Buying Property With An Existing Tenant – Your Legal Responsibilities
Thinking about buying a property with an existing tenant? Whether you’re planning to keep the tenant as part of a rental investment or hoping to move in yourself, it’s important to understand how Ontario’s tenancy laws could affect your plans. From lease agreements to tenant rights, there are key legal factors to consider before you make an offer.
If you’re ready to make an offer on a tenanted property, working with a real estate lawyer can help ensure everything is handled properly from the start.
What Is a Tenanted Property?
A tenanted property is simply a home or unit that someone is currently renting. In Ontario, when you’re buying property with an existing tenant, you’re taking over the lease and that means you’re also taking on the legal responsibilities that come with it.
Tenants in Ontario have strong protections under the Residential Tenancies Act (RTA), which stays in effect even after the property is sold. You can’t raise the rent or ask the tenants to leave just because you’re the new owner. It’s a good idea to review the act before you take on a tenant or consult with an experienced real estate lawyer who can explain what’s covered.
Before Buying Property With An Existing Tenant, Review the Lease
One of the first things you should do is review, with your lawyer, the current lease agreements which you can request from the seller. These tell you how much rent is being paid, what the tenant is responsible for (like utilities or yard work), and if there are any special terms. You’ll also want to confirm that the lease follows Ontario’s rental laws—some agreements may include clauses that aren’t actually legal or enforceable.
Some things you should review in the lease agreements:
- Rent payment terms and history
- Lease start and end dates
- Any provisions for lease renewal or termination
- Restrictions on property use or modifications
- Pet policies and any associated fees
- Parking arrangements
It’s a good idea to make your offer conditional on reviewing the lease, just in case something comes up that doesn’t work with your plans. A real estate lawyer can help you go over everything before you commit.
Your Role as the New Landlord Of A Tenanted Property
Once you take possession of property with an existing tenant, you officially become the landlord. That means you’re now responsible for things like collecting rent, handling maintenance and repairs, respecting the tenant’s right to privacy, and following the legal process if you ever need to end the tenancy. If you’re buying the home to live in yourself, you can’t just ask the tenant to leave. The seller must give proper notice before closing, and even then, the process can take several months.
Ontario’s rules are strict, and one of the biggest obligations you take on is honouring the existing lease. You can’t change the rent, add new rules, or evict the tenant just because ownership has changed. If the sale is conditional on the property being vacant, it’s up to the seller to make that happen before closing. Otherwise, you’re bound by the lease in place.
What If You Want To Evict The Tenant and Live There Yourself?
If you plan to move in yourself, the seller must give the tenant 60 days’ notice using an N12 form, offer one month’s rent as compensation (or another suitable unit), and provide a signed statement confirming you or a close family member intends to live there for at least a year. Even with that notice, the tenant can wait for a Landlord and Tenant Board hearing before leaving, which may delay your move.
Because this process can take a long time and there are penalties for doing it wrong, it’s crucial to work with a real estate lawyer. They’ll make sure your Agreement of Purchase and Sale includes the right clauses to protect you, or help you explore other options like a “cash-for-keys” agreement – a mutually agreed-upon arrangement where a landlord offers a tenant a payment to vacate a rental property.
Thinking Of Buying a Property With An Existing Tenant? Work With The Skilled Lawyers At Hukam Law To Protect Your Interests
Buying a property with an existing tenant can be a smart investment, but it’s not as simple as just taking over the keys. You’re also stepping into a legal relationship with the tenant and that comes with both rights and responsibilities.
To make sure everything goes smoothly, you need to work with a real estate lawyer from the beginning. At Hukam Law, our lawyers have a strong background in real estate and tenant rights in Simcoe County and the GTA and can offer you legal guidance to understand the rules of buying a tenanted property.
Call us at 705-915-0884 or email info@hukamlaw.ca to speak with one of our real estate lawyers today.
***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.