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.

If you haven’t bought a condominium before, or any property for that matter, you’ve probably never seen a purchase contract.  It’s a pretty important piece of the puzzle when you’re looking to buy a property so let’s not wait until you’re ready to write an offer to start getting familiar with it.  Here is a brief overview of the general terms and conditions: 

The first bit of information we will need to include is the legal names of anyone going on the offer, who will also be on title assuming you go firm on the purchase.  This means what it says on your ID has to match - spelling and all - not an alias or preferred name, including your parents or anyone else who needs to be on it need to be on it for financing purposes, or if you are buying it under your business/corporation name/number (which will require proof of signing authority so we know that you have the right to act on behalf of the company).

1. THE PROPERTY

• 1.1(a): Describes the specific details of the condo unit, including address, project name, and legal information.  I '(or your Realtor) will fill this out, referencing the Title, ensuring accuracy.

• 1.1(b): Outlines parking and storage details - might be titled or assigned, your Realtor will fill this out

• 1.1(c): Mentions any unattached goods - this includes any appliances, window coverings, keys, furniture, electronics, anything you expect to stay with the property on moving day and is negotiable (meaning the seller could strike or add certain items they intend on keeping or leaving).  If there is any gray area with attached vs. unattached goods (common ones are TV & wall mount, garage shelving, etc.), it’s better to itemize it out if you have strong feelings one way or the other to make sure there is no confusion or disappointment on moving day

• 1.1(d): Specifies excluded attached goods - this is often left blank, it could include something like a light fixture (ie. chandelier) that is a family heir loom and the seller plans on taking & may offer to replace with something else that matches the rest of the decor. If there is something intended to be excluded that is typically left behind on move out, the seller usually discloses that at the showing stage so we can prepare the offer properly, or if there is something you very specifically want removed, we will include it here and follow up with verbal communication to the Seller’s Agent to make sure they don’t miss it since it’s commonly left empty.

2. PURCHASE PRICE AND COMPLETION DAY

• 2.1: States the purchase price - this is ‘the number’ that matters the most, it’s what you’re offering and the seller may counter before hopefully coming to an agreement and moving forward to an accepted offer.

• 2.2: Confirms if the price includes taxes - most residential re-sale does not need to acknowledge GST in the price.  Only new construction, a ‘flipped’ property that has been extensively renovated to sell, short term rentals (looked at as commercial properties by CRA) and commercial property does assess GST in the sale.  Only condominiumized short term rental properties (Airbnb/VRBO style rentals) use the contract we are currently breaking down, the others will be on a different contract which we are not looking at right now.  Feel free to reach out if you wanted to talk more about GST and when it does and doesn’t apply, the above is an overly simplified ‘list’. 

• 2.3: Specifies the completion day - aka moving day.  Your Lawyer will need to have all your down payment funds + lender instructions by today at the latest and you will get keys and can start moving in that afternoon… assuming all goes to plan.  The Seller could counter this if they have a specific date in mind.  It has to be a business day where the banks & lawyers are working.

• 2.4: Ensures the property's condition remains the same on completion day and all goods (attached or unattached) must be in good working order - this term is my favorite term to point out.  It is what protects Buyers but also sets expectations. The property DOES NOT have to be in BETTER condition than when you achieve an accepted offer.  It is not a new build (or it wouldn’t be on this contract) so it will have a little wear and tear; it can’t be in worse condition but it doesn’t have to be in better condition either.  If you are concerned about the cleanliness or negotiate that the seller will replace something like the carpet or re-paint a damaged wall, these things need to be included under 9.3) Other Terms or there is little recourse on the completion day if the property is, for better or worse, in substantially the same condition as it was on acceptance.  That being said, the appliances, as the included unattached goods, need to be in good working order so if we show up on the completion day and the fridge is not working, we can expect a remedy to that because of this term. 

3. GENERAL TERMS

• 3.1: Lists general agreements, including the use of agents, applicable laws, time sensitivity, and mutual responsibilities.

• 3.1(f): Requires the seller to disclose significant known defects (the word ‘known’ is key, if a seller isn’t aware of an issue, they can’t disclose it.  This is a big reason a home inspection is a good idea, you might find something the seller had no clue about before you brought it to their attention.  Once they know about it, there are requirements for remedy or we negotiate a term to ensure the seller addresses the issue prior to closing or a price reduction but all these things require it being or becoming a known/disclosed issue).

• 3.1(h) and 3.1(i): Outlines due diligence responsibilities for both parties.

• 3.1(l): Emphasizes the importance of reading and seeking advice before signing.

• 3.1(m): Allows brokerages and listing services to use transaction information.

• 3.1(n): Establishes who will provide contract and related documents/information to the Lawyers.  This is typically the Seller’s brokerage unless they are unfit to do so or there is some other reason to assign it to the Buyer or a Law Firm.

4. DEPOSITS

• 4.1: Establishes terms for deposit trust.

• 4.2 to 4.8: Details deposit-related procedures, responsibilities, and disbursements. 

  • The Seller’s Brokerage typically holds the deposit funds unless they are unfit to do so (like in a For Sale by Owner deal) and we assign it to the Buyer’s Brokerage or a Law Firm.

  • The Deposit is held in trust and is typically around 5% of the purchase price to show capacity - over simplifying here, but if you can’t come up with 5% you can’t get a mortgage so showing the Seller you have that ready to go is a show of confidence.  

  • The Deposit typically needs to be guaranteed funds (bank draft or wire transfer), personal cheques, e-transfers and global money transfers are not guaranteed so most brokerage policies won’t accept those forms of payment.

  • The Deposit is returned to the Buyer if they are unable to waive conditions by the specified date.  If you are successful at waiving conditions and proceed with the purchase (go firm), the funds are forwarded from the holding brokerage to the Lawyers to make up part of the purchase funds on the completion day.

5. LAND TITLE

• 5.1: Ensures the property title is free of certain encumbrances.

6. REPRESENTATIONS AND WARRANTIES

• 6.1: Seller assures legal right to sell, non-resident status, and truth of representations.

• 6.2: Specifies the timeline and enforceability of representations.

7. DOWER

• 7.1: Addresses potential dower rights and the need for specific documentation.  Dower Rights are only applicable if there is only 1 seller on title and that person is legally married and their spouse has spent the night in the property at some point throughout their marriage.  The Seller will determine if Dower Rights apply and if they do, the non-titled spouse will be included in the sale.

8. CONDITIONS

• 8.1: Requires reasonable efforts to fulfill conditions.

• 8.2 to 8.4: Outlines buyer's and seller's conditions and the process for satisfaction or waiver.  Condo doc review, home inspection and financing are typical but additional conditions could be relevant depending on your situation.  If you have a financing condition the ‘typical’ condition period is 2 full weeks, if you don’t need financing, you can generally shorten that as home inspectors and condo doc review specialists generally have availability within a few days of reaching out to them.  A shorter condition period is more attractive to Sellers and a way to ‘strengthen’ your offer in a competitive marketplace but you need to make sure you have enough time to do your due diligence and feel comfortable moving forward or not.

9. ATTACHMENTS AND ADDITIONAL TERMS

• 9.1: Lists attached documents forming part of the contract - This is often not needed, it would be typical if you are assuming tenancy or have a Sale of Buyer’s Home Condition and need to include a property schedule.

• 9.2: This is the amount for the condo fee & any additional known fees.  Your Realtor will fill it out and is generally disclosed in the listing.

• 9.3:  Other Terms - we can include any extras that aren’t already covered with the general terms and conditions.  One standard one is a include a walkthrough term on the morning of the completion day to confirm the property is in at least the same condition as when the offer was accepted and all the included goods are in good working order.  If we need a professional cleaning term or anything else, we will add it as appropriate.

10. CLOSING PROCESS

• 10.1 to 10.12: Details the closing process, including document delivery, payments, costs, and potential delays.

11. INSURANCE

• 11.1: Addresses the party responsible for property insurance until the purchase price is paid.

12. REMEDIES

• 12.1 to 12.3: Describes potential remedies in case of contract default.

13. NOTICE AND DOCUMENTS

• 13.1 to 13.4: Clarifies notice procedures and the use of electronic signatures.

14. AUTHORIZATION

• 14.1 to 14.3: Authorizes representatives for notice purposes.

15. CONFIRMATION OF CONTRACT TERMS

• 15.1: Confirms the completeness and exclusivity of the contract.

16. LEGAL OBLIGATIONS BEGIN

• 16.1: Specifies when legal obligations begin and their binding nature.

17. OFFER

• 17.1: Formalizes the buyer's offer and its acceptance timeline.  The offer has to have a timeline for response so we will give the seller usually around 24 hours to respond and if they don’t reply in that timeframe, the offer automatically becomes null and void.  If they counter, they will generally extend the time so you have time to reply back after receiving the new contract terms back.

18. ACCEPTANCE

• 18.1: Confirms the seller's agreement to the terms.  If the Seller counters (changes) anything, the Buyer will have to initial off on those changes to confirm acceptance.  The offer is not accepted until all parties agree to all terms by way of written (initialed) acknowledgement. 

This breakdown should help the buyer, with the guidance of their Realtor, understand the key aspects of the condominium purchase contract before signing. It's important to seek legal advice and clarification on any terms that may be unclear.  As always, I am happy to dive deeper into any of the topics brought up in this blog post or anything else you have questions about in regards to the Buying and Selling process in Alberta.