Leases are Binding Documents

From a conversation regarding leasing situation:

A while ago we had a tenant come to us and say they can’t afford to continue on in the residence and they’re renting one of the more expensive suites in one of the more prestigious buildings in town. The rent’s about $7000 a month. So – a difficult situation. They told us they probably won’t be able to pay the rent next month. We can’t do anything, we can’t re-lease the suite or do anything until we actually get a written notice from the tenant.

Now once the tenant breaks the lease they are liable for any losses or damages that the owner might incur as a result of their lease breaking, so if they’re 3 months into the lease and they’ve got 9 months to go and it takes us 7 months to get the suite rented we would have the right to go to arbitration for 7 months rent.

Plus they’re also responsible for the re-leasing fee which is half a month’s rent. So something that need to be thought of quite carefully especially if you’re a tenant, when you are signing a lease you are responsible for the full term of it.

Generally speaking we’re able to re-rent suites fairly quickly. In fact, in this instance we have a fellow actually say that he wanted to take it for the first of the month – because we had put an ad up to try and mitigate any damages for the owner, and the tenant. But at the moment, the tenant is travelling and we haven’t got the signed notice so there’s nothing we can do. We can’t enter into another lease agreement until we have that notice.

At Downtown Suites we’re trying to mitigate costs for everybody. We don’t want to be the bad guy, at the same time you have to protect everybody’s rights, and that includes the landlord, obviously. We’re also very conscious of trying to be helpful to the tenant. Situations in life do change- people get transferred This chap’s financial situation has changed even though he had a very stable credit background for a long time, something’s happened and that changes.

We do try to mitigate and we do try to rearrange as quickly as possible. But it’s something to remember, that there are when you’re a tenant.

From the landlord perspective there’s an obligation too. Once you’ve signed the lease you are not able to do anything with the property, you can’t move into it. The lease takes precedence, the lease runs with the lands. So even if you sell your apartment or property, you can’t evict the tenants, the tenants are there for the term of the lease. You can ask the tenants if you can show the suite – they more or less have to oblige for that with 24 hour notice. But even if you do sell it, the new owners have to take on those tenants. You can’t raise the rent, and actually you can’t make any other changes whatsoever. The lease is firm for the full term.

We like to take a one year lease at Downtown Suites because one of the other concerns we have is that we have some sort of longevity with a tenant. We don’t want somebody using it just as a crash pad and then walking away. So we like to have people in for one year and after that we go month to month. We don’t renegotiate actual leases because it gives the landlord more flexibility should they want to sell or should they want to move in. Then it’s a 60 day notice situation and they can either move in or the new owner can move in.

It is something to be concerned about: leases are binding legal documents.

A Day in the Life of a Property Manager: The Lease

Just another Day in the Life of a Property Manager. This time it’s a tricky situation involving a broken lease and written notice!
Nicholas Meyer of Downtown Suites explains the ins and outs of leasing in Vancouver. Good info for both landlords and tenants.

Downtown Suites Presentation
Ozzie Jurock and Nic Meyer
Ozzie Jurock and Nic Meyer
Real Estate Action Group, Sept. 2010
Real Estate Action Group Meeting

Nic Meyer and Lisa Taylor recently presented to Ozzie Jurock’s Real Estate Action Group, for their September Meeting.

Talking about the pitfalls to avoid in renting suites and condos, Nic and Lisa went over all the reasons why hiring a professional property management company is the smartest way to go.

The talk is here in 4 parts, along with slides from the presentation.

Video Part 1, Introduction from Ozzie Jurock. Why hire a professional management company? What does a management company do for you as an owner/investor?

Video Part 2, Pitfalls and tenant issues and how to avoid them

Video Part 3, More on pitfalls and tenant issues and how to avoid them

Video Part 4, Tenants to look out for, the value of working with experienced professional management, advice for owners.

View the slides that accompanied the talk

Tenanted Suites

Many owners of investment property may be unaware of the ins and outs of the new BC Residential Tenancy Act, which has been recently updated. If your suite is currently rented to a tenant, this information should help you understand the tenant rights written into the current legislation.

The new rules for residential tenancy apply to the many suites here in Vancouver that are held as investments and currently occupied by tenants. When owners wish to sell the suite, they find that tenants are not simply expendable, to be evicted upon sale of the suite.

Here in BC, tenants have many rights, upheld by law. It may come as a surprise to owners to discover that when tenants are in a lease situation, that lease takes precendence over the sale. Unlike other countries, an owner here cannot evict a tenant for the purposes of selling. In fact, it is only if the new owner wishes to live in the suite that a tenant may be evicted. This new owner is referred to as an “owner-occupier”.

This is important legislation. At Downtown Suites, we help the owners understand the ramifications of this legislation when they decide to sell their investment property.

(This is an important Evergreen Resource article, revisited from our archives.)

Lease Advice For Landlords

Should landlords have a closed one year lease, with no month to month extensions allowed or use the standard 1 year lease and continue on month to month?
The standard form agreement is for the lease to be one year and then go month to month. If the tenancy is to be for one year only, the tenant has to initial agreement to this. Very few people will want to take a large or expensive suite and not have the security of knowing that they can continue on indefinitely, so we do find it is harder to rent without such an option.

On the other hand, with a one year lease, the tenancy officially ends at end of term. Tenants are not obliged to actually give notice, they may not cooperate with releasing, and usually are not responsive on whether they are staying on etc. We have had situations where they move out and then we have an empty month to then try and get the suite re-rented.
The advantages of the approach we use at Downtown Suites are as follows:

1. The rent can be renegotiated should the market warrant it. The owner can possibly avoid the legislated maximum increase allowed by the provincial government (this year currently 4%) on ongoing agreements.

2. In the event of a sale or the owner wishing to move into their own property, the tenant does not have to be asked to leave, under current legislation the landlord is required to pay one months rent for asking the tenant to move out.

Rents have increased quite significantly over the past year, quality tenants are becoming scarcer and the reality is properties are becoming much less affordable for the tenant rental pool (whose wages haven’t increased in the same ratio). There are also hundreds more rental suites coming on each month even though demand is still quite strong.
For more info, here is a link to the Residential Tenancy web site which governs these transactions.

What Landlords Should Know

What happens if you own a property and you decide to sell it? What happens with the tenant?

There are very defined rights and responsibilities for both parties, under the Residential Tenancy Act which is the governing act for all rental transactions in the province of British Columbia.
At Downtown Suites, we always rent our properties on a one year lease. The reason we take a one year lease is so we get some longevity with the tenant client, but after that we always go on a month to month basis. That gives flexibility to the owner, should they want to sell their property they then are able to do it. We’ve had a couple of instances where owners have asked us to get another lease from the tenant, and we have done that, and they decide the market is very strong, they want to sell it. The rental lease takes precedence over any sale. It is important to remember that.
It is almost impossible to sell a property with a long lease, even ten months left still on it, they wouldn’t be able to move in for 11 months. The other option is that sometimes you can buy the tenant out, but it’s not a very easy thing to do and of course you are very much in the tenant’s pocket then – they are writing the rules.
Once we have the flexibility of a month to month lease, the requirement is that should the property be sold, and the new owner wants to move in to it, (or should the existing owner wish to move back into his own property as well,) they have to give 60 days notice to the tenant that they want to move in, before the end of the rental period. The means of delivery of this notice is very regulated as well. If the notice is just posted on the door, I believe it’s three or four days notice is used up just by putting it on the door, so we have to be very careful about that.
So essentially, 60 days notice at the end of the month. The tenant then has the right to give 10 days notice to move out on any time within that period, and rent that has been paid for the time they are not going to be there is pro-rated and refunded to them.
So this can be quite complicated if you are expecting that rental stream and you won’t get it for two months if they decide to move out within 10 days of being served the notice. You would be without any rent for 50 days, so it’s something to bear in mind.
The other thing is they are required to receive one month’s rent for the inconvenience of having to move. Now a lot of owners balk at that, but the law is One Month’s Rent. I just had a situation with a gentleman from overseas, who didn’t want to pay this. A lot of overseas owners find this absurd in their mind and they want to get their own property back. The gentleman who was the tenant went to the arbitration court and, of course, he won. So be very careful. You are obliged to pay one month’s rent, plus once you serve the 60 days notice they can then give you 10 days notice and move out any time they want. And then the remaining rent is pro-rated and refunded to them.
I’ve had personal experience of this. I bought a house not so long ago and I had to pay out $6,000 in rents to tenants just so I could get the house back for myself. So it is quite painful. However looking at it from the other side, I can fully appreciate how tenants would feel if they’ve enjoyed living in their home – it is their home after all – and they are being forced to move. Of course now a lot of people are being forced to move so people can realize capital gains. We are not into the social issues here, but I’m just saying I’m sympathetic with both sides. But what really counts is the law, and what we have to administer.

(Video version posted below.)

(originally posted April 20, 2007)