What If The Home You Want to Buy is Tenant Occupied?
You finally found a single family home you want to buy. There’s one wrinkle. The home is tenant occupied yet you want the property for your own use. That is you want to move in. The Agreement of Purchase and Sale states that, “Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.
Obtain Vacant Possession
Given Tenancy law, in Ontario there is a procedure that has to be followed. First and foremost you need to inquire as to the type of tenancy arrangement. Is there a lease or a monthly tenancy?
- If a lease, you must wait until the lease expires. You may have to close the deal and assume the tenants. You can give notice to vacate 60 days prior to the last day of the leas.
- If a monthly tenancy, you would ask for vacant possession in the Agreement on the basis that you want to move in. As this rule applies to any property that has 3 or fewer residential units, a single family home qualifies.
The Agreement of Purchase and Sale would have a clause stating that once all of the buyer’s conditions have been removed, the buyer directs the seller to give to the tenant the required notice requiring vacant possession for the buyer personal use or a member or his immediate family by a stipulated date.
The prescribed form to use is called the “Notice to Terminate a Tenancy at the End of the Term For Landlord’s or Purchaser’s Own Use.” A portion of this form discloses that the owner has signed an Agreement of Purchase and Sale and the purchaser wants to move into the home or unit. The notice must be given to the tenant at least 60 days before the last day of the rental period, not counting the day the notice is given.
The Tenant’s Options
The tenant may terminate the tenancy sooner or by the termination date. The tenant also has the right to stay in the home and cannot legally be evicted without an order from the Landlord and Tenant Board. So the Seller may not be able to guarantee vacant possession on closing. The landlord can file an application to the Board as soon giving notice; the Board will then schedule a hearing. This process may very well go beyond the last day of the rental period. So the Agreement should state that if the tenant fails to vacate, the buyer agrees to assume the tenant on completion.
Buyer to Move in and Indemnify Seller. The Agreement should also state that upon providing the buyer vacant possession, the buyer or his immediate family agrees to occupy the property immediately after closing. The Agreement should also specify that the buyer indemnify and protect the seller in writing from any action or claim made by the previous tenant against the seller if the buyer did not move into the home as represented, something that is out of the seller’s control.