Wednesday, 13 March 2013

Selling Residential Rental Properties in Alberta- How to Terminate a Tenancy

By Courtney Aarbo Barristers & Solicitors

Providing Information to Assist Small Businesses

It has been our experience at Courtney Aarbo that in sales of rental property there is some confusion about what is required to be done by seller’s to comply with the “Residential Tenancies Act of Alberta”. Failing to comply with this legislation can result in great complications or even not being able to close the real estate deal.

As a first point one should note clause 2 (1) of the Act, which exempts certain types of rental properties from its provisions. These include rentals of mobile homes and rooms rental within the landlord’s home (boarders).

Assuming the Act applies, and the Seller is attempting to sell a home or condo that is rented with either a yearly or monthly lease, and the Buyer is planning to move in as apposed to continuing to rent, then the Seller is going to need to properly terminate the lease as of the sale closing date, or earlier. Failure to do so will breach the Seller’s obligation to provide the Buyer vacant possession under the contract.

If the Lease is a ‘month to month’ lease then section 8 (1) (b) of the Act requires the landlord (the Seller) to give the tenant notice on or before “the first day of the notice period.” The notice period is defined as being 3 consecutive ‘Tenancy months’. By way of example, if the sale is to close on July 1st, then the month to month tenant must be given proper notice to vacate by no later than April 1st.

If the Lease is a yearly tenancy then section 9 of the Act requires that a landlord give notice to the tenant “on or before the 90th day before the last day of the tenancy year”, to be effective at the end of the lease year. Section 10 (c) does allow a notice to terminate a yearly tenancy that is late to be effective 90 days later so long as it is served before the end of the tenancy year. By way of example, if the lease year ends June 30, a notice would need to be served on the Tenant on or before April 2nd to be effective June 30th. If however it was served on June 1st, it would be effective 90 days later. If the landlord (the Seller) did not serve the tenant until July 1st, into a new tenancy year, the notice would not terminate the tenancy until June 30th the following year- obviously a problem if the real estate deal close date is only one month later.

Please note that by section 10 of the Act the notice to terminate must

a)      be in writing;

b)      be signed by the person giving the notice (landlord) or the landlord’s agent;

c)      set out the reason for terminating the tenancy example: a sale of the property;          

d)      identify the premises for which the notice is being served; and

e)      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.

Of course if the Buyer is purchasing the property with the idea of not continuing to rent it, then provided the Buyer wants the existing tenant, no notice to terminate needs to be given. The Seller will however have to assigned the tenancy agreement to the Buyer, notify the Tenant of his or her new landlord, and properly adjust on closing for rent paid and damage deposits. These adjustments are usually calculated by the Seller and Buyer’s respective lawyers.

For more information contact Courtney Aarbo Barristers & Solicitors at 3rd Floor 1131 Kensington Road N.W., Calgary Alberta T2N 3P4 or or phone 403-571-5120.

Gary C. Courtney
Courtney Aarbo Barristers & Solicitors

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