Navigating the real estate market can be a bit of a rollercoaster, especially when you're dealing with properties that have existing tenants. Whether you're a buyer, a seller, or a landlord, understanding tenants' rights in Alberta is crucial for a smooth transaction. Let's break down what you need to know:

Tenants' Rights in Alberta: The Basics

First things first, let's cover the basics of tenants' rights in Alberta. The Residential Tenancies Act (RTA) is the main piece of legislation that protects tenants. This act outlines everything from security deposits to eviction notices, ensuring tenants are treated fairly and landlords uphold their responsibilities.

Here are some key rights tenants have:

1. Right to Privacy: Landlords must give at least 24 hours written notice before entering a rental property.  Tenants DO NOT have to vacate the property, they just have to allow access.  This means a Tenant can be home during showings - it’s preferred and more comfortable for everyone to have the property vacant for showings but it is not required.

2. Security Deposits: These cannot exceed one month's rent and must be returned within 10 days of the tenancy ending, provided there are no valid reasons to withhold funds.

3. Maintenance and Repairs: Landlords are responsible for ensuring the property meets health, safety, and housing standards. Unless otherwise stated or purposeful or negligent damage by a tenant, they are also responsible for appliances and fixtures to be in good working order.

4. Protection Against Unlawful Eviction: Tenants can’t be evicted without proper notice and valid reasons, as specified in the RTA.  Lease agreements supersede a purchase contract, selling the property is not a cause for eviction without proper notice and honoring tenants rights under the RTA. 

5. Insurance Responsibilities: Under the RTA, tenants are typically responsible for obtaining their own tenant insurance to cover personal belongings and liability. Landlords are responsible for insuring the property itself, including the building and any fixtures, but this insurance does not cover the tenant's personal possessions or liability.

Buying a Tenanted Property

So, you’ve found the perfect investment property—but it comes with tenants. What does this mean for you?

1. Assuming Tenancy and Adjusting the Purchase Contract: When buying a property with a tenant in place, you need to strike out 'vacant possession' in the purchase contract and include a Tenancy Schedule to assume the existing lease. This changes the property's classification to an investment property rather than the Buyer's primary residence, typically requiring a higher down payment due to ineligibility for a high ratio mortgage*. 

*Make sure your lender knows you intend to purchase a tenanted property as it could change your pre-approval even if you just need to bridge the 3 month notice period before the tenant leaves and you can move in yourself - otherwise you need to set the possession date for the end of the lease agreement, or required notice period, allowing for vacant possession and different lending options.

2. Honoring Existing Leases: As a new owner, you must honor any existing lease agreements. You can't just kick tenants out because you’re the new landlord.  You also can’t kick the tenants out to rent it to someone else (typically done to raise rent), you can only terminate a periodic tenancy if you or a family member intends to move in, if you sell the property and the Buyer or their family member intends to move in, if the property is undergoing major renovations or demolition or if the property is undergoing a change of use.

3. Transferring Security Deposits: The seller must transfer any security deposits to you at the time of sale. It's your job (or your Lawyer) to ensure this happens.  

4. Notification Requirements: You need to inform the tenants about the change in ownership. This should include your contact information and details about where and how they should pay rent.

5. New Inspection Walkthrough: After taking possession of a tenanted property, the buyer should conduct a new inspection walkthrough with the tenant. The standard clause in the purchase contract endorses the property's condition from when the offer was accepted, not from when the tenant moved in. Any issues the buyer wants the seller to address must be negotiated as part of the sale. When the buyer takes possession, they should expect to start with a blank slate, condition wise, with the tenant, meaning reasonable wear and tear* is assessed from the date of the new walkthrough.

   Any pre-existing issues should be addressed with the seller (who may be able/choose to address it with the tenant), before the keys are handed over.  The Tenancy Schedule request a copy of the Move-in Inspection Report but historically, in disputes, the Residential Tenancy Dispute Resolution Service has thrown out ‘inherited’ inspection reports unless the people (i.e. seller- who may no longer be reachable) who were present at the inspection can speak to the condition of the Property themselves.  In best case scenarios, you can probably get away with using the pre-existing inspection report but in my experience, it’s best to address any issues with the Seller pre-possession and conduct a new inspection yourself when you take possession of a tenanted property.

*Under the RTA, 'reasonable wear and tear' refers to the natural and gradual deterioration of a property due to normal use over time. This does not include damage caused by negligence or misuse by the tenant. Deductions from the security deposit can only be made for repairs beyond reasonable wear and tear, such as broken fixtures, holes in walls, or significant stains on carpets.

Selling a Tenanted Property

Selling a property with tenants requires a bit more finesse. Here’s what you need to keep in mind:

1. Notice of Sale: You should notify your tenants as soon as you decide to sell. This keeps them in the loop and helps maintain a positive relationship.  Keeping in mind, you cannot give them notice on a periodic tenancy until/unless you have a firm offer in place.

2. Showing the Property: Remember that 24-hour notice? It applies here too. Schedule showings with consideration for your tenants' schedules to avoid conflicts.

3. Lease Continuation: Unless the new owner plans to move in and gives proper notice, the lease will continue under the new ownership. This can be a selling point if your property is an investment opportunity or a problem if the Buyer needs a high ratio mortgage.

Terminating a Tenancy

If you or the new owner plan to occupy the property, you must follow legal procedures to end the tenancy:

1. Notice Periods for Periodic Tenancies: If you have a periodic tenancy (month-to-month), you cannot simply give 3 months' notice without a valid reason. The valid reasons include:

   • The landlord or their family intends to move into the property.

   • There is a firm offer on the property, and the buyer or their family intends to reside in the property.

   The notice must be given prior to the start of the next tenancy period. For example, if you provide notice on June 1 (or any day thereafter in June), the 3-month period starts on July 1. So, the tenant would have until the end of September to move out and vacant possession could be offered for October 1.

2. Notice Periods for Fixed-Term Leases: For fixed-term leases, you must wait until the lease term ends, unless the lease agreement states otherwise.

3. Eviction for Cause: If tenants violate lease terms, such as not paying rent, you can issue a 14-day eviction notice. Be prepared to provide evidence if the tenant disputes this.

Key Takeaways for Buyers and Sellers

• Due Diligence: Before buying or selling, review the lease agreements and understand your obligations.

• Communication: Keep open lines of communication with tenants to ensure a smooth process.

• Legal Compliance: Always follow the legal requirements set out by the RTA to avoid disputes and potential legal issues.

• The Residential Tenancy Dispute Resolution Service (RTDRS): In the event of a dispute, the RTDRS provides landlords and tenants with an alternative to the traditional court system for resolving disputes. This service offers a more accessible, cost-effective, and quicker way to address conflicts arising from residential tenancy agreements. The RTDRS can handle a variety of issues, including security deposit returns, rent disputes, eviction notices, and damage claims. Both landlords and tenants can file applications with the RTDRS, and a Tenancy Dispute Officer will review the case, conduct hearings, and make legally binding decisions. This service ensures that both parties have a fair and impartial venue to resolve their disputes efficiently - a service you hopefully never need to use but when you do, it’s there.

Navigating the real estate market with tenants involved might seem daunting, but with a clear understanding of the rules and a proactive approach, it can be a seamless process.  Know your rights as both a Tenant or a property Owner - and Happy Buying and Selling!

Disclaimer: This blog post is intended for informational purposes only and should not be considered as legal or professional advice. Every real estate transaction is unique, and it is important to consult with a qualified real estate professional or legal advisor to address your specific circumstances. While every effort has been made to ensure the accuracy of the information provided, errors and omissions may occur. The author and publisher assume no responsibility or liability for any errors or omissions in the content of this post.

British Columbia (really most of Canada) is grappling with a severe housing crisis, marked by a shortage of affordable long-term rentals and attainable housing options. This crisis is significantly exacerbated by the rise of short-term rentals, where over 16,000 entire homes are being used for this purpose, making it increasingly challenging for residents to secure affordable housing. In response, the BC government has introduced the Short-Term Rental Accommodations Act to alleviate the housing crisis by returning valuable housing inventory to the long-term rental market. These new regulations have the potential to ripple into Alberta, as investors may seek opportunities beyond BC's borders and international visitors may look for more stable and affordable rental opportunities when planning a trip to Canada.

BC's Housing Crisis

The scarcity of affordable housing, including long-term rentals, has become a pressing issue in British Columbia. Short-term rentals, particularly entire homes, are viewed as a major contributor to the problem, occupying housing units that could otherwise serve residents seeking stable accommodations. Local governments have taken steps to regulate short-term rentals, but enforcement of these bylaws remains a challenge, prompting a call for additional resources and tools.

Primary Goals of the Legislation

The newly introduced regulatory measures have three key objectives:

1. Returning Units to the Long-Term Rental Market: The most critical goal is to return short-term rental units to the long-term rental market. By achieving this, British Columbia hopes to mitigate the housing shortage, ensuring that more affordable housing options become available to residents through existing dwellings with new construction and development opportunities not keeping up with current demand.

2. Empowering Local Governments: These regulations aim to provide local governments with the tools needed to enforce short-term rental bylaws effectively. This empowerment allows local authorities to address the housing crisis at the community level.

3. Provincial Oversight: These regulations establish a provincial role in the oversight of short-term rentals, ensuring that standards and compliance are consistent across the province.

Scope of the Regulations

The new rules encompass all short-term rentals offered to the public, including various platforms like Airbnb, VRBO, Expedia, and other web listings such as Facebook Marketplace, Kijiji, and Craigslist.  However, specific exemptions include reserve lands, Nisga’a Lands, Treaty Lands of a Treaty First Nation (unless a coordination agreement is established with the Province), hotels, and motels.  The new legislation doesn’t apply to any municipalities with a population of less than 10,000 that aren’t immediately adjacent to larger municipalities (ie. greater Vancouver area), any of the 14 designated resort communities (Fernie, Golden, Harrison Hot Springs, Invermere, Kimberley, Osoyoos, Radium, Revelstoke, Rossland, Sun Peaks, Tofino, Ucluelet, Valemount, and Whistler) or are an Agri-tourism business. 

Key Changes and Implications

The new regulations introduce several significant changes, including:

1. Strengthened Enforcement Tools: Regional districts will witness a substantial increase in the maximum fines for bylaw violations, rising from $2,000 to up to $50,000. This aligns with municipalities under the Community Charter, equipping local governments with more robust enforcement capabilities.

2. Business Licensing Authority: Regional districts will gain the authority to regulate and license short-term rentals, similar to municipalities, under amendments to the Local Government Act. This ensures a uniform approach to regulation.

3. Display of Business License: In areas where a business license is required, short-term rental hosts must display a valid business license number on their listings, enhancing transparency.

4. Platform Accountability: Listings without a valid business license, where required, must be removed by the short-term rental platform at the request of the local government.

5. Data Sharing: Short-term rental platforms are obligated to share listing information with the Province, which is then shared with local governments to facilitate effective bylaw enforcement.

Returning Units to Long-Term Rental Market

To fulfill the goal of returning units to the long-term rental market, the regulations implement a provincial principal residence requirement. This requirement limits short-term rentals to the host's primary residence, along with one secondary suite or accessory dwelling unit. The principal residence requirement applies province-wide in municipalities with a population of 10,000 and over, and adjacent communities.

Exemptions for specific areas or accommodation types may be defined in future regulations. Local governments can also request to "opt in" to or "opt out" of the principal residence requirement, depending on local vacancy rates.

Provincial Oversight

To ensure compliance with the new rules, the Province will establish a short-term rental registry. Hosts will need to include a provincial registration number on their listings, along with their business license number if required. Short-term rental platforms must validate these numbers against the provincial registry data.

Additionally, a provincial compliance and enforcement unit will be established to track compliance, issue orders, and administer penalties for violations.

Implications for Alberta

The introduction of these regulations in BC has sparked discussions about potential implications for Alberta's real estate landscape. As investors in BC navigate the changing regulatory environment, Alberta may emerge as an attractive destination for those seeking new opportunities in the short-term rental market. The possibility of a more stable regulatory environment in Alberta, combined with the potential for increased demand in this sector, could lead to investors selling their BC properties and venturing into Alberta or other parts of Canada.  The stringent limitations on short-term rentals in BC may divert tourism dollars to other regions in Canada, like the Bow Valley, where a wider range of more affordable accommodation options are available, potentially attracting more visitors and bolstering local tourism economies.

If you are looking to purchase a vacation rental property in Canmore, you may want to secure a purchase sooner than later in the event that we do see an influx of BC investors looking to move their for profit housing investments to other markets. 

For prospective homebuyers in Canmore, the impact of BC investors shifting their focus to the Bow Valley should be minimal. Canmore has been proactive in addressing short-term rentals long before online platforms like Airbnb and VRBO became popular. The town's Land Use Bylaws have already established clear guidelines for short-term rentals – a property must have "Visitor Accommodation" or "Tourist Home" designated as a permitted use. Licensing requirements, much like those soon to be introduced in BC, have been in place for years. These regulations are aimed at preserving existing residential inventory from being converted into short-term rentals and safeguarding long-term renters from potential displacement by landlords seeking higher profits through short-term rentals. While tackling the housing crisis is crucial, Canmore's unique challenges are driven by various factors, including residential properties that remain vacant and a focus on Visitor Accommodation developments rather than residential ones, which does not effectively address the town's supply issue or provide affordable housing for its residents. Adopting a similar approach to BC's Short-Term Rental Accommodation Act wouldn't provide a viable solution to Canmore's housing crisis, as the town has already implemented similar control mechanisms to prevent or discourage the conversion of long-term rentals into short-term ones.

Conclusion

BC's new regulations for short-term rentals represent a concerted effort to address the housing crisis by returning valuable housing inventory to the long-term rental market. While the impact on BC's real estate and tourism industries is evident, the implications for Alberta may include an influx of investors looking for more favorable conditions. As these regulations unfold over the next two years, it's essential to stay informed about how they shape the real estate landscapes in both provinces, working toward a balance that benefits residents, investors, and the broader community.