COVID-19 and Residential Tenancies: I am selling my rental unit to a buyer who would like to evict my tenant and receive vacant possession of the property. How will BC’s temporary eviction ban affect our transaction?
As of March 30, 2020, there are changes to the BC Residential Tenancy Act and BC Manufactured Home Park Tenancy Act that will remain in force until our provincial state of emergency ends. These changes:
- establish a general moratorium on evictions, except if a landlord can prove extenuating circumstances;
- freeze rent increases;
- allow landlords to restrict tenants’ access to common areas;
- restrict landlords’ ability to enter the rental unit, unless there is a risk to personal property or life; and
- change the procedures for handling dispute resolution.
In a series of articles, our firm will provide insight into each of these changes.
This is also a good opportunity to review the legislative requirements for providing notice to tenants in the event of a real estate transaction. These requirements apply to landlords who wish to unilaterally provide notice to their tenants. Of course, if a landlord and tenant are willing to negotiate and enter into a written mutual agreement to end the tenancy, then these requirements will not apply.
Under BC’s tenancy legislation, a landlord is permitted to give a tenant a Two Month Notice to End Tenancy if the landlord (or a landlord’s close family member) intends to occupy the rental unit. An intention to occupy the rental unit is different than providing notice in anticipation of sale.
For example, if a landlord lives in a residence separate and apart from the rental unit, then they cannot provide a Two Month Notice to End Tenancy to a tenant in anticipation of sale, unless the landlord (or a close family member) intends, in good faith, to occupy the rental unit prior to sale. This means that if you have a legal suite in your house that you rent out, and you intend to sell your home, you cannot provide a Two Month Notice to End Tenancy to your tenant in anticipation of that sale unless (1) a close family member intends, in good faith, to reside in the suite until sale, (2) you intend to move into the suite (perhaps in order to perform some renovations to the main living space prior to sale?) or (3) or you intend to decommission the suite as a separate residence and integrate it back into the home as living space.
Instead, if the landlord does not intend, in good faith, to occupy the rental unit prior to sale, the landlord must wait to provide notice until he or she is in receipt of a written request from a buyer to serve the tenant with a Two Month Notice to End Tenancy because it is the buyer’s intention to occupy the rental unit. This means that the Two Month Notice to End Tenancy must not be issued until there is a binding contract of purchase and sale.
In addition to the Two Month Notice to End Tenancy, a tenant is also entitled to receive compensation of one months rent. Usually the tenant simply does not pay the rent in the last month of the tenancy in lieu of compensation. If the tenant chooses to leave before the effective date of the notice, then the landlord must pay the tenant a pro-rated daily amount for the period in which the tenant vacated early, in addition to compensation of one months rent.
As a landlord, it is important that the timing of the Two Month Notice to End Tenancy is accurate in order to avoid the consequences for not using the rental unit for the stated purpose, which is prescribed by legislation as an amount equal to 12 months rent. For example, if the buyer requests that the seller provide the notice to the tenant, but then does not occupy the rental unit, then the tenant will have a claim against the buyer and not the seller.
However, as of March 30, 2020, any new Two Month Notice to End Tenancy is invalid and unenforceable. A Two Month Notice to End Tenancy is enforceable against the tenant if the landlord has received an Order of Possession from the Residential Tenancy Branch. In other words, if the Two Month Notice to End Tenancy that the landlord seeks to rely upon to receive an Order of Possession is dated March 31, 2020 or any time within the period of the state of emergency, then the Residential Tenancy Branch will refuse to issue the Order of Possession and will inform the landlord to reissue the Two Month Notice to End Tenancy when legal to do so. This means that a landlord must wait to issue a Two Month Notice to End Tenancy until after the end of the state of emergency.
If a landlord has issued a Two Month Notice to End Tenancy prior to March 30, 2020, it is still valid, and the landlord may apply to the Residential Tenancy Branch for an Order of Possession if the tenant refuses to vacate the rental unit. However, enforceability of an Order of Possession is also suspended to the end of the state of emergency. This means that a tenant who has received a valid Two Month Notice to End Tenancy may stay in the rental unit until the end of the state of emergency, but must vacate immediately when the state of emergency ends. The tenant is not absolved of paying rent during this period, and if the tenant does not pay rent, then the landlord may apply for an order for monetary compensation against the tenant at the end of the state of emergency.
In a nutshell, the only manner in which a tenancy may end in anticipation of a real estate transaction after March 30, 2020 is where there is a mutual agreement to end tenancy.
Generally, an inability to give a tenant a Two Month Notice to End Tenancy should not prohibit sale of the rental unit, unless the seller has made representations to the buyer that the seller will provide vacant possession of the rental unit.
Therefore, if you are a landlord who is entering into a contract of purchase of sale with a buyer during the provincial state of emergency, your contract must address the fact that the tenant may continue in possession and that the buyer may give the tenant the Two Month Notice to End Tenancy at any time following completion of the purchase and sale and the end of the state of emergency.
If you are a landlord who has already entered into a contract of purchase and sale, you must review that contract to determine your obligations to the buyer to provide vacant possession of the rental unit. It may be prudent to negotiate an amendment to the contract of purchase and sale that includes completing the transaction, subject to the ongoing possession of the rental unit by the tenant, where possible.