Bridgewell’s Guide to Selling Your Tenanted Property: What You Need to Know
Rental suites are becoming more common in the Greater Vancouver region as housing is more expensive. Many families that are living in single family homes are trying to subsidize costs such as property taxes or interest rate increases, so they are renting out their suites on a monthly basis. It’s a good way to recoup some of their housing investment, and the demand for rentals is certainly there with so many young students and professionals struggling to save up for a down payment.
With that being said, this blog is for any home owners that are thinking about selling their property. Whether they live in it with a renter downstairs, or the property is solely a rental, here are some details that you might need to know about showings, notice, and definitions/details on why rental income properties are attractive to home buyers. Read on!
What is the minimum amount of time I need to give my tenant notice when I am selling my house?
Two months notice to end tenancy if month to month tenancy, and written notice is required. A landlord must serve the Two Month Notice to End Tenancy so that it’s received:
- At least two months before the effective date of the notice, and
- Before the day that rent is due
For example, a notice given on March 15 would take effect on the last day of May. In this case, one month is to be rent free, thus the seller is compensating the tenant(s) with the amount equal to one month’s rent and only receiving one paid month out of the two months notice. It is also important to note that compensation is owed to the tenant even if they leave earlier than 2 months.
If the tenancy is in the form of a lease, the new buyers of the property cannot move in until the lease expires, unless otherwise mutually agreed to by both parties. The new buyer will have no power over to whether or not the tenancy will end early, the only way to end this type of tenancy early is if both the seller (current landlord) and the tenant(s) agree and complete a “Mutual Agreement to End Tenancy” form.
When should I give my tenant notice to move out if I am selling my house?
When you decide to list your home, make sure to inform your tenant that you are selling. If this is a property that is strictly tenanted, then make sure they are well aware that if you give them 24 hours notice then they are obligated to show the property. It is your right.
It’s not certain that you will sell your home right away or if the new buyers would be interested in keeping the tenants, so it is usually best to give the tenant notice upon a firm deal (once you have an accepted offer with subjects removed) given the new buyers require the home to be vacant upon possession.
How much can the buyer qualify for if I have a income-generating property (rental) vs. a non-income-generation property?
Income generating properties, for example single family homes with unauthorized or authorized suites, are very attractive to home buyers because they have income to support their mortgage payments. What’s more is that rental income can help to increase the buyer’s purchasing power, and ultimately allow them to qualify for a larger mortgage when applying for financing approval. However, this qualification also takes in to consideration whether the suite is legal/authorized or unauthorized in many situations across various lenders.
As a general rule of thumb, mortgage lenders and insurers will allow the purchase to add 50% of their annual rental income to their employment income when qualifying for financing. In some cases, lenders will even allow 100% of rental income to be added.
How do I deal with showings for the property?
As outlined in the BC Residential Tenancy Act, the seller/landlord must inform the tenant that the property is for sale and give the tenant 24-hour written notice to show the property, which must include the date and time, as well as the reason for entry – in this case a potential buyer showing.
Notice is given a minimum 24 hours in advance, not to exceed 30 days; generally with showing requests between the hours of 8am-9pm. Written notice is typically the best way to deal with this, rather than calling them, try to make sure there is some sort of text confirmation to show that you gave them 24 hours notice.
Keep in mind that the tenant does not have to comply with vacating the unit during showings, as landlords and realtors have to balance their need to show the unit with the tenant’s right to quiet enjoyment. In the event that you catch the tenant providing dishonest or falsified information about your rental property to the prospective purchaser, Section 47 of the Residential Tenancy Act allows a landlord to issue a One Month Eviction Notice for Cause for knowingly giving false information.
How can I deal with an uncooperative tenant?
There are a couple of different ways to deal with uncooperative tenants when selling your house. Usually if they’re uncooperative, it’s when showings are occurring. Do what you can to prep them in advance, and let them know that you will always give them 24 hours notice as per the Tenancy Act.
If you want to, you can make a schedule with them in advance and have your realtor try their hardest to only show during those designated times. But keep in mind, the majority of buyers won’t re-book a showing if the first request is rejected, and it is your right to show the property as long as you give 24 hours notice. Don’t let the tenants bully you in to only 2 hours a week of showing times… but if they’re give you a fairly wide range like 2-8PM Monday to Friday and 10-2PM on Saturday and Sunday, then it might not be a bad idea to go that route.
If issues continue to occur after already having prepped them, opt for the following:
- Approach the tenant(s) directly and try to resolve the issue. See how you could make it easier for them when showing the property, and share your concerns as well.
- Supply the tenant with a copy of your rights and responsibilities as well as theirs, as per the BC Residential Tenancy Act with regards to showing and selling the home.
- Serve One Month Notice to End Tenancy for Cause for cause.
Can the buyer take over the tenancy?
Yes, when the property sells and the tenancy is to continue, an additional agreement is not necessary as the purchaser assumes the tenancy with the original terms and conditions given they were written in. In the contract of purchase and sale the buyer’s agent will have most likely put that the current tenancy agreement between the seller (current landlord) and the tenant(s) is required for handover, that the security deposit be transferred to the new buyer at the completion date, and that upon possession of the property the current tenants would remain.
If the buyer takes title of the property later than the 1st of the month, the rent for that month is typically adjusted and split between the buyer and the seller. If desired, the new buyer can arrange a new agreement to be drafted with or without amendments to the terms and conditions already stipulated.
If the buyer wants to move in to the home, what do they have to serve in terms of paperwork?
If the buyer would like the home to be vacant at the time of possession, on the contract of purchase and sale in the “possession” section of the contract they would add ‘vacant’ in addition to their move in date and time. The buyer must also serve a written notice to tenants to move in, which would be provided by the buyer’s agent to the buyer to sign off on and then deliver to the seller’s agent.
Is having a vacant home better than a tenanted one?
If your tenants are extremely difficult, or the rent that you’re charging them is very low, it may not be a bad idea to sell the home while it’s vacant. A number of buyers may be looking for a quick possession (i.e. 2 weeks) and are in a rush to move if they’ve already sold their current place. Another plus to having a vacant home is showing times are extremely flexible, which means you’ll never miss a request or an interested buyer when it comes to showings. 50% of buyers don’t send in a second showing request after the first request is rejected. Some buyers may be doing a tour and are booking a last minute showing, and your tenanted property cannot accommodate due to the 24 hours restriction.
On the flip side, vacant properties that haven’t been staged can feel “cold,” “empty,” and often times smaller, and if the tenants are relatively clean then a tenanted property can feel more like a home. There’s pros and cons to each, if you’re thinking about it, it’s probably best to have a realtor come through the property while it’s still tenanted and give you their recommendation.
Other helpful tips:
If you’re thinking about selling in the near future, don’t get in to a new lease.
- Wait for your current lease to expire, then switch over to the month to month if your tenant is still interested in staying. With a month to month tenancy you require 60 days notice, while a lease cannot be broken until the expiry date unless mutually agreed to by both the landlord and the tenant. Buyers may need a relatively quick possession, and a long completion date (i.e. 6-12 months) can have an impact on your sales price.
If you’re not thinking about selling anytime soon, make sure to increase your rents accordingly every year.
- A number of buyers may be looking to take over the tenancy, and if that’s the case they will want to make sure that they’re receiving market rent. The amount of money that your tenant pays will have a direct effect on the price that your tenanted property sells for, so make sure that you’re increasing your rent within the parameters of the law accordingly.
It’s usually more difficult to sell and market a tenanted home, make sure that you really communicate well with your tenant about the sales process before you list.
- Marketing goes a long way, and if your tenant is really messy it can effect the online marketing in terms of pictures and the virtual tour. It can also shy away buyers that come in to look at the property, but can’t see past the junk. Try your best to communicate with your tenant beforehand, let them know that photography is important and your home needs to show well the day the pictures are taken, and also while the home is being shown. Explain to them that you’ll give them lots of notice, 24 hours is plenty, and you’d appreciate it if they would cooperate with you, and that you’ll do the best you can to communicate with them and hopefully have an investor purchase.
Be aware of your rights. Read through the BC Residential Tenancy Act beforehand.
- Don’t let your tenant bully you around and only book showings between certain times. You are entitled to show the home if you give them 24 hours notice. Do your best to be respectful of them and only show between 9AM-8PM, no later and no earlier. Make sure that your realtor adds in the realtor remarks and public remarks that 24 hours notice is mandatory as per tenancy act, so that there aren’t requests put in 2 hours before.
Are you thinking about selling your rental income and maxing out on the price of Vancouver real estate? Call us today at 604-765-0376 for your free evaluation and guideline of how to sell your partial or fully tenanted property. Prefer text? 604-319-0200. Or email us at firstname.lastname@example.org.
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