Selling a house with a tenant

Selling a house with a tenant in British Columbia, Canada?

To ensure a smooth process and prevent issues with your tenants or the prospective buyer, it's crucial to understand your fundamental rights and legal responsibilities during the selling process.

This blog shows you what to do and what not to do if you're selling a tenanted property in BC.

Tenant Rights When a Landlord Sells a House in BC

Right to Remain

Tenants in British Columbia have the right to remain in the rental property and pay rent until the end of their lease term. Even after the property changes ownership, tenancy continues until the lease expires.

As a landlord selling your investment property, you must respect your tenants' right to continue paying rent and living in the property until the expiry of their lease agreement.

Lease Continuation & Transfer

When you sell a property with tenants in BC, the terms of the existing lease or rental agreement remain valid and binding for the new owners – including the rental terms, lease duration, and any other agreements outlined in the duration of the lease.

As the owner of a tenant occupied property, you're obligated to transfer the existing lease to the new owner on the closing date, ensuring that your tenants' rights are upheld throughout the sale process.

Make sure to document the transfer of lease so you have a legal record of the transfer to protect everyone's rights and obligations.

You can either return the damage deposit to your tenant, or make a 3-way agreement with your tenant and buyer to transfer the damage deposit directly to the buyer.

Notice of Sale | Tenant Notice

It's essential to provide adequate notice to your existing tenant, informing them about the sale of the property.

According to BC's Residential Tenancy Act, landlords must provide tenants with written notice about the sale of the property as soon as possible.

Your written notice of sale should include details about the new buyers, their contact information, and any changes that may affect the tenants' living arrangements or rights.

Fixed Term Lease vs Month to Month Lease

In BC we have 2 lease periods: fixed term (usually an annual lease), and month to month (or periodic) lease periods.

Month-to-Month Lease Rules

Under the BC Residential Tenancy Act, if your tenant is on a monthly lease, you have to provide them with at least 2 months' proper notice, which starts on the date of their next lease payment. For example, if your tenant pays rent on the 1st of the month, and plan to sell your house in June, you need to give notice to your tenant before the 1st of April. Note that you can only serve a one month eviction notice if your tenant fails to pay rent on time, causes excessive damages, or violates the lease agreement.

2-Month Notice To Occupy the Rental Unit

There are three main reasons a landlord can end a month to month tenancy with a 2-month notice.

  1. If the landlord, or a close family member of the landlord, plans to move into the rental unit themselves.

  2. If the landlord is a family corporation and a person who owns shares in the corporation, or a close family member of that person, plans to move into the rental unit.

  3. If the landlord intends to sell the rental unit and has found a buyer who wants to move in. This requires the buyer to fulfill certain conditions, such as completing the purchase and requesting the tenant to leave in writing, stating their intention to occupy the unit themselves or for a close family member to do so.

4-Month Notice To Renovate, Repair, Demo, or Convert

If you're planning renovations, repairs, demolition, or conversion of the property, you can end the tenancy with a four-month notice period.

This notice period allows your tenants ample time to prepare for the changes ahead, including finding new accommodations if needed. Remember, during this period, tenants have the right to end their tenancy early with just 10 days' written notice.

Fixed Term Lease Rules

If you've signed a fixed term lease with your tenant, both you and your tenant and obligated to fulfill your ends of the lease agreement until it completes - or unless you reach a mutual agreement otherwise.

Mutual Agreement to End Tenancy

A mutual agreement to end a tenancy refers to a collaborative arrangement between you as the landlord and your tenant to terminate the rental agreement by mutual consent. This agreement empowers both parties to discuss and decide on crucial aspects of the termination process, including:

  • Move-Out Date: Agreeing on a specific date for the tenant to vacate the property ensures clarity and helps both parties plan accordingly.
  • Financial Matters: Resolving outstanding rent payments, return the security deposit originally collected, and any other financial obligations ensures a smooth transition and minimizes potential disputes.
  • Property Condition: Discussing expectations regarding the condition of the property upon move-out can prevent misunderstandings and ensure the return of security deposits in a timely manner.
  • Legal Considerations: It's essential to review any legal implications of the mutual agreement, such as ensuring compliance with local tenancy laws and regulations.

To make a mutual agreement to end tenancy formal in British Columbia, you'll have to complete form RTB-8 (PDF).

How To Incentivize a Mutual Agreement

If you're aiming for a mutual agreement to end the tenancy, offering your tenants a financial incentive is a smart move. Here are some possible incentives:

  1. Financial Incentives: Providing a monetary incentive, such as offering more than 1 month's rent or a portion of the security deposit as a bonus for early departure.

  2. Rent Reduction: Offering a temporary reduction in rent for the remaining months of the lease term.

  3. Assistance with Moving Costs: Covering or partially reimbursing moving expenses, such as hiring movers or renting a moving truck.

  4. Flexible Lease Termination Date: Allowing tenants to choose their preferred move-out date within a specified timeframe.

  5. Waiving Lease Penalties: Waiving penalties or fees associated with early lease termination.

When offering incentives for early exit, be sure to communicate clearly with your tenant and outline the terms and conditions of the offer in writing. Ensure that any incentives offered comply with local tenancy laws and regulations.

Before Service Notice to End Tenancy

Before a landlord can serve notice for the purchaser's use of the property, certain conditions must be met.

  1. There must be a bona fide agreement to sell the property, with all sale conditions fulfilled.

  2. The purchaser must formally request, in writing, for the landlord to terminate the tenancy.

1-Month Rent Compensation

When issuing a two or four-month notice to end tenancy, landlords must compensate tenants with one month's rent, paid before the notice period ends. Tenants can opt to forgo the last month's rent instead of receiving compensation.

Showings & Open Houses

When showing your house to potential buyers, remember to respect your tenant's right to quiet enjoyment, as outlined in Section 28 of the Residential Tenancy Act of British Columbia. This means ensuring their privacy and avoiding unnecessary disturbances during showings.

Landlords must agree on a showing schedule with the tenant or provide written notice for each entry. According to Section 29 of the Act, landlords need proper authorization to enter the rental unit with prospective buyers.

If permission isn't granted at the time or within 30 days prior, landlords must give written notice at least 24 hours beforehand. The notice should state the purpose of entry (which must be reasonable) and the date and time, typically between 8 a.m. and 9 p.m., unless otherwise agreed upon by the tenant.

Wrapping Up

Remember these key points: careful planning, respect for tenants, and smooth execution are essential.

To be sure your legal bases are covered, we recommend working with a trusted real estate attorney.

Vantage West Real Estate Agents

Ready to navigate the sale of your rental property with confidence and respect for tenant rights?

For expert guidance through every step, consider partnering with a Vantage West Real Estate Agent. We have extensive experience in buying, managing, and selling investment properties in Kelowna and throughout the Okanagan Valley.

Let's make your property sale a success together! 

Posted by AJ Hazzi on
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