I want to purchase a home that has existing tenants. What are my next steps as the purchaser?

I want to purchase a home that has existing tenants. What are my next steps as the purchaser?

by | Jun 20, 2023 | Purchasing A Home

If you intend to reside in the house yourself, you must negotiate a clause in the contract calling for “Vacant Possession”.  This now puts the onus on the seller to ensure the house is empty at the date of closing.

According to Advocacy Centre for Tenants Ontario, 30% of Ontario’s population rent. Renting has become increasingly popular due to the increasing cost of home ownership.

In the news recently, tenants refusing to leave because their landlord is selling the property is becoming a well-known problem. Rising rent prices are partially to blame.

According to the law in Ontario, when a landlord/ current homeowner wishes to sell the property, they cannot forcibly remove tenants if their lease is still valid. If the landlord wishes to sell the property, they must work with the tenants to do so peacefully. This can be done in a couple of ways:

  1. The tenants can agree to leave on the closing date set out in the Agreement of Purchase and Sale.
  2. The seller can put a condition in the Agreement of Purchase and Sale stating that the tenants will continue occupying the residency until the lease ends. The buyer must agree.

Can a real estate deal go awry due to a landlord’s misjudgement?

A couple in London, Ontario signed a deal to buy a home in March. The deal was set to close on June 12, 2023. The current tenants of the property refused to leave; therefore, the deal threatens to be squashed.

According to cbc.ca, “The buyers of a four-bedroom home in White Oaks say a standoff between them and an uncooperative family of tenants who refuses to leave has left them in legal limbo.”

The buyers purchased this home thinking the tenants would vacate the property prior to their possession. Unfortunately, the buyers must seek an extension on their purchase agreement while the landlord tries to get the tenants to leave through Ontario’s Landlord Tenant Board (LTB). The LTB ruling could take up to one year to get a ruling.

Tenants refuse to leave. What happens next?

If the seller has guaranteed a vacant property in the Agreement of Purchase and Sale, the seller is the one who takes the biggest risk. As a landlord, you cannot forcibly evict your tenants without just cause. Selling the property is not classified as such. The tenants can stall the entire process by requesting a trial with the LTB. In this case, the deal can be in limbo for months, even up to one year.

What should you do as a landlord/ homeowner who wants to sell the property?

If you are a landlord and you are ready to sell with tenants currently occupying the property, we recommend you seek legal advice and follow the rules of the LTB.

Not every real estate transaction that involves tenants will end in aggravation. Often, the tenants and the landlord/ seller will work together to compromise a scenario that works for everyone involved.

If you are purchasing a property that currently has tenants, your real estate team can best help you navigate this. Your team will work with the seller to determine the plans for the tenants on the closing date of your deal and will seek the appropriate paperwork to prove the plan is accurately being shared with you.

This article is intended as an informative piece about the subject. It should not be taken as legal advice. We recommend you connect with a real estate lawyer about your specific legal issue.

McMurter & Associates in Whitby has been providing estate planning services throughout the Durham Region for more than 30 years. We have the experience needed to provide you with expert advice for any of your real estate and estate planning needs.

To meet with a member of our firm, send us an email or call us at 1-1-800-756-7138 or 289-278-0934 to schedule a consultation.