Purchasing a new home, whether to occupy yourself or as a rental/investment property, can be an exciting yet daunting process.  There can be an added level of complexity if the home is occupied by tenants put into place by the prior owner, whether you intend to keep those tenants or not.  In British Columbia, the Residential Tenancy Act (“Act”) sets out the statutory scheme application to residential tenancies.  These requirements are generally enforced through the Residential Tenancy Branch which has authority to deal with tenancy disputes.  The laws are quite protective of tenants and are very specific as to the obligation of both parties.  The Act itself confirms that landlords and tenants cannot contract out of the Act and applicable regulations so regardless of the terms of the tenancy agreement, it is imperative that both landlords and tenants be aware of the legislative requirements.

As a purchaser of a home occupied by residential tenants, you take on the obligations of the landlord under the pre-existing tenancy arrangement.  This applies whether the tenancy agreement is in writing or simply a verbal agreement. Although its not recommended, tenancy agreements can be entered into by the exchange of monies for deposit(s) and/or rent, so the terms of the tenancy agreement may not exist in any written format.  Accordingly, it is very important for a purchaser to be fully aware of the terms of the existing arrangement. As part of the due diligence process, a request should be made for a number of items including a copy of the written tenancy agreement and the Condition Inspection Report (which must be completed at the beginning and end of every tenancy).  This process needs to be a condition in the real estate contract.

The tenancy agreement itself will document the terms agreed to between the landlord and the tenant.  There is a standard form tenancy agreement provided on the Residential Tenancy Branch website which includes all of the key terms.  It is by far the most common version of the agreement used and is a form fillable version. Updated forms of the Residential Tenancy Branch tenancy agreement should be obtained directly from the Residential Tenancy Branch website to ensure you have a valid form of agreement.  Besides being comfortable with the general terms, one of the most important pieces to be aware of is found in Section 2 of the standard form agreement which has been pasted below:

The key significance of this section revolves around the ability of the landlord to terminate the tenancy.  If the tenancy agreement is on a month to month basis either under 2(a) or 2(b)(i), the landlord is restricted from terminating the tenancy and evicting a tenant except in strict compliance with the legislation.  Under the Act, such a tenancy can only be terminated in certain circumstances including, but not limited to, the following:

• Unpaid/late payment of rent or utilities (and ensuring compliance with the required notices and processes);
• Tenant (or tenant guest) caused damage/jeopardizing health and safety to property or other tenants/failure to comply with tenancy agreement (all after written warnings provided by the landlord)
• Has an unreasonable number of occupants in the property;
• Landlord’s use of the property; or
• Landlord’s intention to complete major renovations.

If the purchaser (or his or her immediate family member) is intending to occupy the rental space as their residence or if the purchaser intends to complete a major renovation that requires the tenant to move out, a notice to terminate the tenancy agreement may be used. However, the notice requirements are very specific and the tenant is entitled to the last month rent free (or payment equal to one month’s rent).  Who is responsible for this cost depends on the timing and on the terms of the contract of purchase and sale.  On the other hand, if the purchaser is simply wanting to have the tenant leave so they can find a new tenant, particularly if they’re looking for an increase in rent, they are not legally entitled to do so and will be restricted to the statutory rent increases.  Penalties for evicting a tenant under the Two Month Notice to End Tenancy may be applied should the Residential Tenancy Branch find a landlord guilty of evicting a tenant without proper cause under the Act.

Under the Act, the obligations with respect to security and pet deposits will also transfer to the new owner so it is important to get the Condition Inspection Report. This will be needed to determine whether the tenants caused any damage to the property such that the landlord can claim all or a portion of their security deposit.  Without the report, it is impossible to know, and prove, at what point the damage occurred. In order for the landlord to claim the right to retain all or part of the damage deposit, the Condition Inspection Report must have been completed at the commencement and the termination of the tenancy.

As with most matters surrounding a home purchase, we strongly recommend that a lawyer is consulted with respect to the implications of assuming a tenant with a newly purchased property.  The law is very specific in this area and strict compliance is a necessity.  A failure to do so can result in a tenancy dispute proceeding which can tie up the property as well as a significant amount of time and energy and be quite costly.

Please do not hesitate to contact us if you are thinking about buying a home with an existing tenancy or are considering renting out your new home.

Author: Una Gabie

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of real estate law at the following: