The concept of ‘vacant possession’ is often guaranteed by realtors, however those who are familiar with the landlord and tenant procedures and the Residential Tenancies Act, 2006, know that such guarantee does not exist.

Clause 2 in the Agreement of Purchase and Sale is a very powerful clause, and, if not paid attention to, it can cost a seller (landlord) thousands of dollars in penalties.

Clause 2 states, “Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.”

If this clause is not removed from the agreement, the seller has undertaken the responsibility to ‘get rid of the tenant’ and provide vacant possession to the new purchaser on closing.

Upon a purchase/sale of a residential (tenanted) property, the seller (landlord) has 3 options to consider prior to listing the property for sale:

Option #1 – New purchaser to assume the existing tenancy

Include in the listing that the new purchaser is to assume the existing tenant and if the new purchaser agrees, the tenancy would just carry over and continue the way it is.

Option #2 – N12 – Notice to end the tenancy for the new purchasers use

The seller can serve the tenant the N12, upon a firm agreement of purchase and sale and file a copy with the LTB. Certain requirements of the N12 must be fulfilled which include providing compensation to the tenant in the amount of 1 months rent. The challenge that seller (landlords) will face is obtaining a hearing date which can take up to 7-9 months. This means that the closing date will have to be amended if a notice for a hearing is not received in time.

Please note- as mentioned, on the second page of the N12 notice, it informs the tenant- “if you don’t agree with this notice, you don’t have to move out”. The tenant has the right to remain in the property until a hearing date is set to contest the N12.

Please also note (as this is very important)- if the new purchaser does not move in to occupy the property as they affirmed in a declaration submitted to the LTB, the former tenant can bring a bad faith application (T5) against the former landlords claiming up to $50,000 in damages of pocket expenses, difference in rent from the former rental until compared to their new rental unit for up to one year from the date that they moved out of the property.

Option #3 – Cash for Keys

This option is controversial as may seller (landlords) think it is extortion… my opinion- it’s business!

This strategy is the more proactive approach as the seller (landlord) has an influence on the time and the outcome of the agreement, more specifically the termination date.

This strategy should be carried out by an experienced legal profession- it is NOT a DIY!

A legal professional will draft a proposal to the tenant providing them with a proposal for termination of tenancy and ask that they commit to one. If the tenant agrees, then a consent agreement which outlines the terms of settlement and an N11- Agreement to end the tenancy will be drafted.

Once those 2 documents are signed by all parties, they are filed with the board for an ex parte order (which is an eviction order without a hearing).

Please note- the tenant has 10 days from the date that the board issues the order to put a ’stay’ on the eviction if they change their mind. If this happens, then the board will set a date for a hearing about 4-8 weeks after the stay is put on the order to hear what the tenant has to say. Due to the consent agreement stating that the tenant was provided monetary compensation in exchange to end the tenancy, the board usually lifts the stay and allows for the eviction.

The reason that this strategy is so effective is that it can take 60-90 days to complete and the seller (landlord) can do whatever they want with the property- sell, re-rent at a higher amount, move in… etc.

The presence of a tenant in a residential property affects all parties on a sale of a property- the seller (landlord), the new purchaser, the lawyers… etc, and it is concluded that although there is no such “guarantee to vacant possession”, the seller (landlord) has options that they can consider prior to selling their income property.

The services of a licensed paralegal who is well versed with the RTA and has the experience in real estate and terminating tenancy should be considered and legal advise is recommended to be sought by the landlord.

This piece is from Bita Di Lisi, a Licensed Paralegal with Stonegate Legal Services and it does not reflect the opinion or endorsed by SOLO Inc.