Navigating RTA Provisions

When dealing with tenanted properties, the Alberta Real Estate Association (AREA) purchase contract contains several critical provisions that demand close attention. One of the most significant is Paragraph 2.3, which states: "This contract will be completed, the Purchase Price fully paid and vacant possession given to the buyer at 12 noon on ________, 20". This clause is particularly important because it obligates the Seller to provide vacant possession unless the Buyer is specifically assuming the Tenant.

For real estate professionals representing sellers with tenants, this provision requires careful consideration. On the other hand, if you're representing buyers who wish to assume tenants, clarity is key. In such cases, it's essential to obtain copies of all lease agreements and ensure that your buyer reviews these leases thoroughly before removing any conditions.

To protect your buyer's interests when assuming tenants, consider adding a condition precedent to the Contract under paragraph 8.2 (d). This condition should stipulate that the Seller will provide the Buyer with true copies of relevant documents such as the lease agreement, inspection report, and confirmation of security deposits by a specified date. The contract should then be subject to the Buyer's satisfaction with these documents by another specified date.

>Another valuable tool provided by the AREA contract is the "Tenancy Schedule" in paragraph 9.1. This schedule is not only beneficial for you and your clients but also immensely helpful to lawyers involved in the transaction. Always make sure to provide this schedule to the lawyer when sending over conveyancing documents.

When a Buyer is assuming a Tenant, there are several important steps to follow. The lawyers involved will need to adjust for the security deposit and rent. It's the Seller's responsibility to notify the tenant of the property sale and provide them with the new landlord's details. Following this, the new landlord should make contact with the tenant to advise on how future rental payments should be made.

Inspection reports play a crucial role in these transactions. The Seller is required to deliver copies of all rental agreements and inspection reports to the buyer on or before the Completion Day. If the Seller did not obtain an inspection report, it's important to note that the Buyer will not be able to use the security deposit to repair any damages. In such cases, it's advisable for the buyer to conduct an inspection with the tenant, ideally on the Completion Day.

A clear understanding of the different types of tenancies is fundamental to properly managing rental properties and navigating the buying or selling process. There are three main types of tenancies you should be familiar with: Fixed Term, Periodic, and Implied Periodic.

A Fixed Term tenancy is straightforward in its definition. It starts and ends on specific dates as laid out in the Agreement. For example, an agreement might state: "This Agreement will be for a fixed term commencing at 12 o'clock noon on the 1st day of January, 2024 and ending at 12 o'clock noon on the 30th day of December, 2024".

Periodic tenancies, on the other hand, automatically renew at the end of each period, whether that's weekly, monthly, or yearly. These tenancies continue until either party serves a notice of termination.

The third type, Implied Periodic tenancy, is a bit more complex. This occurs when a fixed term tenancy ends, but the tenant continues to reside in the property with the landlord's implied consent. In such cases, the tenancy becomes either a monthly or weekly tenancy, depending on the length of the original fixed term. If the original term was for a period of one month or more, it becomes a monthly tenancy. If it was for less than one month, it becomes a weekly tenancy.

To avoid the complications that can arise from an implied periodic tenancy, it's advisable for the parties to enter into a new fixed term tenancy agreement before the initial fixed term ends.

The requirements for terminating a tenancy vary depending on the type of tenancy in question. For Fixed Term tenancies, no formal notice is required as the tenancy expires on the end date specified in the agreement. However, to avoid any confusion or the creation of an implied tenancy situation, it's recommended that the landlord notify the tenant that the term will expire and vacant possession will be required.

Periodic tenancies, however, always require notice. The notice period depends on the type of periodic tenancy:

For a Weekly Periodic Tenancy, one week's written notice is required. The landlord must serve this notice on the first day of the tenancy week. For instance, if the weekly tenancy runs from Tuesday to Monday, notice must be served on or before the Tuesday, with the tenancy ending on the following Monday.

Monthly Periodic Tenancies require more extensive notice. The landlord must provide three months' written notice, which must be served on or before the first day of the three-month period. For example, if you require your tenant to vacate the home by March 31, notice must be given on or before January 1st. It's worth noting that tenants in a monthly periodic tenancy can give notice to the landlord by serving one month's written notice, which must be on or before the first day of the one-month notice period.

Yearly Tenancies require 90 days' written notice. The landlord must serve this notice to be effective on the last day of the tenancy year. For instance, if the last day of the tenancy year is December 31, the 90-day notice must be served on or before October 2.

It's crucial to understand that landlords can only terminate a periodic tenancy for specific reasons. These include: the property being sold with the purchaser or a relative of the purchaser intending to move in; the landlord intending to do major renovations; plans to demolish the property; intentions to use the property for commercial reasons; or a substantial breach of the contract by the tenant.

The notice to terminate must meet several criteria as outlined in Section 10 of the Act. It must be in writing, signed by the person giving notice (the landlord) or the landlord's agent, set out the reasons for terminating the tenancy, specify the property for which notice is being provided, and state the date on which the tenancy is to terminate.

Service of the notice can be effected under Section 57 of the Act by personal service, registered mail, or certified mail. If the landlord cannot serve because the tenant is absent from the premises, it can be left with an adult or posted to the premises door.

When dealing with rental properties, there are several key questions that realtors should always ask and answer. First, identify what type of tenancy you're dealing with - is it Fixed, Periodic, or Implied? If the Buyer is assuming the tenancy, it's crucial to ask the Seller for a copy of the lease agreement and inspection report, and review these documents with your Buyer.

You should also inquire about who is holding the security deposit - is it the landlord or a property manager? If a property manager is involved, further inquiries should be made as to whether the Buyer will continue with their services. This information is important because it affects how the security deposit will be handled during the transaction.

Understanding the required notice period is another critical aspect. Has the Seller given the required notice? And if notice has been given, will the seller be in a position to deliver vacant possession to the Buyer on the Completion Day? These are crucial questions that can significantly impact the transaction.

If the Buyer is assuming the Tenant, but the Seller can't deliver the inspection report, arrange for an inspection report to be completed by the Completion Day. This is important because without an inspection report, the new owner may face difficulties if they need to use the security deposit for repairs in the future.

It's worth noting that if the buyer is not assuming the tenancy, and the seller is unable to provide vacant possession, the Seller will be liable for the buyer's damages. This could include costs such as storage fees or hotel accommodation.

Condominium rental properties require special considerations. Many property management companies require landlords to pay a security deposit to the condominium corporation or property management company. In these cases, it's necessary to determine whether this security deposit can be transferred to the new owner. If it's transferable, lawyers will adjust for this security deposit in the statement of adjustments. If the management company does not allow for a transfer, the Seller must directly approach the property management company for a refund.

When it comes to showing a rental property, there are specific rules to follow. You must give the tenant 24-hour notice, and a landlord can only enter between 8 a.m. and 8 p.m. Entry is not allowed on a holiday or on the tenant's day of religious worship. It's important to remember that the tenant cannot be forced to leave during showings. Working with the tenants to encourage cleaning and documenting everything you do is always good practice.

In situations where you're acting for a Buyer who does not wish to assume a tenancy (and proper notice hasn't been given to the tenant), there are several strategies you can employ. The seller and the tenant could mutually agree to a move-out date. The seller could also incentivize the tenant by helping them find a new place to move to, providing a good reference to the tenant's new landlord, or offering to pay for their first month's rent and moving expenses. Once a move-out date and/or settlement is agreed to, it's crucial to get it in writing.

By understanding these RTA provisions and their practical implications, you'll be better equipped to handle the complexities of buying and selling rental properties in Alberta. Remember, each situation is unique, so don't hesitate to consult with a legal professional for specific advice. Whether you're a realtor, a property owner, or a potential buyer, this knowledge will serve you well in navigating the intricate world of tenanted property transactions.