Ontario - Can I force existing tenants to sign lease with me as new owner

[getmovinggroup]

Hi everyone.



I am wanting to purchase a multi use building mix of commercial and residential tenants. Commercial tenants have leases but residential tenants do not. Can I get existing tenants to sign leases with me. They are all on low rents but I know that I cannot insist that I get building empty. I'll just have to increase rents (slowly!) over time.



Thanks

 

[Thomas Beyer]

How would you force a person to sign something ?



My understanding is that leases get grandfathered if there is proof of regular payment, say $500, then that is the rent - based on a standard lease, and you can raise rents following provincial rules.



You could also ask them to sign a new lease, or even reno a few things in their unit and ask them to sign a lease with a higher rent - they may say "yes" !



You could also give incentives to residential tenants to move, and if they are juicy enough, they will usually take them.

 

[GaryMcGowan]

Just ask them! We have done this in past. Got new month to month agreements signed before we took possession of the property. (to start on the day we took possession)

 

[invst4profit]

As a buyer you have the option to ask for any conditions you want as part of the purchase offer. Vacant occupancy is often a condition of offer in Ontario primarily because of the pro tenant RTA rent controls (max 2.5% annually). The reality is that the value of a rental property is based on the rental income. If the rents are low you can make two offers one very low to reflect the low rents and the other with the condition of vacant occupancy.

If you do it is the task of the seller to get rid of the tenants. If tenants then refuse to leave you simply walk away from the deal. After all it is your intent to get what you want and if not you move to the next deal.



I would not count on being able to raise the rents gradually to market value. In Ontario this is impossible unless tenants actually leave.

Renovating to raise rents is not going to get you rent increases either as existing tenants rents are guaranteed regardless of renovation upgrades.

You do have the option of evicting by having immediate family members move into the units.



If you purchase a property with low rents you ultimately must find a way to encourage tenants to leave but unfortunately in Ontario low rent tenants know when they have a good thing and will not leave voluntarily. For this reason cash often will not work. I have found that ultimately the only option left is to make their lives miserable to the point of vacating. Not easy but if they refuse to leave your property you ultimately must place business ahead of stubborn tenants.

 

[Nir]

You [quote user=getmovinggroup] Can I get existing tenants to sign leases with me.


as you mentioned you may not increase their rents initially. therefore you don't really need that. but indirectly yes, you can get all you do need, which is tenant acknowledgements singed by all existing tenants. how? you add the form to your offer and do not release the conditions unless getting all signed forms back. This will not be under your name yet but include all you need. I never had an issue with a tenant not singing same after closing showing my name as landlord. However, as Thomas mentioned you can not force them to sign. Having it under your name may also help with future mortgage applications where bank needs to confirm your stated rental income.

Regards,

Nir

 

[ShannonMurree]

I do not recommend creating a bad reputation for yourself and "making their lives miserable to the point of vacating" and the additional stress this causes to you as well.



Agreement to Increase above the Guideline





Since just purchasing, N12 - Notice of Termination for Landlord or Purchaser's Own use cannot be used for any residential purchases with units over 3. Also, do not recommend using this unless it's absolutely true because you will be asked by real estate lawyer and be told to sign an Affidavit which is a sworn document that you will be living in the unit.



The other suggestions for negotiation would be between the Seller and tenants and hopefully receive an N11 - which is a Mutual Notice to Terminate. This way it's a mutual agreement and application to Tribunal can be made right away -should the tenants refuse to leave; recommend putting a clause to extend closing until you can receive the vacant possession you require (making seller responsible)



Here's a good outline - Reasons a Landlord Can Apply to Evict a Tenant



So, try to put what you can on the Seller, if possible, or do the increases as you choose to keep them.



Good luck on your offer!