Can I sell my rental property with tenants in it during COVID-19?

by Emma Scott on 08 Jul 2021

Whether you’ve had a bad experience with your tenants or are simply looking to cash in on Canada's red hot housing market, you may be considering whether you can sell your rental property during the COVID-19 pandemic. There are many legal regulations that need to be abided by while selling a rental property that houses tenants, and new regulations have recently been introduced during the pandemic. These regulations can make it confusing as to whether you can really sell your investment property during the COVID-19 pandemic.

In this article, we will touch on your legal right to sell your property, current restrictions, and how to navigate selling your property with your tenants.

COVID-19 has pushed owners to list their investment properties

In early 2020, the COVID-19 pandemic caused difficulties for most people with investment properties as provinces across Canada put a moratorium on evictions in place. This banned anyone from removing their tenants during this time in order to keep people where they were. However, this meant that even if a tenant stopped paying rent, they were not allowed to be removed from a rental property. Similarly, many tenants were paying below market rent as freezes were put in place.

At the same time, the Canadian real estate market found great success. Many buyers flooded the market to find a new home due to record low interest rates. The high demand for houses along with the low supply caused prices to skyrocket. Now, houses go to the buyer with the highest bid, often tens to hundreds of thousands over the asking price.

The combination of rental restrictions and booming real estate has caused many landlords to consider whether they can put their occupied property on the market. They too hope that they can sell to the highest buyer and retain some of their wealth during such turbulent times. The short answer is yes, they can sell a property with tenants inside.

Putting a rental property on the real estate market

It is within a landlord's legal rights to sell their property - even with a tenant in place. Even provincial eviction moratoriums do not infringe on this right. The only thing that impacts this is the terms of the lease agreement currently in place.

Review the rental agreement

A rental agreement will provide landlords with the information they need to end their tenancy and sell their rental property

A rental agreement (also called a lease) can be a landlord's saving grace when they would like to sell tenanted properties. The lease agreement outlines the contract between landlords and their tenant, including the regulations for selling and early termination clauses. Some leases even offer tenants the right to first refusal which provides them with the opportunity to buy the residence outright. This could save them the time of trying to find a new owner.

A landlord with a month-to-month lease will find the process of ending the lease much quicker because of the relatively short lease term. Individuals with a month-to-month agreement can provide their current tenant with notice that they do not plan to renew the lease so they may sell the property. This must be done according to terms of the lease and their province or territory's laws.

Long-term leases, which last anywhere between 12 to 18 months, can be more difficult to navigate based on the length of time left in the lease.

Those with long-term leases that are ending soon may also find themselves in luck. If a long-term lease is coming close to the point of renewal, the landlord can provide notice to their tenant that they do not plan on renewing the lease in order to sell the house. Despite early notice of non-renewal, they still must give notice to the tenant according to local laws and the lease agreement.

Landlords who have a long-term lease that is not ending anytime soon must uphold the terms of their lease to their tenant. This means that they cannot force a tenant to vacate the premises until the end of the term if they intend to sell. However, there are several solutions to this issue. Landlords can provide the tenant with the opportunity to vacate the premises or sell the unit while keeping the tenant in place.

It is important to note that a rental term does not end when a fixed-term lease ends. There must be some sort of written documentation or court order to end a tenancy. Either a landlord can provide a notice to end the tenancy, the tenant and landlord can mutually agree to end the lease or a Landlord and Tenant Board (LTB) or court order ends it.

Asking a tenant to vacate the premises after selling

Those who are looking to sell their investment property must keep the situation of both their tenant and the potential buyers in mind. As previously mentioned, a landlord cannot end a long-term lease without a valid reason, and selling is not one of them.

Failure to pay rent is not a reason for to evict a tenant under provincial eviction moratoriums

Other reasons to evict a tenant are overlooked under provincial eviction moratoriums. This list includes failure to pay rent; not making a full rent payment; unauthorized occupants; a tenant, their family member or friend causing damage to the property; and more.

The only way a person can ask their tenant to leave under an eviction ban and before the end of term is if they have already sold the property to a new owner. The new buyer must also have plans to either live on the property or take on a new tenant such as their family member or a caregiver.

Navigating selling your tenanted property

While the Ontario government has not suspended in-person showings, they strongly discourage them during this time. Instead, it is up to the owner to determine whether they would like to continue with in-person showings or turn to virtual tours. Despite what they choose, an owner must always let their tenant know of a showing at least 24 hours before. Open houses must also be between 8 am to 8 pm so as to not disturb the people living in the unit.

Finding a new buyer with an at-risk tenant

In current times, real estate professionals also recommend that sellers who wish to complete in-person showings speak to their tenants about any concerns prior to scheduling. If they are at risk (whether it be immunocompromised, pregnant, elderly or such on) they should consider postponing or providing cleaning services to the tenant's home after the showing is completed.

An owner and real estate agent should also follow the general advice of their local government while completing a showing. This means following all applicable laws like wearing a face mask, social distancing, and limiting contact with others while showing the house to potential buyers. Not only will this protect everyone's safety, but it will also build trust between a landlord and their tenants.

Everyone’s safety should be kept in mind while hosting open houses during the COVID-19 pandemic

Abiding by tenant rights

In order to end a tenancy to sell their income property, landlords must give proper notice to their tenants. This notice is within tenant rights and a landlord cannot skip this step. This written notice must be documented in one of the LTB's forms and it must clearly state the date that the tenanted property should be evacuated.

The timeframe that a landlord must give a contract to their tenant(s) is also dictated by provincial and territorial laws. For example, in Ontario, a tenant must be notified 60 days before the end of their rent period. Those who are not in a fixed-term agreement are legally required to be notified within 28 days and may not necessarily have a reason for the eviction. If the proper process is not followed, tenants can seek legal advice from a lawyer and contact the LTB for guidance.

Selling rental properties during COVID-19

Despite assumptions, provincial and territorial eviction moratoriums do not impact a landlord's ability to sell their property during the COVID-19 pandemic. It is within a landlord’s right to sell their rental property at any time they wish. They simply need to review their lease agreement and determine whether they can sell sooner rather than later.

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