Navigating Tenant Occupied Property Sales

Navigating Tenant Occupied Property Sales: Managing Costs and Legalities

Selling a property occupied by tenants introduces complexities, especially when tenants resist eviction notices. It's crucial to understand that if tenants do not vacate voluntarily, only the Landlord and Tenant Board (LTB) can legally enforce eviction. This situation can lead to protracted legal processes and significant costs. Here’s how both sellers and buyers can navigate these challenges effectively, with specific strategies to manage expenses and legal hurdles.

Scenario Overview

After finalizing a firm deal on a tenant-occupied property, you issued an N12 notice for eviction due to personal use, providing adequate notice and compensation. However, the tenant contests the notice and opts to take the matter to trial with the LTB, potentially causing a delay of eight months or more.

Financial Impact and Strategic Advice for Sellers

1. Legal and Eviction Process: Understand that only the LTB can legally evict a tenant who refuses to leave. This process can be lengthy and costly due to legal fees and potential delays in the sale.

2. Cash for Keys Negotiation: To avoid the high costs and delays associated with LTB proceedings, consider negotiating a "cash for keys" agreement. This involves offering the tenant a financial incentive to vacate the property voluntarily, which can be significantly less expensive than the costs associated with legal eviction.

3. Contingency Clauses in the APS: Incorporate clauses that allow for flexibility in the transaction:

   • Extend the closing date to accommodate LTB decision timelines.

   • Include terms that allow for termination of the agreement with specific penalties or compensations if the property cannot be vacated on time.

Financial Impact and Advice for Buyers

1. Anticipate Delays: Buyers should prepare for potential delays in possession. This includes budgeting for temporary housing or storage and understanding the implications of extended mortgage approvals.

2. Negotiate Protective Terms: Ensure the APS includes clauses that mitigate financial losses due to delayed possession, such as the option to extend the closing date or receive compensation if the seller fails to provide vacant possession as agreed.

3. Legal Consultation: Engage with a real estate lawyer to explore legal avenues for recourse if the seller cannot deliver vacant possession on time, including potential claims for damages or renegotiating the purchase price based on current market evaluations.

Proactive Steps and Ongoing Management

• Continuous Negotiation: Maintain open lines of communication with the tenant. Offering increased compensation for leaving voluntarily could save time and legal expenses.

• Stay Informed: Regular updates from your legal team regarding the status of the LTB proceedings will help manage expectations and allow for timely adjustments to financial and logistical plans.

• Financial Preparedness: Set aside a contingency fund to cover unexpected expenses related to the tenant eviction process, legal fees, or other unforeseen costs.

Conclusion

Handling tenant-occupied property sales requires a nuanced approach to legal and financial planning. For sellers, negotiating a "cash for keys" deal can be a cost-effective alternative to formal eviction processes. Buyers must prepare for potential delays and ensure their contracts protect against financial losses. By proactively managing these elements, both parties can navigate the complexities of such transactions more smoothly, safeguarding their interests and maintaining financial stability.