Here’s everything you need to know about getting ready to sell a tenant-occupied property in Alberta
Selling a home can often be a straightforward experience, especially when working with a seasoned Realtor® who can help streamline the process.
But when it’s a tenant-occupied property, the dynamics can change. Whether you’re a landlord with multiple properties or a first-time investor, selling a tenant-occupied property in Alberta requires careful planning, legal understanding, and clear, well-documented communication with all stakeholders.
As real estate investors, we’ve compiled a step-by-step guide based on much of our own experience to help you navigate the complexities while ensuring a smooth transaction for you and your tenants.
1. Weigh the pros and cons of selling with or without tenants
The first point we counsel home buyers to consider is whether or not they will sell “with tenants.” In other words, will you wait until the lease expires before selling the home, or will you list the property with tenants in place?
Selling a property where the buyer assumes the tenants gives you the advantage of listing your property on the market whenever you like — regardless of lease terms. It can also be attractive to potential investors, as they’re purchasing an asset from which they can earn rental income immediately. The drawback here is that you're limiting your target market to investors and excluding buyers looking for a personal residence.
Some investors also prefer to vet or select tenants through their own processes. Showing a property while tenants live in the home can also be challenging, especially if they aren’t motivated to present the house in the best light.
Selling a vacant home is easier to stage, offers more flexibility for showings, and appeals to a broader buyer pool. Still, you’ll need to give the required notice, navigate the tenant transition and consider the gap in rental income if the sale takes time.
2. Making a decision
If you’ve weighed the pros and cons but are still struggling to decide whether to sell with tenants, consider the following:
- How easy is your tenant to interact with? Will they cooperate with showings? Do you believe they’ll commit to leaving the property during the showing? If they have pets, how will their pets be managed?
- Are any major repairs needed that will increase the property's saleability? Forgoing repairs because the property is tenant-occupied can leave money on the table or even impact the likelihood of a sale.
- Will the property be tidy for showings or left as a mess? As noted above, tenants do not have the same financial incentives as owners to ensure a home is shown in the best possible light.
If these factors are not in place, it might be in your best interest to wait until lease terms are up and sell the property vacant to increase the likelihood of selling at a fair or great price.
3. Know the laws
Regardless of what you might have written into your lease, it’s crucial to understand that in Alberta, tenants have rights protected by the Residential Tenancies Act (RTA). These rights will often supersede any other exceptions or clauses, even if they’re put in writing.
Before communicating with your tenants about selling the property, knowing the legal requirements specific to your situation is essential to avoid potential misunderstandings or difficulties in communication.
When considering tenancy laws, there are generally three key points to consider:
- Tenants' Right to Stay - If the property is sold, the tenant generally has the right to stay until the end of their lease. The new owner cannot terminate the lease agreement unless the lease permits or both parties mutually agree.
- Proper Notice - If you have a fixed-term lease and your tenants intend to stay for the full term and want to sell the property vacant, you must wait for the lease to expire before selling. If the lease is periodic (e.g. month-to-month), Alberta law requires a minimum of three calendar months' notice if the new buyer plans to occupy the property themselves.
- Showings - Tenants must be given at least 24 hours written notice before a showing. All showings must be conducted between 8 a.m. and 8 p.m., and tenants can refuse entry under certain circumstances (such as illness).
4. Establish open communication
Once you’ve decided to sell, and you have an idea as to whether or not you will sell “with tenants,” we suggest having an open and honest conversation with your tenants as early as possible.
Not only does this build trust, but it can also make the process smoother. Your tenants may have concerns about how the sale will affect them, and being upfront can help alleviate their worries and positively impact communication throughout the process.
Some landlords may even offer additional incentives to tenants to cooperate during the sale, such as rent reductions during the showing period or covering moving costs if they decide to exit the lease and leave early.
If pursuing these options, they should always be well-documented, put in writing, and formally agreed upon by both parties.
5. Go with the pros
When selling a tenant-owned property, it’s important to work with a real estate agent who has experience selling or owning investment properties — ideally both.
An experienced agent will be familiar with local market conditions and the specific challenges of managing showings, legalities, negotiations, and closing deals with tenants in place.
They can also help position the property to attract buyers looking for investment properties with existing tenants or help highlight other features such as rental income potential, solid tenant history, and property condition.
At TB Real Estate Team, we also work collaboratively with the best real estate lawyers to ensure you comply with Alberta’s tenancy laws throughout the process.
Summary
Selling a tenant-occupied property in Calgary can be complex, but it can be done smoothly with the right approach. Understanding tenant rights, keeping communication open, and working with professionals who know the market are key to ensuring a successful sale.
Whether you sell with tenants in place or wait for the lease to end, there are opportunities to attract the right buyer and complete the sale on favourable terms.
If you’re interested in selling a tenant-occupied property or have questions about anything you’ve read here, don’t hesitate to reach out.
