Buying a Rental Property for Personal Use – A Few Important Steps

SKRealEstateLaw 10 Different Times Blog FI

Just imagine this:

You find the home that you are going to buy.  You make an offer, and after some negotiations, it is accepted.  You deal with all your conditions, and remove them.  You understand that there is a tenant in the property, but the owner/landlord is going to ‘handle it’. 
The possession day comes.  You get the keys.  You open the door. 
There is Pete, the tenant.  Hanging out in his t-shirt and underwear on the couch in the middle of the house, playing video games.  All of his stuff is still there.
Ugh.
One of the transactions that can cause a lot of grief if not handled correctly is when a Purchaser is buying a home that is currently rented by a tenant.  If the tenant was planning on leaving in the first place, or is comfortable with being removed from the property, the deal may progress without a hitch.  The landlord might have some confidence that the deal can progress rather simply.  
However, if you are relying on Residential Tenancies Act (“RTA”)to remove the tenant from the property, you should be aware the procedure and eligibility for removal, or you might be stuck with old Pete hanging out in your living room for a while.***
Normally, if you are buying a rental property, you take it subject to the tenant that lives there, and the agreement that is already in place.  However, there are a number of uses by the landlord that can cause the end a tenancy. One of those exceptions (in broad strokes) is when they sell the rental property to a purchaser and the purchaser or close relative intends to live there.
Section 60 of the RTA describes how a vendor and purchaser of the property can have the existing tenant removed.  Some fairly significant criteria include:
(1)  Must be a tenant under a periodic tenancy, not a fixed tenancy (s.60(6))

 

(2)  Landlord has entered into a written agreement to sell the property in good faith, and all conditions are removed (s.60(6)(a)/(b))

 

(3)  The Purchaser requests that the Landlord end the tenancy for the reasons that the Purchaser or close friend/family will live in the property. (s.60(6)(c))

 

(4)  The notice needs to be delivered at least one month prior to the eviction date.
If the tenant decides to dispute this process, delay to the possession of the property can be increased significantly.  The process is as follows:
·       The tenant has 15 days to dispute the notice.  If the tenant does, then a hearing will be scheduled.  In previous presentations from the Office of Residential Tenancies (“ORT”), I understand that they try to do that in 7 business days, but there are no guarantees. 

 

·       Once the decision is made, the tenant would have 30 days to appeal the decision to the Court of Queen’s Bench. 

 

·       Once that decision is made, the tenant would have 30 days to seek leave to appeal to the Saskatchewan Court of Appeal (which is rarely done and even more rarely successful). 
Again, referring to the last presentation that I attended virtually on the subject, the ORT suggested a possession date of at least 2 months down the road to allow for this dispute resolution process to play out.  While it could last much longer than that, it was indicated that is a reasonable time frame for most disputes to be resolved.  Be aware that recently in Regina there has been some examples hitting the media of tenants who use their knowledge of this process to delay eviction as long as is possible through the use of the appellate courts.  See, for example, the following article: http://www.cbc.ca/news/canada/saskatchewan/regina-tenant-manipulates-system-to-squat-for-free-at-landlords-expense-1.3244756
There may also be some ways to draft your offer to purchase in such a fashion that it better protects you as either the vendor or purchaser.  The standard real estate contract likely needs a modification or a schedule with additional terms to best protect you when dealing with these types of transactions. As always, if you want to best protect you or your clients, these matters should be discussed with your lawyer prior to making the offer.

 

***Actually, in that case, the vendor’s lawyer would likely have the obligation to return the money to the purchaser if they didn’t get vacant possession to the property.  You could be taking the property subject to the lease of the tenant. The dispute resolution in that situation would be quite messy.  Let’s not focus on that.  Let’s focus on fixing it in the front end.  The explanation of how to fix after the fact can come in another article. 🙂
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