Landlords looking to sell rental units should be very cautious in providing vacant possession as a condition of sale and are better off letting the purchaser navigate the termination of any tenancy agreements after the sale has closed.
Although the Residential Tenancies Act, 2006 (“RTA”) specifically permits the eviction of a tenant in anticipation of a new buyer taking possession of a unit, it remains a gamble for landlords to enter into an Agreement of Purchase and Sale with a condition of vacant possession.
Under section 49 of the RTA, a landlord can provide notice of termination to a tenant on behalf of the purchaser if the following criteria are met:
- The seller (landlord) and the purchaser have already entered into an agreement of purchase and sale of the residential complex;
- The residential complex has no more than three residential units or is a condominium;
- The purchaser requires possession of either the entire residential complex or the unit for the purpose of residential occupancy;
- That residential occupancy will be by:
- The purchaser;
- The purchaser’s spouse;
- A child or parent of the purchaser or the purchaser’s spouse; or
- A person who provides or will provide care services to any of the above if the person requiring care resides or will reside in the same building; and,
- The purchaser is acting in good faith in requiring possession.
It’s All About Timing
Besides common technical deficiencies faced by a landlord in this kind of eviction, the real issue a landlord will face is one of timing.
The RTA requires that the tenant receive notice of termination at least 60 days prior to the termination date. Upon first glance, this may seem like a comfortable time period. However, this is just the beginning for most attempted terminations of tenancy.
Despite valid notice of termination of tenancy, the tenant has the right to dispute the eviction. The tenant does not need to inform the landlord of an intention to dispute, they can simply continue to occupy their unit under the tenancy agreement. In this circumstance, the obligation is on the landlord to apply to the LTB for an eviction order to formally terminate the tenancy. Until an order for eviction is granted, the tenant remains a lawful occupant.
Once the application for an eviction order is filed by the landlord, the parties must wait for a hearing to be scheduled before the LTB. The average delay is currently 6 to 8 months from when the application is filed. This will be the landlord’s first opportunity to receive an order of eviction and secure vacant possession. For the typical real estate transaction, this could be fatal.
Should the closing date be prior to the scheduled hearing date, the seller will likely be in breach of the agreement of purchase and sale. Based on this breach, the buyer may then (i) consider the agreement cancelled, and (ii) sue the seller for damages.
To save the deal, the seller could provide the tenant a “cash-for-keys” lump sum payment or request an extension on the closing date (likely with a penalty).
Am I Guaranteed Vacant Possession at the Hearing?
However, even if you do extend the closing date to allow the hearing to take place, you may not get an order for immediate eviction.
For example, the application may be rejected for technical deficiencies, or the hearing may be rescheduled if the tenant fails to appear.
The tenant may also invoke the Board’s power to delay or entirely deny the eviction under section 83 of the RTA. Depending on the circumstance, the Board may even be required to refuse the application.
Am I Guaranteed Vacant Possession with an Order?
Be further warned that, at least in the Ottawa area, even with an eviction order in hand, it currently takes approximately one (1) month for the sheriff to evict a tenant who refuses to vacate. This is an additional consideration for any real estate transaction where closing is being extended to allow for vacant possession.
What if the Purchaser Does Not Take Valid Possession?
Finally, the landlord should consider the risk that the purchaser does not take possession under the conditions put forward in the original notice, which could create a situation of unnecessary liability and headache.
Where evictions of this nature are made in bad faith, damages can include further compensation for the tenant, moving expenses, a fine of $10,000, and any other order that the LTB considers appropriate.
So, What Can be Done?
A lawyer who is familiar with the RTA can guide you through the required steps and provide strategic advice so as to not jeopardize your real estate transaction and protect you from any potential claim from a disappointed buyer. This includes:
- Ensuring technical requirements are met;
- Negotiating terms that ensure the tenant will vacate prior to closing, referred to commonly as a “cash for keys” deal;
- Requesting an expedited hearing;
- Identifying potential risks or obstacles;
- Advocating for immediate eviction and opposing section 83 arguments raised;
- Protecting the real estate transaction.
About the Author: Hayley is a bilingual litigation associate at Soloway Wright LLP whose practice includes disputes in residential real estate transactions and landlord and tenant board matters. Prior to becoming a lawyer, Hayley worked for years in short and long-term residential leasing.
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DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.