Buying a Property with Tenants: 5 Things You Must Know

Buying a Property with Tenants: 5 Things You Must Know

So you are buying a property with tenants in the home?  There is a risk to this!  I’m Meegan Dennie, a real estate agent in Toronto, Ontario, Canada and In this video, I am going to take you through the must know’s and the must do’s, to help minimize your risk level.  

We are going to tackle two subjects in the video: 1) if you are purchasing the property to move into yourself and 2) if you are purchasing an investment property.  Typically, these properties are priced at market value or just below.  The reason for this is because when there is a tenant, you have to typically give them 24 hours notice for every showing.   If you are purchasing the property with the intent of moving into it on closing, then you need a few clauses in your offer/agreement to protect yourself.

• #1 - You will need to make sure the tenant is on a month to month lease.  If they are currently still in their 1 year lease agreement and that agreement doesn’t end for another 5 months, let’s say… the tenant doesn’t need to leave until the end of that lease agreement.   If they are month to month, You need to have the seller provide a minimum of 60 days notice to the tenant.  Which means, your closing date or move in date will not be until 60 days or later.  I recommend a later date, if you can just in case.  
• #2 - your clause should request for the landlord/seller to have the tenant sign a N11.  This form is found on the Landlord and Tenant Board website.  The form is called, Agreement to end tenancy.  This has the tenant officially signing off on the specified move out date and formally acknowledging that they are aware they need to leave the property and when the form was signed, further showing proof that they were given the appropriate amount of notice (i.e 60 days)
• In Ontario, it can be very time consuming and costly to have a tenant evicted from a property, even though you may have given the appropriate notice.  So, you need to have the tenants full cooperation and understanding to vacate the premises and give them enough time to find something else. 
• #3 - It’s always a good idea to find out the details of the tenant living there.  For example. How long have been living there? How much rent are they paying per month and have they been on time?  Is it a family? Etc
• #4 - purchasing an investment property that is currently tenanted -  You want to see the lease agreement if they are still under a lease agreement contract which is typically for one year..  I would also ask for all the documentation the tenant provided to secure the lease. Ex. employment letters, credit report, etc
• #5 - If they are a month to month tenant and have been there over one year, then you want to ask the seller for documents that can prove the tenant is paying the rent regularly.  Either bank deposits, etc.  Again, you would want to know who is occupying the property.  How long have they been there and how much are they paying, etc?  This will need to make sense for your costs, etc. 

Now that you know the risks of purchasing with a tenant occupying the home, I want to walk you through in my next video, what buying and selling looks like in the same market

Please subscribe for more of my informational videos.  I’m Meegan Dennie, a real estate agent in Toronto and the GTA, please don’t hesitate to call me for your real estate needs.