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I Want to Sell But I Have Tenants, What Can I Do?

I Want to Sell But I Have Tenants,What Can I Do?

You have seen the market and how the trends have been going. Your property has gained some great value. Now it’s time that you have decided to sell…but you have tenants. So what can you do and what can’t you do? That’s the question.

Let’s talk about some of your options here.

Your Tenants Rights

  • If your tenant is in a lease, your tenant has a right to stay. That’s the cold hard truth…It doesn’t matter if a new owner wants to move in, the lease obligations transfer to the new owner until the end of the lease term.
  • If the tenant is month-to-month, the new owner may move into their space. This is the best case scenario for both the buyers and sellers, should there be any tenants. Hopefully you are at the point in your lease that it’s month-to-month.
  • You must give a minimum 60 days of written notice (from the first of the month) and the new owner must occupy the space themselves (or rent it to a family member) – they can’t simply kick the tenant out and rent it to someone else.
  • If a rental property is sold, there are two ways a tenancy can be ended if, in good faith, the buyer plans to occupy the unit or use the property for another purpose:
    1. The buyer makes a written request to the seller to end the tenancy before they take possession of the property (this cannot be a condition of sale) – the existing landlord then must give their tenant a Two Month Notice to End Tenancy for Landlord’s Use of Property.
    2. Once the buyer takes possession of the property, they can serve a Two Month Notice to End Tenancy for Landlord’s Use of Property
  • When a landlord ends a tenancy for landlord’s use of property or to do major construction, the landlord must give the tenant the equivalent of one month’s rent on or before the effective date of the landlord’s notice. This is true even if the tenant pays rent for the last month.
  • Fixed-term tenancies: Neither party in a fixed-term agreement (or lease) can end the tenancy early. If both parties agree to end it early, they can complete the Mutual Agreement to End Tenancy form
  • A Notice to End Tenancy is not required for fixed-term tenancies where a tenant is required to move out at the end of the term.

Timing

It’s tough knowing when to list your property? Should you list it while your tenant has a lease in place, at the end of their lease or wait until they have given notice that they are leaving? There’s a lot of factors to consider but having a plan is key.

  • Consider that the fact there’s a tenant already in place, and hopefully with a good rent coming in. This may be a benefit to the buyers. On the other hand though, if you are renting for below market value, that could be a deterrent to investors.
  • You’ll want to time the listing of the property towards the end of their lease. This is if you and your Realtor feel that the market shows your place with benefit most from selling to an end-user. This is someone who is going to actually live in the property when purchased.
  • Remember that once an agreement of purchase is in place, you can provide 60 days notice to the tenant (from the 1st of the month) on behalf of the new Buyer, if they (or their immediate family member) will be moving into it.
  • Remember to consider the fact that you may have to pay Capital Gains on your investment property. Talk to your Realtor and Accountant to help you with this question.
  • What’s happening in the real estate market? Are values in your building or neighbourhood increasing or decreasing? Should you lock in your returns and move on? What’s happening to interest rates? Are the properties selling, selling with renters or not and for how much?
  • Keep in mind that you cannot ask your tenant to leave because you want to sell, if they are in a lease OR if they are month-to-month tenants. There are rules that must be followed. Check out this link to help you with some tough questions.

Staging

As a landlord, how well a property is presented impacts price and how long it takes to sell. The key aspect to keep in mind is that you don’t have the right to stage your tenant’s apartment. You can’t force your tenant to rearrange their furniture, take down their personal photos or keep it clean. Here’s some strategies to help with the cooperation of your tenants:

  • You DO have the right to repair anything that isn’t working, give the walls a fresh coat of paint, change the light fixtures or wash the carpets.
  • If you think about it, odds are that your tenants will be okay with you sending in a maid service o give the place a great cleaning. This is definitely something to consider.
  • Having a good relationship with your tenants, or allowing your real estate agent to build a positive relationship with them, will go a long way to helping the sale. Happy tenants will be more open to de-cluttering and preparing their apartment. A fast sale is to your tenants benefit too.
  • Be sure to keep in good contact with your tenants. They may need help in finding that new place to live. Odds are your Realtor can help them, even if they are looking to rent or maybe they too are wanting to buy.

Marketing

  • It can be more difficult to market a tenanted property. Depending on your tenant, you might be restricted in what photos can be taken, or if you have a messy tenant, photos might work against you.
  • Tenants are often not very cooperative with open houses, so reaching potential buyers can be more difficult.
  • A good Realtor will market your home online, through all social media platforms and will have an idea already of the buyers that will be thinking of your place.
  • Again think staging as this will truly help you get the maximum value you deserve.
  • Think about asking your Realtor what their marketing plan includes.

Showings

  • You have a right to show your home to potential Buyers, provided appropriate notice (24 hours) is given. While it isn’t convenient for a tenant, it is your right.
  • The true key to this process is to always be respectful of the tenant. A cooperative tenant will go a long way to making the sale happen faster. The 24-hour notice requirement means that you’ll miss out on last-minute showings, but this isn’t unusual with investment properties in Vancouver.
  • Ideally, your tenant will leave their apartment during a showing, but again, this isn’t something that you can require.

More Selling Considerations

  • If you’re thinking of selling an investment house or a multi-unit property soon, make sure to not sign any new leases.
  • Having a vacant apartment is an attractive feature for many buyers. Especially if you want to make to sell for top dollars.
  • If you’re not thinking of selling soon, make sure to consider increasing your tenants rent every year.
  • The amount of rent your tenant pays will directly impact the sale price of your house. Because the lease transfers with the property, a tenant who is paying below market rent will mean the new owner will take in less income than they would with a comparable property.
  • Always charge market rent to a new tenant, and always increase rents annually by the amount allowed by law.

I imagine there will still be a ton of questions on your behalf. So lets this be an opening to the conversation that we deserve.

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