Real Estate

Buying a tenanted house during COVID 19?

  • Last Updated:
  • May 5th, 2020 1:11 pm
Tags:
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes

Buying a tenanted house during COVID 19?

Was looking at houses, some have a tenant in the basement, would they be evicted by closing date?

Should I stay away from buying a house with a tenant right now as lucrative the price is?

Ontario-GTA location.
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
19 replies
Deal Addict
Feb 19, 2019
1033 posts
1387 upvotes
Stouffville ON
Buying a tenanted house could be a pain in the butt and many people see it this way, hence an opportunity to score a decent deal if you are willing to take on the potential headache.
If the tenants don’t want to leave the chances of evicting them are pretty much zero right now, you can put proper clauses and conditions in your offer and put the onus on the seller to have the property empty on closing, if they are not able to do so they will need to be a compensation since they have not fulfilled their part of the contract. The seller may of course reject any such clauses or conditions.
Full Time and Full Service Realtor
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: Was looking at houses, some have a tenant in the basement, would they be evicted by closing date?

Should I stay away from buying a house with a tenant right now as lucrative the price is?

Ontario-GTA location.
You should be talking to your realtor and lawyer about questions like this. You can specify a vacant possession in your offer, which means it's up to the current owner to secure an end to the tenancy. However, you still run the risk that no matter what was decided between the landlord and tenant, the tenant decides to remain in place, which means a headache for everyone. But by specifying a vacant possession, you would have the option later to go after the seller/landlord for any damages you incurred because you couldn't get full possession.

I guess a big part of the question would be "How critical is it to you that you get a vacant possession?". If it means you can't move in and you'll be homeless with your stuff in storage and 4 kids sleeping in the car until you can get full possession, then I'd say it's a bigger risk than I might want to take. If it's a minor inconvenience (you're buying it as an investment property, but want to pick your own tenants), then it might be worth taking the chance.

C
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
senasena wrote: Buying a tenanted house could be a pain in the butt and many people see it this way, hence an opportunity to score a decent deal if you are willing to take on the potential headache.
If the tenants don’t want to leave the chances of evicting them are pretty much zero right now, you can put proper clauses and conditions in your offer and put the onus on the seller to have the property empty on closing, if they are not able to do so they will need to be a compensation since they have not fulfilled their part of the contract. The seller may of course reject any such clauses or conditions.
But the contract by default has "Vacant possession" which means they should have it vacant by the time I take possession.
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
CNeufeld wrote: You should be talking to your realtor and lawyer about questions like this. You can specify a vacant possession in your offer, which means it's up to the current owner to secure an end to the tenancy. However, you still run the risk that no matter what was decided between the landlord and tenant, the tenant decides to remain in place, which means a headache for everyone. But by specifying a vacant possession, you would have the option later to go after the seller/landlord for any damages you incurred because you couldn't get full possession.

I guess a big part of the question would be "How critical is it to you that you get a vacant possession?". If it means you can't move in and you'll be homeless with your stuff in storage and 4 kids sleeping in the car until you can get full possession, then I'd say it's a bigger risk than I might want to take. If it's a minor inconvenience (you're buying it as an investment property, but want to pick your own tenants), then it might be worth taking the chance.

C
Not an investment, want to move into it, and would need to sell my current house to do so as well. The contract itself as per my realtor states "Vacant Possession". I worry that I sell my house then I won't have a place to be in having kids. Can't just go to my family's basement as I don't want to expose or burden them either.
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
I heard that kicking out a tenant is a problem if they don't want to leave, but don't know what COVID-19 would add into that noting that LTB is closed. Like if I buy and have a closing of 6 months, would that be enough?
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: But the contract by default has "Vacant possession" which means they should have it vacant by the time I take possession.
Sure, that's what it means. But just because they agree to it doesn't mean the tenant isn't going to be squatting in your basement when your possession date arrives. There's a process for evicting a tenant that doesn't want to move out, and right now in particular, it's a higher risk process because the LTB isn't taking in-person hearings and is likely backed up the wazoo. The tenant could agree to moving out right up until the day you take possession and then suddenly change their mind because they didn't find a suitable place, and you'll be potentially screwed. Your only real protection at that point is the fact that you specified "vacant possession" in your purchase agreement, which gives you an opportunity to pursue the seller/landlord for your damages.

C
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: I heard that kicking out a tenant is a problem if they don't want to leave, but don't know what COVID-19 would add into that noting that LTB is closed. Like if I buy and have a closing of 6 months, would that be enough?
As I mentioned in my post right above this... You can specify whatever closing you like, but if the tenant changes their mind at the last minute, you'll still be left holding your suitcase in your hands on your new driveway, with nowhere to go. You'd still have to go through the actual eviction process. In 6 months, maybe it won't be as painful as it would be, say, this weekend, but it still won't happen overnight. Even at the best of times (aka "pre-covid"), it could still take weeks to accomplish.

C
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
CNeufeld wrote: Sure, that's what it means. But just because they agree to it doesn't mean the tenant isn't going to be squatting in your basement when your possession date arrives. There's a process for evicting a tenant that doesn't want to move out, and right now in particular, it's a higher risk process because the LTB isn't taking in-person hearings and is likely backed up the wazoo. The tenant could agree to moving out right up until the day you take possession and then suddenly change their mind because they didn't find a suitable place, and you'll be potentially screwed. Your only real protection at that point is the fact that you specified "vacant possession" in your purchase agreement, which gives you an opportunity to pursue the seller/landlord for your damages.

C
Realtor said that he would have a visit or two included prior to closing. He said I can use those visits to check. But by that time if I am visiting a day before, I already have "sold"/"rented out" my current residence. Which means no place to be in. However if I visited it 2 weeks prior, I would still see the tenant is there and will not mean anything as they would say that they will leave in a week.
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
Deal Fanatic
Jul 3, 2011
5773 posts
2936 upvotes
Thornhill
PriceHunter wrote: Realtor said that he would have a visit or two included prior to closing. He said I can use those visits to check. But by that time if I am visiting a day before, I already have "sold"/"rented out" my current residence. Which means no place to be in. However if I visited it 2 weeks prior, I would still see the tenant is there and will not mean anything as they would say that they will leave in a week.
No offense to your realtor but talk to someone who knows better - your lawyer
Deal Addict
User avatar
Jan 2, 2012
3979 posts
1846 upvotes
Toronto
PriceHunter wrote: Not an investment, want to move into it, and would need to sell my current house to do so as well. The contract itself as per my realtor states "Vacant Possession". I worry that I sell my house then I won't have a place to be in having kids. Can't just go to my family's basement as I don't want to expose or burden them either.
If you don't want as investment, then you should include in your agreement you want the unit for personal use, and consider submitting a declaration as such to the current owner. This would make the eviction process a lot simpler, as the current owner could serve the tenant an N12 form in good faith (eviction for personal use of buyer), and simultaneously submit an L2 form to the LTB to get official eviction order should the tenant decide to challenge it.
Simply saying you want "vacant possession" with no terms, means the landlord is responsible to get the tenant to move voluntarily, which can be a heck of a lot harder.

However, due to current situation LTB is not doing hearings and more importantly all evictions are suspended. So at this time even with the N12, tenants do not need to move for any reason, end of story.

When things get back to normal and LTB starts hearings for evictions again, then the tenant can be evicted as usual.

So the problem you have is that no matter what goes in your agreement, it all depends on cooperation of the tenant and when things get back to normal. There is no guarantee at this time what will be happening up to 6 months from now, so there is no guarantee the home will be vacant at any given time in the future. As mentioned, you can put wording into the sales contract that would allow you to collect damages in this case, but ultimately you may not get the vacant home when you want it.
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: Realtor said that he would have a visit or two included prior to closing. He said I can use those visits to check. But by that time if I am visiting a day before, I already have "sold"/"rented out" my current residence. Which means no place to be in. However if I visited it 2 weeks prior, I would still see the tenant is there and will not mean anything as they would say that they will leave in a week.
Which is basically what's being discussed here... You could visit it the day before you're supposed to move in, and the tenant could still be in the property. And everything could still go smoothly the next day... Or not...

Sounds like you know what the risks are, and you're looking for an answer that will let you sleep at night after signing your purchase agreement. Sorry, but there's no easy answer. If you want a more risk-free solution, you'll have to forgo the "lucrative price".

You COULD talk to your realtor about inserting some conditions that include receiving copies of LTB-filed forms. For example, the N12 form that the landlord would give the tenant to let them know that they're being evicted, and the L2 form that will allow the landlord to secure an eviction in advance. This would reduce the delays as much as possible, but you could still be sitting on the curb with your luggage while you wait for your bailiff service to evict the tenant (which could take days/weeks). But, I think the seller isn't supposed to give the N12 form until there's an unconditional offer on the property, so I'm not sure you can make your offer conditional on getting the N12/L2 forms... Kinda circular reasoning... But even if your offer wasn't conditional on those documents, you'd at least have some reassurance that the process was being followed as closely as possible.

C
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
rob444 wrote: If you don't want as investment, then you should include in your agreement you want the unit for personal use, and consider submitting a declaration as such to the current owner. This would make the eviction process a lot simpler, as the current owner could serve the tenant an N12 form in good faith (eviction for personal use of buyer), and simultaneously submit an L2 form to the LTB to get official eviction order should the tenant decide to challenge it.
Simply saying you want "vacant possession" with no terms, means the landlord is responsible to get the tenant to move voluntarily, which can be a heck of a lot harder.

However, due to current situation LTB is not doing hearings and more importantly all evictions are suspended. So at this time even with the N12, tenants do not need to move for any reason, end of story.

When things get back to normal and LTB starts hearings for evictions again, then the tenant can be evicted as usual.

So the problem you have is that no matter what goes in your agreement, it all depends on cooperation of the tenant and when things get back to normal. There is no guarantee at this time what will be happening up to 6 months from now, so there is no guarantee the home will be vacant at any given time in the future. As mentioned, you can put wording into the sales contract that would allow you to collect damages in this case, but ultimately you may not get the vacant home when you want it.
But it would be my house, and I dont want to sign anything that would limit me from using it as I please, I might start for family use but might reno it and have it ready to rent.

Overall looks to be a headache to go over with no firm dates.
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: But it would be my house, and I dont want to sign anything that would limit me from using it as I please, I might start for family use but might reno it and have it ready to rent.

Overall looks to be a headache to go over with no firm dates.
If you're not willing to sign an affidavit that the property is being purchased for personal use, you are making things more difficult for the seller to secure vacant possession. At that point, they're depending on the tenant to voluntarily give up possession of the property, rather than having grounds to file for an eviction. Which means that things could get MUCH more complicated if things go south...

C
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
CNeufeld wrote: If you're not willing to sign an affidavit that the property is being purchased for personal use, you are making things more difficult for the seller to secure vacant possession. At that point, they're depending on the tenant to voluntarily give up possession of the property, rather than having grounds to file for an eviction. Which means that things could get MUCH more complicated if things go south...

C
Would my ultimate solution to not take possession at that time?
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: Would my ultimate solution to not take possession at that time?
I believe that would be your "ultimate solution", but the legal cleanup would be a mess, I think.

C
[OP]
Deal Addict
Nov 12, 2015
3361 posts
3544 upvotes
CNeufeld wrote: I believe that would be your "ultimate solution", but the legal cleanup would be a mess, I think.

C
Legal cleanup? That would be between lawyers and I would not be the one liable right ?

Anyways looks like not so lucrative now that the headache is confirmed.
Stay strong, situation always looks harder and that it will never end when you are in the middle of it, but remember past experiences, everything has an ending.
Deal Addict
User avatar
Jan 2, 2012
3979 posts
1846 upvotes
Toronto
PriceHunter wrote: Would my ultimate solution to not take possession at that time?
If the closing date comes and tenant is still living there, then you may have grounds to void the deal and walk away. You should talk to your lawyer about possible scenarios that may happen and what legally you would be able to do at that time. There should be lots of legal precedent for this kind of situation.
Deal Guru
User avatar
Mar 23, 2008
11877 posts
8134 upvotes
Edmonton
PriceHunter wrote: Legal cleanup? That would be between lawyers and I would not be the one liable right ?

Anyways looks like not so lucrative now that the headache is confirmed.
You may not be the one liable, but you're the one with potentially thousands of dollars tied up in the transaction until the lawyers on both sides work things out. And then you could still get stuck trying to collect from the seller.

Keep in mind that this is "potential headache". I'd suspect the vast majority of the transactions like this flow smoothly, with nobody making waves. But the ones that go wrong can end up in the newspaper, so those are the ones people hear about. It's all a question of risk/reward, and you're the only one who can decide where your comfort zone is.

C
Deal Fanatic
User avatar
Feb 2, 2014
8575 posts
2449 upvotes
Toronto
PriceHunter wrote: But the contract by default has "Vacant possession" which means they should have it vacant by the time I take possession.
You're in uncharted territory with COVID19.

I sold a house last week that was tenanted.

Talk to your lawyer. If it works for you, I would but in an escape clause if they can't deliver VP on closing date.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

Top