Tenants and Rental Properties

What happens if you are purchasing or selling a rental property?  What do you do with the tenant?  Does the tenant have to stay or does the tenant go?

The standard sale and purchase contract used in Alberta is provided by the Alberta Real Estate Association (AREA).  That contract sets out that the seller is to provide the buyer with “vacant possession” which means that no tenants will be occupying the property as at the closing date (unless otherwise agreed to).

If the new buyer does not wish to take on the new tenant, then the seller will be required to serve on the tenant a notice terminating the tenancy.  This needs to be done well in advance to the possession or closing date, especially if the tenant refuses to leave.

In the event that you are buying or selling a property that is occupied by a tenant, and both the seller and buyer agree to keep that tenant, then certain considerations must be made including an assignment of the lease and the obtaining of a tenant estoppel certificate, among other things.

Assignment of the Lease to the Buyer and Tenant Estoppel Certificates

In the event that there is a tenant in the property, a decision must be made by the buyer as to whether or not they want that tenant to continue to reside in the property and pay rent to the new buyer.  If so, an assignment of the lease needs to be given from the seller to the buyer.  This will allow the buyer to become the new landlord to the tenant.  In addition, adjustments to the purchase price need to be made to factor in the damage deposit paid by the tenant (and presumably being held by the seller), as well as the rent paid or payable by the tenant during the month in which possession is to take place.

An estoppel certificate by the tenant may also be required if the new buyer is considering allowing that tenant to continue to reside in the property being purchased.  A tenant estoppel certificate is similar to a guarantee or promise by the tenant as to certain matters that cannot later be changed by the tenant.  For instance, the tenant may guarantee that they did or did not pay a security deposit, how much the deposit was for, whether current rent is or is not paid in full, the term of their lease, whether either the tenant or the landlord has defaulted on any terms of the lease agreement, among other things.