How to Buy a House with Tenants in Ontario?

Buy a House with Tenants
Buy a House with Tenants

You planned to buy a house, got the one in Ontario that matches your requirements, but sadly, you find tenants residing there. Additionally, you got to know that their lease period is still continuing and has a long time to expire. In this case, will it be wise to buy a house with tenants in Ontario?

This is a rare, yet challenging situation is purchasing a house with tenants. Beyond the traditional buyer and seller agreement, the transaction involves other parties. For the buyer, it may be a very challenging situation.

Whether you want to explore the potential of a vacant unit, evict present tenants, or how the existing lease could affect the transaction, there is a lot to think about. Along with the practical implications, you must also take important legal issues into account. Here is all the information you require to buy a house with tenants in Ontario.

Should you buy a house with tenants in Ontario?

It all depends on your plan. If you are planning to move-in immediately, then you should drop your plan to buy a house with tenants in Ontario. It is because the existing lease is taken into account first. If a lease is in place between the seller and the renters, it will continue to be valid beyond the closing date. A lease is not terminated by a change in ownership. You cannot evict a tenant while there is a lease in place, even if you intend for it to be your primary residence.

You assume the tenant along with the lease, its terms, and the existing rental rate when you buy a property that is leased. The Agreement of Purchase and Sale should contain the lease terms.

The present owner cannot be asked to evict the tenant. You have to hold off till the lease expires. 

But yes, if you have some time in your hand till the lease expires, then you can surely wait. You can also agree on a closing date that corresponds with the end of the lease in order to acquire an empty home. Additionally, the seller is not required to comply if you request a financial incentive from the buyer to keep the renters.

Purchasing a home with month-to-month tenants

In Ontario, when a residential lease expires, the tenants’ tenancy automatically converts to a month-to-month arrangement.

There are additional alternatives for acquiring a vacant home if the tenant is under a month-to-month lease. The seller must deal with the current tenants to terminate their tenancy if you state in your offer that you want vacant possession. The only method to formally terminate the lease is if you, a member of your family, or a caregiver plans to move into the empty apartment.

Legally, the renters must get a written notice of termination of the lease 60 days in advance. With existing renters, it might not be possible to obtain speedy possession. Additionally, as payment for ending the rental agreement, you must supply one month’s rent. It’s crucial to keep in mind that you must give the tenants a N12 (a notice of Eviction for Personal Use). It demands that the following people live in any rental property:

  • you (the buyer/landlord)
  • your spouse
  • a child or a parent of you or your spouse
  • a person who will provide care services to you or a family member.

Therefore, it is prohibited to evict existing tenants in order to find new ones and raise the rent. A “bad-faith eviction” is when you evict renters using a N12 form but subsequently re-rent to someone who is not you or a member of your family. Tenants may file a lawsuit for unlawful eviction in this situation.

Regulations to Buy a house with Tenants in Ontario

You must uphold the terms of the present lease agreement if you choose to keep the current renters. That includes keeping the rent at its current level of expense. You are permitted by law to increase the rent by around 2.2% per 12 months. The provincial government sets this amount each year, and it is subject to change. That rental increase cap cannot be exceeded.

If the renters are renting on a month-to-month basis, you may ask them to sign a new contract with an adjusted rent. They can still rent under the conditions they agreed upon with the previous landlord, though they are not required to do so.

You can offer money if finding new tenants is necessary to make the move worthwhile. “Cash for keys” is another name for this. Although it will result in an immediate financial loss, you might be able to make it up by charging a future tenant more rent. The tenants will need to sign a N11 if they choose to leave (an Agreement to Terminate tenancy).

Renovating a House with tenants in Ontario

You might have plans to carry out a significant renovation after buying a new house. You can legally evict the renters in order to carry out a significant remodeling. They require 120 days’ advance notice.

The tenant has the right to return to their prior residence after the work is finished. They have the so-called “right of first refusal” to occupy the space. Rent must remain unchanged from before the renovations. The only snag is that the tenant needs to let you know before they leave whether they intend to stay in the property after the renovations.

After reading through the article, you must have understood that it is possible to buy a house with tenants in Ontario, but after defying various legal obligations. So, we would suggest you have good legal support handy. If you have the time, you can easily wait till the lease of the tenants expires. 

However, why fall in such a hassle when you can have plenty of options to choose from fresh properties. Take the initiative to gift your life with professionally designed, architecturally correct and obligatory free properties in Ontario.

For more Canadian Real estate news, please visit our Canada Real Estate section.

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