Selling a Tenanted Property in BC: A Guide for Landlords

by Richard Morrison
August 14, 2016
Sellers
0

Selling a rental property that is currently occupied by tenants can seem daunting for landlords in BC. However, with some knowledge of the Residential Tenancy Act and best practices, the process does not have to be overly difficult. This guide covers everything BC landlords need to know when selling your property.

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Key Takeaways:

Landlords cannot evict tenants just to sell the property
Proper notice must be given to show the property and end tenancies
Maintain open communication and cooperation with tenants
Adjustments to rent and deposits must be handled properly
Experienced realtors familiar with the tenancy laws can help navigate the process

As a realtor in Vancouver for over 10 years, I’ve helped dozens of landlords sell their tenanted properties. The key is getting the landlord, tenant and realtor all on the same page. With some advanced planning and clear guidelines, the sale can go smoothly for all parties involved.

Showing a Tenanted Property

One of the first steps when selling a tenanted home is arranging showings for potential buyers. Under the Residential Tenancy Act, tenants have a right to “reasonable privacy, freedom from unreasonable disturbance, and exclusive possession of the rental unit.”

This means landlords cannot simply enter whenever they want to show the property. Written notice must be provided to tenants before entering to show the unit. Ideally, the landlord and tenant can mutually agree on a showing schedule in writing. Barring that:

24 hours written notice must be given before each showing
Notice must include the reason, date and time (between 8am-9pm)
The landlord or their agent must be present during showings
Tenants can refuse entry if notice is inadequate or at unreasonable times/frequency

As a realtor, I always recommend grouping showings together into designated time slots if possible, to minimize disturbances for tenants. Patience and cooperation from both parties makes this process far easier.

Ending a Residential Tenancy to Sell

A common misconception among landlords is that they can evict a tenant just to sell the property. This is not the case in BC. The tenancy continues through the sale unless proper procedures are followed.

There are two main ways an existing tenancy can end when selling:

1. Mutual Agreement

The landlord and tenant mutually agree to end the tenancy early by signing a Mutual Agreement to End Tenancy form. This is the simplest option but requires the tenant’s consent.

2. Two Months’ Notice

For month-to-month tenancies, the landlord can issue a Two Month Notice to End Tenancy if the buyer intends to occupy the unit. This does not require mutual consent.

For fixed term tenancies, the landlord must wait until the end of the term before ending the tenancy without mutual consent.

The notice must clearly state the reason for ending the tenancy and must be issued properly:

Before the date rent is due
At least 2 full months before the effective date

When ending a tenancy this way, the landlord must provide compensation equal to one month’s rent to the tenant. The tenant can choose to apply this to their last month’s rent instead of receiving payment.

Maintaining Good Relationships With The Tenant

Selling an occupied property requires cooperation from tenants. As a landlord, maintaining open communication and mutual respect is key during this process.

I once had a landlord client who offered tenants a $200 gift card if they helped keep the unit tidy for showings. While not mandatory, incentives like this can go a long way to ensure a smooth process.

Tenants also have a duty to allow reasonable showings and not interfere with the landlord’s right to sell. Any issues should be brought to the Residential Tenancy Branch. Unreasonable behavior by tenants can warrant eviction notices in some cases.

Handling Adjustments Properly

At the closing of a sale, adjustments need to be made for rent, deposits, and any compensation owed to tenants:

Rent: The seller collects rent as usual until closing, then rent is adjusted and prorated between seller and buyer
Security Deposit: This gets transferred from seller to buyer at closing as a credit to the buyer
Compensation: If owed to tenant, this is paid by seller to buyer as an adjustment

It’s important deposits and any outstanding debts from tenants are addressed in the purchase contract, so responsibilities are clear. Speak to your real estate lawyer for specifics.

Dealing With Uncooperative Tenants

When selling a property with tenants, the landlord must give the tenant notice to end the tenancy. The landlord must enter into the rental unit in good faith and offer a new tenancy agreement to the tenant. If the tenant chooses not to renew, then they must be given at least one month’s notice of the end of their tenancy. Alternatively, if there is a month-to-month tenancy, then two months’ notice must be served.

During this time, buyers may become the new landlord and serve a two-month notice. The tenant may choose to not pay rent or pay rent in the last month of their tenancy instead of taking payment from the landlord. The buyer should provide proof of title of the property on their date and time of entry so that it is clear when they become owner and landlord.

Finding an Experienced Realtor

As a realtor myself, I cannot stress enough the value of having an experienced advisor when selling a tenanted home. Look for realtors who are knowledgeable about the BC tenancy laws and processes. This can greatly simplify the transaction and ensure proper procedures are followed.

In one case I dealt with, the sellers were unaware of the compensation owed to tenants upon ending the tenancy early. Without guidance, this could have become a major issue down the road. As their realtor, I ensured the buyers and sellers were aware of this requirement from the outset.

Did You Know?

Here’s an interesting fact many landlords don’t realize: If the stated purpose for ending a tenancy is not fulfilled within a reasonable timeframe, the landlord can be liable to provide compensation equal to 12 months’ rent to the former tenant.

For example, if a buyer claims they will occupy the unit themselves but then does not move in within 6 months, they can be on the hook for a year’s worth of rent to the previous tenant. Always keep this provision in mind if ending a tenancy early.

Key Takeaways

Selling a property with tenants does not need to be an excessively difficult process with the right knowledge and preparation. To recap, landlords should remember to:

Provide proper notice for showings and to end tenancies
Maintain open and respectful communication with tenants
Compensate tenants appropriately when required
Work with experienced realtors familiar with BC tenancy laws
Handle adjustments for rent, deposits properly at closing

While navigating BC’s tenancy rules can be complex, taking the right steps will lead to a smooth sale and transition to the new owner. With some patience and cooperation from all parties involved, selling your property with tenants does not have to be stressful.

FAQs

Q: How do I sell a tenanted property in British Columbia?

A: When selling a property with tenants in British Columbia, you must give the tenant written notice of the end of the tenancy. The effective date of the notice must be at least one month after the last month of the tenancy or one month after you gave the tenant the notice, whichever is later. You must also give the tenant sufficient time to find other accommodation before they are required to move out.

Q: What should I do if my tenants are uncooperative with showings?

A: If your tenants are uncooperative with showings, it’s important to maintain a good relationship with them and ensure that any agreement to show the property is done in good faith. If necessary, you may need to offer an incentive for cooperation such as providing additional rent free days or agreeing not to increase their rent for a certain period.

Q: What happens when I sell a tenant-occupied property?

A: When selling a tenant-occupied property, it’s important to follow all applicable laws and regulations set by your province’s real estate association. Generally speaking, you must first provide written notice to the tenant regarding their right to quiet enjoyment and informing them that you are selling and that the buyer will become their new landlord. Depending on your province’s laws, you may also be required to provide additional notice regarding entry into their unit or use of common areas of your property.

Q: Must I give my tenant notice when ending a tenancy because I want to sell?

A: Yes, landlords must give proper written notice according to BC Financial Services Authority regulation. The amount of time given depends on whether there is a fixed term lease or month-to-month tenancy agreement. In either case, landlords must usually provide at least one month’s written notice prior to ending a tenancy due to sale.

Q: Is there an exception for terminating a tenancy early due to sale?

A: There are some exceptions where landlords may be able terminate tenancies earlier than usual due to sale. For example, if tenants unreasonably refuse access for viewings by prospective buyers or if they refuse reasonable offers from prospective buyers who plan on living in the property themselves.

Q: Are there any restrictions on who can buy my tenanted property in BC?

A: Generally speaking there are no restrictions on who can buy your tenanted property in BC; however, it cannot be someone related directly (e.g., spouse/partner/sister) as this would constitute an illegal “self help” eviction.

Q: Can tenants vacate before their termination date if they know their landlord wants to sell?

A: Tenants have no obligation under law or contractually obligated duty leave prior than specified termination date even if they know landlord wants sell – unless landlord pays money (sometimes called ‘tenant relocation’) for them move early.

Q: Are there any restrictions on what I can do once I take possession of the property after selling it while still occupied by my tenants?

A: Once you take possession of your sold property with tenants as its new owner , you must respect all existing terms and conditions. This means that until your former tenants legally vacate, they still have rights over occupancy, quiet enjoyment, privacy etc. You should not attempt enter rental unit without proper written permission from your former tenants nor use premises for another purpose other than residential.

Q: Can my sister purchase my tenanted residential property?

A: No, direct relatives like siblings cannot purchase properties owned by each other as this will constitute self help eviction which is illegal in British Columbia. However, indirect relatives such as cousins may purchase property with tenants so long as they abide applicable rules and regulations as set out by Residential Tenancy Branch .

Conclusion

Selling a property with tenants can be complicated but it is possible. If the property is vacant then it is much easier. However, if there is a tenant living in the property, then they must be given proper notice and have their tenancy ended in good faith. Depending on the type of tenancy agreement, the tenant may need to be given up to a month of notice before the property is sold. The buyer will become the new landlord and will need to serve a two month notice if they wish to end the monthly tenancy agreement.

In some cases, such as if the tenant has unreasonably refused access or wishes to use the property for another purpose than that agreed upon by both parties in British Columbia, then proper notice must still be given by the landlord or their sister before attempting to enter and end the tenancy. Additionally, common areas of the property should not be used until all paperwork has been completed and signed off on by both parties involved.

Sources:

https://www.bcrea.bc.ca/legally-speaking/listing-and-selling-tenanted-properties-553/

https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/during-a-tenancy/selling-a-tenanted-property

Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

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