Selling a Tenanted Property

Guide for Realtors and Landlords

By Puneet Shroff

Selling a residential property in Ontario is not always straightforward when there is a tenant living in the home. A tenant does not automatically have to move out simply because the landlord has decided to sell. This is one of the most important points for both landlords and Realtors to understand before the property is listed.

In most residential tenancies, the tenancy continues unless it is ended properly under Ontario’s Residential Tenancies Act. If the property is sold while the tenant remains in possession, the buyer generally becomes the new landlord after closing. That means the existing lease, rent, deposits, and tenant rights usually carry forward.

Before accepting an offer that requires vacant possession, the seller should confirm whether there is a lawful and realistic way to deliver it. This includes reviewing whether the tenant is month-to-month or still within a fixed-term lease, whether the buyer genuinely intends to occupy the property, and whether there is enough time to follow the proper process.

Showings Must Be Handled Properly

A landlord is generally allowed to show the rental unit to prospective purchasers, but the tenant’s rights still matter. In most cases, the landlord must give at least 24 hours’ written notice before entering the unit. The notice should clearly state the reason for entry, the date, and a reasonable time between 8:00 a.m. and 8:00 p.m.

Practically speaking, cooperation is often more valuable than conflict. Realtors and landlords should try to provide as much notice as possible, group showings where appropriate, and avoid unnecessary disruption. A frustrated tenant can make the sale process more difficult, especially if the listing depends on repeated access to the property.

When the Buyer Wants to Move In

If the buyer, or certain qualifying family members of the buyer, genuinely intends to move into the residential unit, the seller may be able to serve an N12 notice for purchaser’s own use. This is commonly used in sales of single-family homes, condominium units, and small residential properties with three or fewer units.

However, an N12 is not just a formality. The sale must be in place, the purchaser’s intention must be genuine, and the intended occupant must plan to live in the unit for at least one year. The landlord must also provide the required compensation, usually one month’s rent, by the termination date.

Timing is also critical. The N12 generally requires at least 60 days’ notice, and the termination date must usually line up with the end of the rental period. If the tenant is still in a fixed-term lease, the termination date cannot usually be earlier than the end of that lease term.

N12 Does Not Guarantee the Tenant Will Leave

Serving an N12 does not physically remove the tenant from the property. If the tenant does not move out by the termination date, the landlord must apply to the Landlord and Tenant Board for an eviction order. Until an eviction order is obtained and enforced through the proper process, the tenant cannot simply be locked out or removed.

This is where sellers can run into closing problems. If the Agreement of Purchase and Sale requires vacant possession, but the tenant has not moved out by closing, the seller may be unable to deliver what was promised. That can create disputes between the seller and buyer, delayed closings, requests for holdbacks, or even litigation.

Negotiated Vacant Possession

In some situations, the most practical solution is a negotiated agreement with the tenant. This is often referred to as a “cash for keys” arrangement. A properly documented agreement can give the seller, buyer, and tenant more certainty than relying on a contested eviction process.

That said, any agreement with the tenant should be voluntary and carefully prepared. Landlords should avoid pressure tactics, misleading statements, or informal side deals that are not properly documented.

Takeaways for Realtors and Landlords

Before listing a tenanted residential property, it is important to understand the tenancy, review the lease, confirm the tenant’s rental status, and consider whether vacant possession is actually achievable. Realtors should also be cautious about how the property is marketed and how offers are drafted.

For landlords, the key is to plan early. A tenanted property can certainly be sold, but the tenancy must be handled properly. The earlier the legal issues are identified, the easier it is to avoid problems with showings, closing dates, purchaser expectations, and vacant possession.

Puneet Shroff assists landlords, property managers, sellers, buyers, and Realtors with residential real estate transactions and tenancy-related issues across Ontario. You can contact Puneet at pshroff@sorbaralaw.com.