restricted condo - rent to own to tennant?

[SherryYvonne]

Hello,

My husband and I are just getting started and looking at various properties. One condo he`s found in Chilliwack says there are no rentals. He didn`t find this out until he spoke to the owner who went on to explain that they`ve been investors for years and they simply rent to own and if the tennants fail on their end of the deal, they move them out and a new one in.

Sounds to good to be true

although a possible loophole? that could cause us unwanted grief?

Anyway, just wondering what more seasoned investors have encountered in the past in this regards.

Thanks!
Sherry

 

[RobMacdonald]

I`ve dealt with some clients in the past, that didn`t read the bylaws closely enough (actually relied on an unexperienced realtor) and found out after closing that rentals weren`t allowed. They worked with the tenants to put together a rent-to-own, aka agreement for purchase and sale.

The catch is that your `tenants` would have to be on the title from day one. The challenge with that will be potentially difficulty in qualifying for mortgage financing. But if your potential tenant has okay credit then anything is possible. Your tenant buyer must be on title, and the agreement could be written for as little as 1%, but if they`re not on title then it woud be viewed as a rental property.

Your best plan is to discuss this with a local lawyer or realtor that is familiar with the strata act.

 

[PaulPoulsen]

Hi Sherry;

It`s my understanding that in Alberta, condo boards aren`t allowed to stop you from renting your unit. I don`t know if it`s a similar case in BC.

That said, I couldn`t be bothered to get into a fight with a condo board. It`s much easier to keep looking and move on to another property where tenants aren`t an issue.

 

[Dan_Eisenhauer]

Rental restrictions are legal in BC, Paul.
Rob`s suggestion is a great one. But, I question whether or not the tenant/buyer is on title from that day you sign your deal, or when they actually complete their contractual arrangement with you. I have one Agreement FOR Sale in place now. Nothing has been registered against the property.

 

[Darlene]

With all the inventory on the market right now, I`d be looking at other properties. Especially if you are just getting started, why not find something that will be rewarding to you without causing you extra grief and maybe high legal bills?

 

[RobMacdonald]

QUOTE (Dan_Eisenhauer @ Mar 17 2009, 05:27 PM) Rental restrictions are legal in BC, Paul.
Rob`s suggestion is a great one. But, I question whether or not the tenant/buyer is on title from that day you sign your deal, or when they actually complete their contractual arrangement with you. I have one Agreement FOR Sale in place now. Nothing has been registered against the property.

I actually spoke with a property manager with one of the larger firms in Vancouver. What he told me is that if he receives a complaint about a rental, the only way he can assess a fine is if the people residing in the unit are not on the title. He will pull a title search on behalf of the corporation. It may be handled different by different managers and management companies, but it made sense to me.

It could be `over protection` but might be better safe than sorry.

 

[SherryYvonne]

Thanks everybody! I think I`ll strongly try to urge my husband to stick to a `basic` landlord/tenant arrangement to start! We can get fancy after we`ve done at least a few!

Basically, for our future considerations, it sounds like the option is available if the deal is very intriguing and we just need to make sure we dot our `i`s` and cross our `t`s` and make sure we discuss all possibilities with our realtor and lawyer before getting into this sort of deal.

Thanks again for all your input. I look forward to discussing ideas on this forum and reading about other`s journeys.

Sherry

 

[Dan_Eisenhauer]

An Agreement For Sale is a legal document that the tenant/purchaser has an agreement to buy the property, provided the terms of the Agreement are honoured.

I think one could make a good case to fight a fine because it was rented. Even though I refer to the occupant as a tenant/buyer, they are, in fact, a buyer, with an extended close,and with a contract to prove it is a purchase.

Financially, there is little difference between a Rent To Own (Lease Option) and an AFS, except the AFS is an actual agreement to buy. All other terms may look identical. But, legally, there is a HUGE difference. The RTO is an option to buy, and the Occupant is referred to as the Tenant or Tenant/Buyer.

The PM is not the one who actually fines an Owner. It is the Council, with the PM acting as the Agent. A lot, and I would say the majority, of PMs and Councils have no idea what a Lease Option or an Agreement For Sale are. They are not equipped to give many legal opinions, although they, especially the PMs, often do.

As a case in point, I had a former boss who made a legal pronouncement on something I was doing. Her words did not make sense to me, so I checked with my own lawyer. She was wrong. The episode taught me to get as much education on strata managment and attend as many legal updates as I could get, and to always check with a lawyer when in doubt.

 

[Cargren]

We had a similar experience last year. Our RTO customer picked out a townhome that they loved, and we put an offer on it. Somehow the community found out and raised a stink with their committee. We tried to explain that our tenants would be buying from us, but to no avail.

We quickly said fine and walked away. It did teach us to check this out before putting in offers.