Buying a condo– and inheriting a tenant

What you should consider before purchasing a property that is already rented out

Are you buying a condo, where a tenant currently resides? Residential tenancies are ongoing and often long-term relationships between a landlord and their tenant. So, what happens when a new owner comes in?

Upon purchasing a property, the rule of thumb is that you inherit all the liabilities and obligations of the previous owner, unless otherwise specified and agreed to in the purchase and sale agreement. This includes payment of all monthly condo fees along with any special levy or levy instalments that become due after the closing date of the sale. And yes, this applies to tenancy agreements.

Do not make the mistake of believing that a simple change in ownership automatically voids or otherwise puts an end to an existing tenancy at the property. It does not.

If you are buying a condo as an investment, the odds are that you will want to keep the existing tenant to ensure that the property continues to generate cash-flow. Even so, prior to purchasing the property, you should perform due diligence to ensure that you are not buying into a tenancy headache – or nightmare. Having a good tenant is particularly important in strata properties, as legislation states that strata home owners are vicariously liable for a fine or remedial cost incurred by their tenant.

Tenancy issues to consider upon purchase:

  • Is there a written tenancy agreement? If so, does this agreement comply with the requirements of the Residential Tenancy Act (the Act)?
  • Is the tenancy for a fixed term or does it renew on a month-to-month basis?
  • Did the seller take a security deposit from the tenant? If so, does the amount of the security deposit comply with the Act?
  • Was a move-in inspection report completed by the seller and the tenant at the beginning of the tenancy?
  • Did the seller increase the tenant’s rent at any point in time during the tenancy? If so, did these rent increases comply with the Act?
  • If the property is sublet or the tenancy is assigned, did the seller provide their written consent to this sublet or assignment?
  • Is there a history of disputes between the seller and the tenant? Are there any previous decisions by the Residential Tenancy Branch that modify the nature of the landlord’s obligations?

On the other hand, you may be buying a condo with the intention of ending the existing tenancy and repossessing the unit for your personal use, or that of a close family member. In this case, prior to the completion of the sale, you may wish to ask the seller to issue a two-month Notice to End Tenancy to the current tenant. Where a tenancy is for a fixed-term, the effective date of this notice may not be earlier than the date specified as the end of the fixed-term.

Before the seller is able to issue this notice to their tenant, three conditions must be met. First, the seller has to accept, in good faith, your offer to purchase the property. Second, all conditions of the purchase and sale agreement have to be fulfilled or otherwise removed. Finally, you have to ask the seller, in writing, to issue a Notice to End Tenancy on the grounds that you or your close family member intends to occupy the property in good faith.

Published in the New Home & Condo Guide (Metro Vancouver Edition)