Owning a house with income potential can be a solid investment for your future, allowing you to build equity and enjoy a passive stream of income every month. On paper, few things sound better. However, being a landlord isn’t always what it’s cracked up to be.

Even if you don’t run into headaches, you may want to move on with your life or cash out of your investment to pursue other goals. Then the question arises, can you sell a house that you’re currently renting out? 

The obvious answer is yes. It is your property, and you can do as you wish with it. That said, having tenants can complicate your transaction. In this post, we’ll talk about the implications of selling a tenanted property and how to handle any challenges that may arise.

The Lease Still Stands

As a landlord, no one has to tell you that your tenant has a lot of rights. One of these is that you can’t evict them unless it’s for one of the reasons approved by the LTB (Landlord Tenant Board.) These reasons include persistent non-payment of rent, illegal activities, property damage or for personal use of the landlord. 

You may notice something missing from this list. It may surprise you, but selling the property is not considered a valid reason for eviction. The new owner must abide by the rules of the lease right through to its expiry date, which could limit the number of potential buyers for your home.

• If you’re selling your home to an investor, a built-in tenant adds to the appeal. The new landlord saves time and money on advertising. Plus, there is no vacancy period without income coming in. That alone can make your property more desirable. 
• However, if the new owner wants the house for themselves, having a tenant can be a liability. They will have to wait until the lease expires, then give the tenant 60 days’ notice before they can move in. If the lease is relatively new, the potential buyer may lose interest in your property and move on to the next listing. 

Do you want to know more about your rights and responsibilities as a landlord? Read our Guide to the Residential Tenancies Act for New Landlords.

Preparing the House for Sale

Customary preparations like a deep clean and declutter, minor updates and staging can all help you sell a house faster and for more money. However, one of your tenant’s rights is to reasonable enjoyment of the property. That applies throughout the selling process. As such, you can’t demand that your tenant remove their family photos or clean or stage the home. If you plan to take photos for marketing purposes, be sure to give your tenant advanced notice as they may not want their personal belongings photographed. 

You can make minor repairs and arrange to clean and paint the home yourself, as long as you provide 24 hours’ notice anytime you enter the premises. Major overhauls can be difficult with a tenant, but are fortunately not necessary most of the time.

Selling a home with tenants can be challenging, but the posts below will help you get results:

• A Back to Basics Guide to Maximizing Your Sale
• Worth It or Not? What Renovations Really Help When Selling Your Home
• Our Full-Service Real Estate Team’s Guide to Marketing Your Home

Can You Ask Nicely for Your Tenant to Leave?

Legally, you can’t evict your tenant unless you have grounds to do so. If your tenant is agreeable, you might be able to negotiate for them to leave early. Otherwise, there are circumstances where you can ask them to leave before the lease expires as long as you provide sufficient notice.

One example is if you plan significant renovations that require a building permit and for the property to be vacant. But there is a catch. That tenant has the right to return to the unit once the renovations are complete at the same cost as when they left.

You can evict a tenant should you decide to move into the home yourself or need the space for a family member or caregiver.

Always Act in Good Faith

Is it ever a good idea to get creative and evict a tenant under the guise of personal use or renovation? Some have tried, citing that they have changed their mind after the fact. However, this is dangerous territory to be in. If your tenant believes that you acted in bad faith, they can file a complaint with the LTB.

The penalties can be severe if they rule against you. In the best-case scenario, your tenant will be permitted to move back in. You could also face financial penalties, including compensating your tenant for up to one year of rent paid. Since this is not a position you ever want to find yourself in, it always pays to be honest and act in good faith.

Showing a Home With Tenants

Once your tenanted home is ready for viewing, presenting it to potential buyers is another challenge. Typically, we never want the homeowner present when buyers come through. Visitors feel more comfortable with just the real estate agent. They can take their time and ask plenty of questions without worrying about offending the current residents. 

However, you can’t ask your tenant to leave every time a potential buyer wants to visit. They might not want to be there, but it’s certainly not something you can enforce. On the other hand, your tenant can’t insist on being present when a buyer comes through. All showings must take place between 8 a.m. and 8 p.m. unless you and your tenant come to an agreement. Once again, your tenant has the right to 24-hour notice whenever you enter their home.

Looking for more resources before listing your home for sale? Here is some related reading you may find helpful:

• FSBO vs Real Estate Agent Assisted Sales: What’s Better?
• Should You Sell Your House or Rent It?
• Selling a Home for Someone Else? Here’s What You Need to Know

Maintaining a Positive Relationship Throughout the Selling Process

Both you and your tenant have certain rights and protections when selling your home. That said, the process will be more successful when you have a positive relationship with your tenant. There are many ways your tenant could go over and beyond their normal obligations to help you enjoy an easier transaction. For example:

• Your tenant must allow you to bring buyers through from 8 a.m. to 8 p.m. But if you have a good relationship, they may allow for greater flexibility.
• Your tenant is under no obligation to clean or prepare the house before a showing. However, just think of how much better the property will look if they care and take the time to present the home well.
• Your tenant doesn’t have to inform you of any issues with the property, but it will save you a lot of time and trouble if they do.

By acting with integrity and treating your tenant with respect, you don’t just have the best chance of a faster and more profitable sale. You’ll come through the process with your reputation intact and just may make a lasting friendship along the way.

Do you have more questions about selling a property with tenants? We are here to help you through every challenge you’ll face along the way. Reach out today or give us a call at (905) 332-9223 for more information.