Selling Tenanted Properties

August 1, 2024 Update to the Extended Notice Period

Effective August 21, 2024, the Province will be amending the notice period from four months to three. Here’s a link to the government website.

Information Bulletin https://news.gov.bc.ca/releases/2024HOUS0141-001239

Many landlords believe they can end a tenancy just because they want to sell their rental property. However, this is not true, because according to British Columbia’s Residential Tenancy Act, a landlord cannot evict a tenant merely because they are selling their rental property. A landlord may only give tenants notice to end their tenancy if the buyer of the property wishes to occupy the property.

Sellers are often approached by buyers wanting vacant possession of an already tenanted property but landlords should be careful with what they can realistically deliver. Effective July 18, 2024, British Columbia introduced new rules to increase notice given to tenants and the mandatory use of a “Landlord Use Web Portal” to help curb bad faith evictions.

S. 49(5) requirement of the Residential Tenancy Act (the “Act”)

Section 49(5) of the Act provides a method for obtaining vacant possession of a tenanted rental property at the buyer’s request. If a buyer wishes for the seller to deliver vacant possession of a rental property, s. 49(5) requires the buyer of the tenanted property to give written notice to the seller that the buyer wishes to occupy the rental property. Receipt of that notice allows the seller to then give notice to the tenant to end the tenancy.

It’s important to understand that in the standard form contract used by Realtors for the purchase and sale of real estate, there is a clause that requires the seller to give vacant possession of the property on a particular date, unless otherwise noted that the tenancy will be transferred to the buyer. Vacant possession means that any tenancies at the property will be terminated and no tenant will be occupying the property. However, the clause does not require the seller to give a s. 49(5) notice. If nothing else is added to the contract to address the situation, the seller would be left in a position where they are legally required to deliver vacant possession but where they have no legal basis for being able to end the tenancy under s. 49(5) in the event the buyer fails or refuses to give its own s. 49(5) notice.

If the buyer has not delivered s. 49(5) written notice, it may force a seller to end the tenancy by mutual agreement with the tenant, which can be uncertain and expensive. Alternatively, if the seller is unable to end the tenancy with the tenant, it may cause the seller to breach a legally binding contract they entered into with the buyer.

Extended Notice Period

Beginning July 18, 2024, after the seller has received s. 49(5) written notice from the buyer, the seller must give a tenant four months’ notice to end a tenancy. Previously, the seller only had to provide two months’ notice. With the housing rental scarcity, it is becoming increasingly difficult for tenants to find long term rentals, so the extended notice period allows tenants more time to find a new home. Furthermore, the period during which a tenant may dispute a landlord’s s. 49(5) notice (e.g. if the tenant believes that notice was given in bad faith) has been increased from 15 days to 30 days.

Mandatory Use of the New “Landlord Use Web Portal”

Beginning July 18, 2024, landlords must use a new web-based portal to generate Notices to End Tenancy for personal occupancy or caretaker use. Landlords will have to use, at the very least, a basic BCeID to provide details about the person or persons moving into the home. Details such as the names, how many people are moving into the home, and the reason for ending the tenancy must be included. Those details will be shared with the tenant. The web portal will contain information for landlords such as the required conditions for ending a tenancy, penalties for bad faith evictions, and compensation that may have to be paid to a tenant for ending a tenancy.

The Landlord Use Web Portal allows the Residential Tenancy Branch to audit compliance with the Act when landlords evict tenants, and gather information about who is conducting bad faith evictions and how often.

Occupancy Requirements

According to the new rules, the person or persons moving into the property must occupy the property for at least 12 months. If the property is found to not be occupied for 12 months or is found to be renovated less than 12 months prior to ending the tenancy, it may be found the tenancy was ended in bad faith. The penalty for bad faith evictions is an order to pay the displaced tenant 12 months’ rent.

If a landlord has a purpose-built rental property that has five units or more, the landlord cannot use the personal use reason to end a tenancy.

How to prepare for a vacant possession sale

A seller must consider carefully whether to enter into a vacant possession contract, ensuring they work with a Realtor experienced in selling tenant-occupied properties. Make sure the terms of the contract are well known and follow the terms and conditions closely and consider having your lawyer review them before signing.