Selling a House With Tenants in Ontario: Notice, Showings and Vacant Possession

London has a lot of rental housing, from student houses near Western and Fanshawe to duplexes in Old East and single-family rentals in St. Thomas. Selling one with a tenant in place is common and it works, but the tenant's rights under the Residential Tenancies Act shape every step, from showings to the closing date.

Option one: sell it tenanted

If the tenant pays on time and the rent is close to market, the house can be worth more to an investor with the tenant in place. The buyer takes over the lease, the rent, the last month's rent deposit and the tenant's rights. Investors will ask for the lease, the rent history and confirmation of the deposit. They will also check whether the unit is covered by the annual rent-increase guideline; units first occupied after November 15, 2018 are exempt from it, and a long-term tenant paying well below market lowers what an investor will pay.

Option two: sell with vacant possession

If your buyer, or their spouse, child, parent, spouse's child or parent, or a caregiver for one of them, intends to live in the home for at least a year, you can give the tenant an N12 once you have a firm agreement of purchase and sale. The rules:

• The termination date must be at least 60 days after the notice is given.
• It must fall on the last day of a rental period, or the end of the lease if a fixed term hasn't ended yet.
• You must pay the tenant one month's rent, or offer another unit they accept, by the termination date.
• The tenant can move out earlier by giving you at least 10 days' written notice.
• This kind of N12 only applies to a building with three or fewer residential units.

The catch: an N12 doesn't make the tenant leave. If they stay past the termination date, you have to apply to the Landlord and Tenant Board, and a hearing can take months. That is why your closing date needs a cushion, and why most sellers in this position try to reach an agreement with the tenant first.

Can I offer a tenant money to leave?

Yes. Many tenants will agree to leave on a specific date in exchange for money and help with moving. Put the agreement in writing on the Board's N11 form (Agreement to End the Tenancy). You can't pressure a tenant to sign, and an N11 signed at the start of a tenancy as a condition of renting is void. A cooperative tenant also makes showings easier, which can be worth more than the payment.

How do showings work with a tenant in place?

You must give the tenant written notice at least 24 hours before entering, stating the reason and a time between 8 a.m. and 8 p.m. Showing the home to a prospective buyer is a permitted reason. Even within the rules, constant showings wear on tenants. Grouped showing windows, one photo day and a virtual tour cut the number of times anyone needs to go in.

Spell out the possession terms

The agreement of purchase and sale has to say whether the home is sold with vacant possession or subject to the tenancy. A buyer who needs vacant possession usually needs it on closing day, and their lender may require it. Have a real estate lawyer review the notice timeline before you accept an offer, so the closing date is one the notice period can actually meet.

Frequently asked questions

Can I evict a tenant just to sell my house in Ontario?

No. A sale alone isn't a reason to end a tenancy. The tenancy can end for the buyer's own use with an N12 after a firm sale, by mutual agreement on an N11, or for another reason the Residential Tenancies Act allows.

What happens if the buyer doesn't move in after an N12?

The former tenant can apply to the Landlord and Tenant Board, and the Board can order compensation and fines if the notice wasn't given in good faith. A buyer who asks for vacant possession for their own use has to mean it.

Do I pay capital gains tax when I sell a rental?

Generally yes, because a rental isn't your principal residence. Speak with an accountant before you list, because the timing of the sale and any depreciation you claimed both affect the bill.