What Realtors, Buyers and Sellers need to know about Vacant Possession
There's an old saying; Possession is 9/10ths of the law. That’s especially true in Real Estate.
Real Estate Agents can help protect Buyers and Sellers when dealing with Vacant Possession.
One default is Section 2 of the APS:
If there is any concern that the current occupant, whether owner or tenant, may not provide vacant possession, be sure to include a final walk through as part of the agreement. Inspect the property on the morning of the closing date, or the day before, to make sure that the property will in fact be vacant on closing.
If the deal closes and an occupant is in possession of the unit / property, they have automatically become a tenant under the Residential Tenancies Act and are afforded all the protections that it entails. That’s a worst case scenario, especially if the tenant intends to stall the process for as long as possible - you definitely don't want that.
If it’s discovered at the final walk through that it’s doubtful that the occupant will be moved out by closing, immediately notify the Buyer’s lawyer. It could and should, be a deal killer.
There is clause in Webforms that seeks to address this concern:
The Buyer hereby authorizes and directs the Seller, and the Seller agrees, when this Agreement becomes unconditional, to give to the tenant(s) the requisite notices under the Residential Tenancies Act, requiring vacant possession of the property for use by the Buyer or the Buyer's immediate family, effective as of _, and the seller agrees to deliver copies of the requisite notices to the Buyer immediately after service of the notices upon the tenant.
If you are representing the Buyer you may want to delete the remaining portion of this clause - if you are representing the Seller, you definitely want this paragraph in the APS:
The Buyer and the Seller hereby agree in the event that the tenant fails to vacate the property prior to completion of the transaction, the Buyer agrees to assume the existing tenant upon completion of this transaction.
In cases where the Buyer has stated that their intention is to occupy the unit for their own use, or their immediate family (no aunts, uncles, nieces or cousins...etc), then the following paragraph is essential to protect the seller:
Upon vacant possession being provided to the Buyer, the Buyer or the Buyer's immediate family agrees to take possession of and occupy the property forthwith thereafter. The Buyer agrees to provide the Seller with a written indemnity on completion, indemnifying the Seller from all actions, causes of action, claims and demands of any kind whatsoever, that may occur in the event that the Buyer does not take possession of and occupy the property as aforesaid.
In any case, where there is a tenant and vacant possession is required, you must support that intention with the proper Landlord Tenant Board form.
If the owner/purchaser wants to occupy the property, you’ll need to serve the N12 Notice, see attached. Note that the tenant is entitled to one month’s rent as compensation and a minimum of 60 days notice from the 1st of the month, typically the rent due date.
If the owner or purchaser uses this method to evict a tenant and it’s proven after the fact that there was no bone-fide intention to occupy the unit and it was in fact a “renoviction”, the owner or purchaser could face a $25,000 fine. Yikes! Hence the need for the last sentence in that clause.
If the tenant is agreeable to vacant possession, get that on paper using the N11 form. It’s another layer of protection and could be vital in a hearing if needed.