When you invest in Toronto real estate, becoming a landlord is typically part of the game. When you’re ready to liquidate one of your investments, will you be selling a rental property with tenants? Whether you’re an investor who needs to know how to sell a tenanted property in Ontario, or a tenant who wants to understand your renters rights when property is sold, we’ve got all the need to know info!
HOW TO SELL A TENANTED PROPERTY IN ONTARIO
When it comes to selling a tenanted property in Ontario, the first thing to know is that if your tenants are still within the first year of their lease, you have to honour the terms of their lease as the tenant has the right to stay under the Ontario Landlord & Tenant Act. It’s best to wait to list your property for sale until the end of their year lease or wait to sell the property till they are on a month-to-month lease.
It’s important to note that all leases that continue beyond a year, by law, move to month-to-month even if you and your tenant have signed a subsequent one year lease.
GIVING NOTICE TO RENTERS OF INTENT TO SELL
When it comes to letting tenants know you’re selling, it’s always best to give them ample notice to get their ducks in a row, but no formal notice needs to be given until your property has actually sold.
When your tenanted property sells, if the new buyers are planning to move in to the property, you are required to give your tenants 60 days notice from the first of the month that their tenancy will be ending. For instance, if your property sells on April 4th, the 60 days notice doesn’t take effect until May 1st, which means your closing date will be July 1st.
Once the tenanted property sells firm and you give notice to tenant to vacate due to sale, you will need to serve them with an N12 form which is the Notice to End Tenancy form.
If the buyers plan to use the property as an investment property themselves, they have to assume your tenants and the terms of their existing lease. The new owners are not allowed to increase the rent anymore than the established rent increase guideline which is currently 1.8% per year (2019).
HOW TO SELL A TENANTED PROPERTY FOR TOP DOLLAR
Speaking from our own personal experience selling Toronto homes and condos, it is far more advantageous to sell an empty property than to sell a property that’s tenanted. When you’re selling a tenanted property in Ontario, you have to market the property with most of the tenant’s personal belongings — fingers crossed your tenants have good style. Some tenants will be flexible and allow you to add some staging items, but, for the most part, you have to work around what they’ve got. Not to mention, coordinating around your tenants, hoping that they keep the place in good shape during showings. How well a property is presented and staged can impact the purchase price of the home and how long it takes to sell. Having a good relationship with your tenants, or allowing your real estate agent to build a positive relationship with them, can go a long way to helping the sale of your property. Happy tenants will be more open to de-cluttering and preparing the apartment for sale.
Staged tenanted property at King Charlotte Condos
When you’re able to list a vacant property, you are able to thoroughly clean and stage the property, highlighting its full potential through proper design. Every time we have had the opportunity to stage a property, we end up selling it for more than the last comparable sale.
In some cases, you may consider offering your tenants a bonus month’s rent to move out early and offer to help them find a new place to rent. Knowing that they will likely need to move in 60 days when the property sells, the bonus month’s rent will help them to cover moving expenses and give them some extra money to put towards their next place.
Some tenants will be happy to take this offer, and they’re spared the added disruption that comes with frequent showings that will take place during the selling process. Ultimately, it’s up to your tenants, as they have the right to stay until the end of 60 days if that’s what works best for them.
Related: Analyzing Your Toronto Real Estate Portfolio: When to Sell