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:
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.
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.
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.
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.
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?
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.
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.
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.
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.
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:
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.
Showing the Property: Remember that 24-hour notice? It applies here too. Schedule showings with consideration for your tenants' schedules to avoid conflicts.
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:
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.
Notice Periods for Fixed-Term Leases: For fixed-term leases, you must wait until the lease term ends, unless the lease agreement states otherwise.
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.
