Thursday, October 15, 2009

Allowing the Buyer to Move In - Terminating an Existing Tenancy

Where there is an existing tenancy and your client wishes to move into the property, the existing tenancy will have to be terminated in accordance with the provisions of the Residential Tenancy Act.

For the new Buyer to move into the property the Seller must file a "Two Month Notice to End Tenancy", Form RTB-32. The sequence of events is:
1. All Subjects must be removed first.
2. Buyer must request the Seller to serve notice in writing.
3. Seller then serves 60 day notice and must immediately pay 1 month rent as compensation.
4. Tenant may then give a 10 notice to move out without penalty.
5. Tenant may dispute note.

Time lines are important here and often get Realtors into trouble. Take into account all the notice period time lines when drafting dates. The 60 days applies only after after the “effective date of notice” [which means the day before rent is payable],

For Example
Notice on Oct 5th
Rent Payable on 1st
Effective Date Oct 31st
Move out Date Dec 31st!

Realtors should add the following language to the standard contract  of purchase and sale when terminating a rental agreement:

A. Upon Subject Removal, the Buyer hereby irrevocably instructs the Seller to terminate the tenancy on the Property.

B. Upon Subject Removal, the Seller shall serve the RTB-32 Form upon the Tenant and pay the Tenant compensation according the Residential Tenancy Act and regulations.

C. Within 48 hours of service of the RTB-32 Form, the Seller shall provide the Buyer with a copy.

Investors - Assuming a Tenancy

Investors are often looking to buy property which generates rental income. Many investment advisors see property as a key component of the financial portfolios for high net worth individuals.

Realtors should ensure that their investor clients have all the information they need to make a decision on a rental property. In addition to the considerations of resident buyers, investors need to know:
1. The Current Monthly Rent
2. Date Tenancy Commenced.
3. Due Date for Rent.
4. Date of Last Rental Increase.
5. Prepaid Amounts on Deposit.
6. Payment History with the Tenant.
7. Damage/ Complaint History with the Tenant.
8. Obtain a copy of the written tenancy agreement between the parties

When working with investors, the Realtor should add the following clauses to the standard contract of purchase and sale:

A. The Seller represents and warrants to the Buyer that the Residential Tenancy Agreement with ____[Tenant]_________ attached to this Contract is in good standing, and has not been modified or amended by the parties.

B.  The Seller represents and warrants to the Buyer that the rent roll for this property is as follows:
Current Monthly Rent:
Date Tenancy Commenced:
Due Date for Rent:
Date of Last Rental Increase:
Prepaid Amounts on Deposit: