With the surge in property values through 2024 and now into 2025 many landlords have finally reached that point where it’s time to sell their rental property. Between rising costs, the strong resale market, changing interest rates and plain old burnout, we’re seeing more landlords feeling now is the time for selling their rentals. For those unprepared, selling a tenanted property can turn into quite a minefield especially if you don’t understand the rules and the potential issues.
In my experience, it’s almost always easier to sell a vacant property and in a perfect world you want to time your leases so the property is vacant when it comes time to put it on the market, but for many smaller landlords not aware of this there are a list of challenges and questions they need to figure out.
Some of these questions include:
- Can I break the tenants lease when selling
- How much notice do I need to give the tenants about showings
- What if the tenants are being difficult & more
Let’s do a quick dive into this and I’ll also include some bonus mortgage tips at the end that could help you save thousands of dollars.
If this all sounds overwhelming I understand your concern. While I include a ton of information here to help out most people selling, the amount of information you need to be aware of could vary in your situation. If you would like to book a thirty minute consultation to make sure you aren’t making a costly mistake jump over to this link and book a call today, Landlord Consultation.
Breaking Tenants Leases When Selling A Property With Tenants
There are specific laws and rules in Alberta when it comes to leases and understanding them can save you a ton of potential headaches. When you’re selling a property with tenants it’s important that you know what type of lease you have, these are either a fixed term lease, or a month to month lease.
If you’re trying to break a fixed term lease you have with your tenant you’re going to be disappointed as you can’t arbitrarily decide to break a fixed term lease, even when selling. You do have options, but both the tenant and yourself would have to agree with them.
Otherwise the lease remains in effect even with the sale of the property. This could seriously impact your ability to sell, especially if you are selling it to someone who’s intent is to live in it.
If you’re trying to break a month to month lease with your tenant because you are selling the news is still not great, but it’s slightly better than a fixed term.
With a month to month lease you can give your tenant 90 days notice that must include three full months, but only after conditions are removed. That means you can’t do it before you list it, or after an offer comes in, only after the offer has come in and conditions are removed which is typically a week to two after the offer is accepted.
To explain this better here are two examples.
Example 1 – Month to Month Lease: Property is listed January 1st, offer comes in January 25th, conditions are removed February 2nd. Tenant is on a month to month lease. Now the landlord can officially give the tenant 90 days notice, but the 90 days must include 3 full occupancy months. Since it’s already the 2nd, February doesn’t count. That means the full months include March, April and May, meaning the tenant has until June 1st to vacate.
Now, think about this from a potential buyer’s perspective. They’re putting an offer in and won’t get to move in for almost 120 days. If they’re buying this as their home, this might be a hard sell. If they are looking to buy it as a rental it might be more palatable. So be very aware of these timelines.
Example 2 – Fixed Term Lease: Property is again listed January 1st, offer comes in January 25th, conditions are removed February 2nd. Tenant is on a one year fixed term lease that expires June 30th. In this case the lease follows the property and even if the new owners take possession in say March, the tenants can remain until the lease expires at the end of June.
If the buyer was hoping to keep the tenant, nothing really changes, if however they wanted the property to live in, you suddenly have a huge issue. An issue which could cost you the sale..
At this point unless the tenant breaks the terms of the lease you CANNOT break the fixed term lease and get them out sooner.
As I mentioned at the start, you can come to an agreement with the tenants to break the lease early, but only if you mutually agree to it. To accomplish this it might require you to assist the tenant with moving expenses, provide a free months rent to assist them paying for a new place or a myriad of concessions on one or both sides. Without mutual agreement though, the tenant can simply stay until the end of the term.
How Much Notice Do I Need To Give The Tenants About Showings
The standard Residential Tenancy Act rules apply when your selling a property with tenants. You need to provide a minimum of 24 hours notice for showings and they need to be within reasonable hours.
Additionally the tenant is not obliged to vacate during the showings, which can be a problem if you have difficult or upset tenants (remember how I mentioned it’s easier to sell a vacant property…).
Some landlords believe they can just provide a random grouping of notices such as every Saturday and Sunday from 12-4, but this would actually fall outside of the rules and could get you in trouble. Additionally, tenants can claim a “religious day” where you aren’t allowed to show on those specific days. Usually this ends up being Sundays, but depending on their faith it could be Saturday instead. Both prime showing days for buyers.
In a perfect world the tenants would be helpful and supportive in assisting you in selling the place they call home, but in the real world they have far less incentive and desire to help than you may hope for and you need to be aware of this.
You’re putting a ton of pressure on your tenants to keep the property clean for showings, you’re disrupting their daily lives by having strangers traipsing through their home (possibly on a daily basis in a tight market) and you’re likely forcing them to not only find a new place to live, but to start packing their belongings at the same time. If you get the property sold fast great, but the longer it drags on the less cooperative tenants tend to be. If you recognize this in advance you can hopefully find creative ways to keep your tenants happy, because if they’re not….
Selling a Rental Property With Difficult Tenants
Unfortunately, this is the most common reason landlords are actually selling. They’re tired of a difficult tenant. It’s also a great way to become even more frustrated with your rental property.
Ideally if you already have a difficult tenant you’re better off working out a deal to help them terminate the current lease and move on. We’ll discuss that a bit later on but for now let’s talk about what you can still do, as in can you still list the property and can you still show it.
The answer to both of these questions is yes.
The tenants can’t block you from listing the property, after all if you’re the owner you can go ahead and sell it and they can’t stop you or your realtor from showing it, if you provide proper notice.
They can however play games and make the process more difficult. One of the most popular reasons tenants have tried to block showings with the last several years has been a sudden case of COVID., but I’ve seen dozens of other excuses that tenants have used as well to try and block a showing.
In the majority of cases though, other than the religious day exemption, most would fall flat and legally you’d still be able to access the property for showing. Again if proper notice periods have been provided.
So even though they can’t legally block you from listing and showing your property, they can still make it difficult.
Just because you have a showing it doesn’t mean they have to vacate and if they’re particularly disgruntled it’s not uncommon for them to share all the problems with the property, real or fictiscious.
They’re also not obligated to clean up to the standards you would hope they would, although under a good lease they are responsible for keeping it up to a reasonable standard and for which a potential eviction for breach of the lease terms may be an option.
If the majority of the showings are around meal time you may find out the tenants are suddenly big fans of fish, cabbage or many other foods that leave a lingering smell in the unit for hours. There are a myriad of different ways tenants can simply make selling more difficult so you need to go into this with eyes wide open and the more I think about this the more challenges I recall hearing from landlords about selling with their difficult tenants.
So, just to reiterate for the third or even fourth time, it is significantly easier to sell your property vacant and you’ll often sell it quicker and for more money if you can get the tenants out and get the property shined up before you list it.
Bonus Mortgage Tip When Selling
So just to wrap this up here’s your mortgage tip. If you know you’ll be selling your property in the near future you will typically be far better off if you are in a variable rate mortgage.
I know currently with higher higher mortgage rates a variable rate may be scarier for a property owner but if you are selling the penalty for breaking a variable rate mortgage is significantly less than the penalty for breaking a fixed term mortgage and the longer that term, the higher that penalty can be.
You could also look at an open mortgage to completely avoid any payout penalties, but the even higher rates involved with open mortgages could wipe out any potential savings so check with your lender or mortgage broker to find the best solution for your situation and timeline.
Did I Miss Anything About Selling A Tenanted Property?
If you still have questions about how you can move forward either as a landlord or as a tenant with a property that is going up for sale you can take advantage of my half hour consulting sessions to get all the answers specifically for your situation.
As a landlord making one mistake could cost you the sale of your property and leave you open to all forms of civil suits.
As a tenant, you could be in a situation where the landlord could provide you compensation to assist moving in a timely manner.
I can answer questions regarding this in a session and more. To book your consult click this link, Residential Tenancy Consulting or use the images below to take advantage of special pricing to close out 2024. I typically get back to you same day and often within an hour or two when consulting is purchased (I get a notification within 30 minutes once payments are processed), so if time is of the essence it is the fastest way to get your answers!
I want to sell my tenant occupied small apartment. No current lease – he’s just paying on the first of each month. I’d like to have it empty to sell. Should I be honest and ask him to move for this reason or tell him I’m going to live in it myself when I give him 90 days notice. I know the second scenario is a valid reason and asking him to move because I’m selling isn’t. If I list with him living there it’s a problem to show and then a problem to sell as he then needs 90 days. If I tell him I’m moving in – and I actually would then I only need to give him 90 days correct?
Hi Cathy,
Typically vacant units are much easier to sell than occupied units for multiple reasons. The challenge is how to do it ethically and honestly versus lying and being subject up to as much as $5,000 in fines for failing to use the premises set out in the notice to terminate. So a good starting place would be notifying the tenant. Ideally you should have put a fixed term lease in place and provided plenty of notice for the tenant as to why you wouldn’t be renewing, but now you have to play catch up for not knowing the rules.
First notify the tenant, but be prepared for them not to go so you may need to incentivize them to leave. This is commonly referred to as “cash for keys” and basically involves you buying them out of the lease.
This could take the form of paying them a few hundred dollars to move or you covering their moving costs for the inconvenience, all the way to paying for their first months rent and security deposit plus more to achieve your goal. Ultimately this comes down to what it’s worth to you. Would $2,500 out of pocket now be worth selling the property and netting $20,000, $50,000 or more? That’s up to you to decide, but lying about why they have to vacate sets a bad precedent and helps create an environment where additional legislation eventually comes in to protect tenants even more form landlords deceiving them and taking advantage of them.
Bill
So if my tenants are fixed term lease till June 30th and I sell the unit in the next 2 weeks can’t the new owners just take possession, say on January 1st, and provide the tenants with an eviction notice so they can move in themselves?
Like is there any legal grounds/exceptions the buyers have if they claim wanting to move in themselves to get the tenants out before the June 30th?
This is coming up a lot due to the relatively hot real estate market in Alberta and is another reason landlords should have a firm grasp of the Residential Tenancy Act. In the case of a fixed term lease the lease follows the property, not the landlord. If you are selling, the lease transfers over to the new owners and they have to follow the terms of it. In this case the tenants get to remain until June 30th.
If your intent was to sell for January 1, it would have been better to have the lease term end at that time.
Bill