the tenancy is month-to-month or for a fixed term. This may affect when and how the tenancy can be ended.
What If You Plan to Live in the Property?
A seller cannot end a tenancy simply because the property has been listed or sold. If the buyer or an eligible close family member intends in good faith to occupy the home, the buyer may make a written request for the seller to serve the required notice after the sale is unconditional.
Alternatively, the buyer can provide notice after taking possession and becoming the landlord.
BC currently requires a generated three-month notice for purchaser or landlord occupancy.
Serving the notice cannot be made a condition of the sale, and the correct Residential Tenancy Branch form must be used. The tenant is also entitled to compensation equal to one month’s rent. Because notice periods and effective dates do not always align neatly with real estate completion dates, buyers should not assume vacant possession will be available immediately.
The Intention to Occupy Must Be Genuine
A notice for purchaser occupancy must be given in good faith. The home must genuinely be intended for residential use by the buyer or an eligible close family member. For this purpose, a close family member has a specific legal definition. It does not include every relative. Buyers should confirm that the person who will occupy the property qualifies before asking the seller to issue notice. Using purchaser occupancy as a reason to end a tenancy and then renting the property to someone else can expose the owner to significant financial consequences.
Deposits Must Be Addressed at Closing
Security and pet damage deposits should be clearly accounted for in the purchase transaction. The person who owns the property when the tenant moves out may be responsible for dealing with those deposits, even if the money was originally paid to the seller. The contract and closing adjustments should clearly address the transfer of deposits, prepaid rent and any outstanding amounts.
Make the Offer Match Your Plans
If your purchase depends on vacant possession, the contract must be drafted carefully. The expected timing should also be realistic under BC tenancy law. Before committing to the purchase, speak with your real estate lawyer about the tenancy documents, the proposed possession date and any terms dealing with deposits or vacant possession.
Morris Law assists buyers with residential real estate transactions throughout Vancouver and British Columbia. Contact us early in the process so we can help you understand the legal details before your purchase is completed.
Note: This article provides general information and is not legal advice. Residential tenancy rules may change, and each situation should be reviewed individually.
