Ontario’s Fair Housing Plan has negatively affected more than just the renting market; it’s also negatively affected the process of buying and selling a property.
Longer Notice Periods and Longer Closings
If you have a client interested in buying a property, but it has a tenant, then make sure to extend the closing date because the required notice days have no doubled in length. In the past, only 30 days written notice was required to terminate a tenancy. Now it’s 60.
Another glitch: the date the tenancy ends must coincide with the end of term or rent period. This could result in a full year passing before your client can move in! For example if the tenant’s lease ends December 1, 2018, then your buyer can’t move until December 1, 2018 even if the closing date is November 1, 2017. And if you’re thinking of “fudging the dates” by giving less notice than is required, don’t! If the termination date is so much as a day off, the notice is invalid and you’ll have to start all over again.
It Costs More
Never has a landlord been required to compensate the tenant if the landlord gave proper notice and acted in good faith. No longer so. Section 48.1 of the RTA requires that the landlord compensate the tenant equal to one month’s rent. This amount has to be paid prior to the termination date specified on the N12 notice. This means a tenant can take the money and still refuse to leave!
Change Your Mind? Suffer a Big Fine!
Some realtors have encouraged investor buyers to buy a place and evict a tenant under the pretense that the buyer, or her family member, is moving in. Under the new rules, if the buyer gets caught, she can be fined up to $25,000.00. This fine can also be levied if the buyer decides to move out before twelve months are up following the date of eviction, rent it to her cousin and charge rent or demolish the place.
What to Do?
Given these rules, it’s important that you get a copy of the tenant’s lease. This way, you can gauge when your buyer can move in and how much she’ll have to pay the tenant to move out. It’s also important that you always use the updated forms found on the Landlord and Tenant Board’s website as previous forms are no longer valid.
To avoid extortion by the tenant – a practice whereby tenants demand money in order to move – make sure that your buyer, once she becomes the landlord, files an L2 application and obtains an order terminating the tenancy pursuant to the notice prior to the termination date. Ensure that the order references the payment so that it is documented that you will be providing the tenant with proper compensation. Getting an order in place speeds up the process if the tenant refuses to move following the notice date and prevents the tenant from extorting the landlord by demanding more and more money in order to move out.
While affordability is an issue and the housing reforms attempted to solve this matter, the reforms have disproportionately hurt landlords and those who are scrimping and saving to buy a home. As such, buyer agents, as well as seller agents, must be aware of these financial and practical changes, as these changes can destroy a deal.