In the competitive Toronto real estate market, properties are in high demand but short supply, putting pressure on investors to move quickly to secure a sale.
But if you’re buying a tenanted property, there’s a lot to consider before diving in, especially for first-time landlords. Rentals in the GTA are regulated by the Landlord and Tenant Board of Ontario and you should know your rights and obligations before taking on a tenant (or trying to evict them!).
Evicting the tenant
When you buy a tenanted property, you step into the shoes of the previous landlord which means you take on the lease and all its conditions. Rent, duration of the lease, and any additional provisions must be honored to minimize disruption to the tenant.
So it doesn’t matter if your new tenant’s lease runs out in a month or in six months, you’re stuck with them for that period. Of course, when the lease is expired, you can then move to legally evict them by giving them 60 days notice and serving them an N-12 form, which is issued when a new purchaser (or a member of their family) requires the unit.
The N-12 can be served 60 days before the existing lease runs out, so you don’t have to wait another two months to move into your property. If the tenant’s original lease has already ended and they’re now living in the property on a month-to-month basis, you can ask the original landlord to serve the 60 days notice on your behalf.
Of course, the best option is always to resolve things amicably so if you want to get rid of a tenant, consider talking to them first, either directly or through their current landlord. You never know – they might be content to break the lease and move on. In this situation, the tenant can end whatever agreement they had with their previous landlord by issuing an N-11 Agreement to End Tenancy.
Waiting for the tenant to vacate
In some cases, the tenant has already decided to leave and is simply staying put while the lease runs out. This leaves landlords with two options – assume the tenancy as part of the sale, or wait them out and coordinate closing dates with the end of the lease.
Either way, it’s crucial to be clear. Include these details in your Agreement of Purchase and Sale so each party is protected and knows exactly where they stand.
Keeping the tenant
A rental property can be a great investment, especially in Toronto’s perpetually in-demand market. If you’re looking to turn your new condo into an income-earner by keeping the tenants, it’s a fairly straightforward process.
You have to honor the terms of the original lease, and these should be included in your Agreement of Purchase. Once that lease runs out, the tenant will automatically transition over to a month-to-month if no other agreement is made.
At this point, it’s a good idea to ask your tenant to sign a new lease and, if it’s been 12 months or more since the last increase, you can even bump up their rent (giving them 90 days notice before it takes effect). This year’s maximum rent increase is fixed at 1.2%, but you can exceed this in certain circumstances.
First-time landlords and property investors are often intimidated at the thought of dealing with tenants, but things don’t have to get fraught.
With respect, clear communication, and clarity around each party’s responsibilities, it’s possible to have a smooth sale and, if desired, a long-standing and mutually beneficial landlord/tenant relationship.
Whether you’ve just decided to become a landlord, or are simply looking for reliable and trustworthy property management, Highgate Properties can help. Leaders in property management, our knowledgeable team handles everything from maintenance to tenant relations. Contact us today to see how we can help you make the most of your investment.