What if you, as a property owner, want to sell a property that is currently rented out? On occasion, we are asked how that works. As well what rules apply to both landlords and tenants in regards to rights, showings etc. Here is some insights on selling a rented house in Calgary.
Type of lease agreement
The first question is which type of lease agreement do you have in place with your tenants? Is it a periodic agreement or a fixed term agreement?
The agreement with a fixed term has a start and end date. Your end date will be any particular date that is mentioned in the agreement. Neither landlord nor tenant are required to give any notice because the exact date is known and set on paper. If a fixed agreement is in place and you want to sell the rented property, you will have to either wait until the tenants’ lease has ended and they have moved out. Or the new buyers must be willing to take over for the tenants. This could be an investor who is looking specifically for a rental property. In practice, we see this less often. But, we cannot say it is never done successfully.
Give notice to the tenants.
You can put the house up for sale, while the tenants are still living on the property
Usually, the notice must be given before the end of the month, . A periodic agreement runs from period to period. Those are the week-to-week, month-to-month or year-to-year agreements with no set date of ending. Either tenant or landlord must give notice to end the agreement. For renters, this is most often 1 or 2 months, and for a landlord it is 3 months. Usually, the notice must be given before the end of the month, to start counting the 3 months. If you give renters notice on March 5, the start date of the 3 months is April 1. In that case, you are looking at nearly 120 days.
You can wait until the tenants have moved out, because you still may want to do work on the house (like painting it or fixing a few things before you showcase the property). But you can also put the house up for sale, while the tenants are still living on the property. As a landlord, you may give notice for several reasons – which includes moving in yourself or wanting to sell the property. Again, that is in the case of a periodic agreement. It is a personal consideration between selling the property vacant, and thus waiting a few months or selling it while tenants live on the property.
Listing contracts for properties occupied by renters
When you put up a property for sale, while the tenants still reside in the property, you sign a regular listing contract. But added to this listing contract, you must sign a separate form called the Tenancy Schedule. In this schedule you sign off on some details that are important for both your realtor, and potential buyers to know. These are details like:
- Is a written rental agreement in place?
- What is the start and end date of the agreement?
- How much rent do the tenants pay?
- Is there a security deposit in place, if so, how much?
- a property management contract, is it in place?
- Is a move-in inspection report in place?
Also, the tenants must sign a document. Tenants must give written consent that photos are allowed on the MLS. Sometimes you see only images from the outside of the home. The reason could be just that the tenants did not allow photos of their belongings.
How to deal with showings when selling a rented house
Tenants must allow access to let you, your realtor or other realtors show the property to potential buyers. But tenants have the right to 24 hours’ notice. This notice must be given in written format, however some tenants will be okay with verbal or text message. Tenants can only refuse showings on a religious day, which includes Sunday. Sometimes tenants are fine with less than 24 hours’ notice, which would be ideal.
Tenants have the right to 24 hours’ notice
To sell a property, showings to potential buyers are crucial. Tenants can make selling your house very difficult. Hope for a good relationship with your tenants, or make it better. If you must, offer your tenants gift cards for coffees.
Not all renters are clean and tidy. You may consider having your property professionally cleaned before and during the time your house is listed on the MLS. Besides, showcasing your home on the MLS means you want good photos.
It is absolutely preferred that tenants leave the property while the home is being showed to potential buyers
Arranging showing appointments with tenants
An option to consider is offering your tenants certain time frames for showings. For example, every Monday, Wednesday and Friday between 10:00am and 5:00pm, and every Saturday and Sunday between 12:00 and 5:00pm. Officially, if you use the MLS to sell your home, the requirement is that properties must be shown within 24 hours. These 24 hours start counting after notice is given.
It is absolutely preferred that tenants leave the property while the home is being showed to potential buyers. Offering specific time frames may help in this situation.
If tenants choose to stay in the home during showings, be aware that potential buyers can ask questions to the tenants. This is great for potential buyers to find out certain things about the home or the neighborhood, but not for the seller when the tenants badmouth the property, the location, exaggerate the crime situation or anything else.
In the MLS listing, the realtor has the option to fill out the occupancy. Fill out “tenants”, and any realtor knows they have their 24 hours’ notice. The listing information also has a place for private remarks. Ideally, here your realtor announces that tenants are living on the property and that they require 24 hours’ notice. Or in some cases – that tenants are flexible for showings or that certain time frames apply – as previously explained.
Possession date for rented properties
The possession date can be another “hurdle” to contend with when you want to sell your rented property. In the case of a vacant property, you can give possession as soon as a few weeks. But if the property is still occupied by renters, the possession day must be 90 days after you have given them notice. Unless you come to a different agreement with your tenants. The contract states that the seller gives vacant possession. Not all buyers want to wait that long for possession and this could be a disadvantage.
2.3 This contract will be completed, the Purchase Price fully paid and vacant possession given to the buyer at 12 noon on _____, 20___ (Completion Day). (from 2016 Alberta Real Estate Association)
Buyers agree to either take vacant possession 3-4 months from now, or the buyers ‘take over’ for the tenants including the rental-agreement that is already in place.
It all depends what you agree upon with your tenants first. We regularly see that the tenants are willing to stay. And it should be clear in the MLS listing.
In case the buyer assumes the tenants, a separate document, the Tenancy Schedule, gets added to the contract. In this Tenancy Schedule the seller guarantees essential details such as;
- the tenants name(s),
- a written agreement being in place,
- provision of a copy of that agreement,
- the amount of rent,
- the security deposit being in place.
Getting an offer on a rental
As a landlord, you may consider giving the tenants an incentive they can’t refuse.
So what if you get an offer on your rental that is too good to refuse, but the buyers want an earlier possession? As a landlord, you may consider giving the tenants an incentive they can’t refuse. However, that must be financially viable. Make sure you get legal counsel in such a case. You want to make sure that tenants are really out on possession day.
Although we don’t have the statistics for it in place, we do tend to see that rented properties are longer on the market. But obviously much will depend on the tenants and your relationship with your tenants. Are they clean and tidy? Or do you prefer to fix up a few things and paint it, before selling? Do they allow showings in a flexible manner? Do they leave the premises during showings? And so on.
If you have more questions in regards to selling your rental, contact us any time via email or by phone 403 978 5267.
For more information, see the Alberta Residential Tenancies Act.
The above article is general information only. It is not meant to be legal advice upon which anyone may rely. If you have questions about this subject, please speak to counsel for definitive advice.