Are You Considering Buying a Rental Property?
April 1st, 2016 by Gemma Brown
When contemplating purchasing rental property, there are some additional key elements that need to be considered. For example, inquiries of the seller should be made as to whether there are written lease agreements; whether the property is correctly zoned for its usage; whether the rental is month-to-month or an annual tenancy; the rent payments for each unit/suite; whether rent is paid by a third party (ie. Manitoba Housing); if security deposits were paid, and if so, when and how much; whether the tenants are to remain tenants following the purchase; the rental history of the tenants; and whether any rent increases have been made in the preceding 12 month period (if so, when and how much). The answers to some or all of these questions can greatly assist you in assessing your potential exposure to certain Residential Tenancies Act (the “Act”) provisions.
When presenting an offer to purchase, we suggest that a buyer obtain the seller’s representations that the property is in compliance with the Act, and that the seller consents to the buyer obtaining a Rent Status Report from the Residential Tenancies Branch (the “RTB”). Landlords also must comply with certain obligations under the Act, whether or not the property is registered with the RTB. A rent status report provides information on a property’s rent history and can alert you to potential rent increase problems. It is important to note however, that there are many rental units that are not properly registered with the RTB, which, if a search is requested of the RTB, may open a “can of worms”.
Why should you be concerned with these issues and obtain appropriate representations from a seller? As an example, if the requirements of the Act are not met (ie. no notice provided, or a rent increase above guidelines is made), then the rent or the increase may be disallowed, and the RTB may roll-back the rent and order the landlord to refund any rent overpayment to the tenants, which could fall on you as the new landlord, resulting in a significant financial loss. For these reasons, and many more, prior to purchasing rental property, we recommend you contact a lawyer so that you are fully informed.
