Posted on
July 10, 2024
by
Unilife Realty Inc.
With a phased rollout of changes to residential tenancy laws in British Columbia that started this spring with Bill 14, the Tenancy Statutes Amendment Act, REALTORS® selling tenant-occupied properties are now in a transitional period. Since Bill 14’s changes involve regulating landlord-tenant relationships, REALTORS® must remain aware of this changing tenancy landscape to advise their clients properly. As the new rules come into effect at different times, it is possible that the rules framing previous deals no longer apply to current or future ones, adding to the challenge of selling tenant-occupied properties.
Transitional period rules
Since the Bill’s changes come into effect at different times – after its introduction, upon royal assent, and throughout the summer of 2024 – Bill 14 also includes transitional period rules (Transitional Provisions), which specify whether the old or new rules apply.
For example, Bill 14 makes significant changes to a tenant’s compensation (RTA Section 51 – Tenant’s Compensation: Section 49 notice) if a landlord does not occupy the property for personal use contemplated by RTA Section 49 – Landlord’s Notice: Landlord’s Use of Property. Prior to Bill 14, if a landlord evicted their tenants for the landlord’s (or a buyer’s) personal use of the property, the landlord (or the buyer) or their immediate family member had to demonstrate a good faith intent to occupy the unit for at least six months. Bill 14 changes this six-month period to a 12-month period (or to a shorter period of at least six months if one is otherwise prescribed).
If the landlord cannot establish that the requirements of RTA Sections 49 and 51 have been met, the tenant is entitled to compensation in the form of 12 times the monthly rent under the tenancy agreement. For REALTORS® selling or buying tenant-occupied properties, the increase in the length of the landlord’s (or buyer’s) occupancy period could have wide-ranging effects on deals, particularly if the buyer requests vacant possession. It is prudent to obtain written confirmation from buyers requesting vacant possession that they will occupy the property for the minimum period required by the RTA.
The Transitional Provisions provide that notices given pursuant to RTA Section 49 before or on the date of the First Reading (being April 2, 2024) are not impacted by these amendments to RTA Sections 49 and 51; however, notices given after the date of the First Reading are impacted. This means that the landlord’s notices to terminate the tenancy for personal use given on or prior to April 2, 2024, are governed by the pre-Bill 14 requirements of six months of occupancy, while notices given after April 2, 2024, are now governed by the Bill 14 amendments and require a 12-month occupancy.
Another example of Bill 14’s major changes is the introduction of the new RTA Section 22.1, which provides a landlord must not increase the rent based on the number of occupants due to the addition of an occupant who is a minor or an occupant who, when the tenancy agreement was entered into, was a minor but is no longer a minor. RTA Section 22.1 came into effect upon the Bill’s royal assent on May 16, 2024, and is also subject to the Transitional Provisions.
The Transitional Provisions provide that Section 22.1 applies to tenancy agreements that were entered into prior to May 16, 2024, but it does not affect rent variances that took effect before Section 22.1 came into force on May 16, 2024.
It is advised that REALTORS® review the entirety of Bill 14, including the Transitional Provisions to fully understand the changes to the residential tenancy laws.
Advice on best practices
One of our instructors for the Selling Tenant Occupied Properties course, Richard Collins, shared his best practices for managing deals during the transitional period:
Drawing your practice lines
Collins emphasizes the importance of drawing clear lines between what is a REALTOR®’s expertise and what is not. Even though it is important for REALTORS® to stay updated on RTA changes, they are not property managers or lawyers. This is particularly important when setting out notices to end tenancies and delivery of vacant possession in the Contract of Purchase and Sale (CPS). Given that there is currently no standardized clause specifying that purchasers must complete even if the tenant fails to leave after being given proper notice, Collins advises REALTORS® to speak with their managing brokers, who can then coordinate with legal advisers about potentially inserting clauses in the CPS.
Always warn clients of potential risks
Collins also highlights the importance of REALTORS® upholding their fiduciary duties to their clients. Part of this duty is warning them of potential risks, including possible liability for tenant compensation, additional closing costs, and potential loss of rental income, involved with the deal. Tenants are entitled to one month of compensation when a tenancy is ended for the landlord’s (or buyer’s) personal use. In addition to that automatic compensation, Collins predicts we may see more “cash for key” deals; a practice where the landlord and tenant voluntarily agree to end the tenancy for a pre-specified amount of compensation. His best practice advice is for REALTORS® to use their negotiation and communication skills to establish rapport with the tenants, which can help clients navigate the tricky situations of negotiating compensation with them. He notes that REALTORS® should only do this with their client’s permission. Since it is unclear when the rest of Bill 14’s changes will take effect, clients are also at risk of having their deals affected by new laws. Given these pending changes, Collins advises that REALTORS® should warn their clients of this risk and encourage them to complete deals as soon as possible when it can be done without putting the client at undue risk.
Recognizing specialty products
Ultimately, Collins advises REALTORS® working with tenant-occupied properties to know their product, both the property and the tenant-landlord situation. He cautions REALTORS® who are not familiar with tenant-occupied properties to refer clients who are dealing with them to those who are.
“Selling a tenant-occupied property is becoming a specialty,” says Collins. “If you are going to venture into this area, do your due diligence.”
The inaugural issue of BrokerConnect, BCREA’s newsletter aimed at managing brokers, provided a detailed breakdown of these changes and their timelines. Bill 14’s effects on the RTA are also addressed in a recently published Legally Speaking #574: Landlords Take Notice – Recent Amendments to BC Tenancy Legislation” by Amy Peck.
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