Buying A Tenanted Property – And Getting Vacant Possession!


6 minute read

March 6, 2015

Easier said than done?  Perhaps.

But not impossible, and if you’re automatically passing on properties just because they’re tenanted, then don’t ever complain about the lack of inventory!

A property that is tenanted, especially those long-term, is not an ideal purchase option if you’re looking to move in immediately.  However, there are ways to get vacant possession upon closing, and if you’re willing to put a little work in, you might open the door to a property that other buyers don’t have access to…


“This is going to be a long, drawn-out process, and it has a fifty percent chance of ending in disappointment,” I told my would-be buyers, of a property that had a long-term tenant.

My buyers had exceptionally specific criteria, with respect to location, price, size, and building amenities, and while we were basically down to three buildings in Toronto’s downtown core, I knew in my heart that it was really only two, and if it came right down to it, they were limiting themselves to one building.

We had seen a couple of units in that particular building, and they said, “If the 07 model on a higher floor ever comes out, we’ll be all over it.”

Sure enough, that unit did come on to the market!

But not only were they on vacation at the time (isn’t that always the way?), but the unit had a long-term tenant.

I’ve never understood why condo-owners decide to put up a unit for sale when it’s tenanted, and ask that the buyer assume the tenant.

“Investors,” and by that I mean buyers who are not looking to occupy the unit as a primary residence, but rather would rent the unit out, probably make up less than five percent of the overall buyer pool.

And any investor worth his or her salt is going to want his or her own tenant in the unit, not just because there’s a possibility of getting a higher rent, but also because you want to forge your own path, and pick your own tenant.

I’ve written about this fascination – owners trying to sell tenanted properties, on this blog before several times.  I really, truly believe that it’s a fruitless task, and if a seller actually was able to move the unit with a tenant attached, they’d likely be doing so at a lower price than what the unit could have sold for if it were vacant.

In any event, my would-be buyers of the tenanted property came back from vacation and within hours of touching down at Pearson, we were in the unit, taking a look.

As we suspected, this was “the” unit for them, but the unit was leased until August 31st, and it was February.

I told them there were two things we were NOT going to do:

1) Close on September 1st.  As much as they loved this unit, there’s just no point in buying a unit with a 6+ month closing.  Not only would we be able to find something comparable, or better, in that time period, but the world can change in an instant, and a half-year is just too long to leave yourself exposed.

2) Assume the Tenant.  There was no way that my clients, first-time home-buyers, who had been renting and saving every penny for years, were going to become landlords by default.  They had no interest being landlords, no business being landlords, and if they were going to buy a condo, it was going to be THEM living in it!

My clients asked me, “What do we do?” and I told them it was simple: we would make an offer, with a closing date of May 1st, asking for vacant possession.

Not exactly ground-breaking stuff, is it?

Don’t forget, you can ask for whatever you want in an offer.  You can include whatever terms and conditions you want.

So what’s to stop somebody from making an offer on a condo, asking for May 1st possession, of a vacant condo, when the MLS listing specifically states, “Buyer Must Assume Tenant Until August 31st, 2015”?


Nothing at all.

And so that’s what we did.  We made an offer with a May 1st closing date, and put several clauses in our Schedule-A with respect to vacant possession, giving proper notice to the tenant, and providing us with a copy of the executed Form-N11.

The rest was up to the seller and the listing agent.

I wouldn’t say that the listing agent was caught off guard by the offer.  It was pretty straightforward, and I spelled it out in my email, and then in my phone call with him.

“The ball is in your court now,” I told the listing agent.  “Do what you can to get the tenant out of there for May 1st, and who knows, maybe we’ll do a deal here.”

Read between the lines, folks.

We use the word “incentivize” in real estate, which basically means “pay the tenant to leave.”

It’s no different than a seeing a gigantic line to get into a nightclub, walking right past that line, handing the doorman $50, and walking right inside.

In fact, it’s the exact same thing.  You want to get in early, and you don’t want to wait.  So you pay the person who is standing in your way.  Doorman, meet Tenant.  Tenant, meet doorman.

Now let’s not gloss over the fact that the tenant had absolutely every right to remain in the condo until August 31st, 2015.  He had a signed lease, and the seller was asking him to leave early, not telling him to.

The earliest that my clients could have taken vacant possession, according to the existing contractual obligations in place, was September 1st, 2015.

So we took a shot, and hoped it paid off.

Speaking of paying off, that’s exactly what the landlord/owner did to the tenant.

If you’re a tenant, and you’re leasing a condo for $1,800 per month, what would you consider “enough money” to leave four months before your lease is up?

It’s not like the tenant was being thrown out on the street.  If he agreed to sign the Form-N11 for early termination of a lease, he would be given 60 days’ notice from March 1st, to vacate the property by April 30th.

So what would you want if you were the tenant?

Well, some people might not want to leave.  Some would say, “To hell with you, I don’t need your money,” and stay in the unit.

But would they really?

Would they stay if offered a dollar?  How about a thousand dollars?  How about ten thousand dollars?  How about a hundred thousand dollars?

Everybody has a price, right?

I certainly hope all this doesn’t come off as insincere.  I realize that tenants have rights, and I respect those rights.  But this is business, and if a deal can be reached between two parties, then have at it.

The tenant first responded to the landlord’s request by saying that he wanted $5,000, and to live in the unit for free for the duration of the lease.

He wasn’t stupid, and apparently, he was a great negotiator!

The tenant had given first and last month’s rent as a deposit when he moved in, so the August rent was already paid for.  He was essentially asking for three months’ rent for free, and at $1,800, that was a whopping $5,400.  Not exactly chump change!

His request was a bit crazy, but perhaps he wanted to know just how bad the landlord wanted him out of the unit, so he could close the deal on May 1st instead of possibly terminating the listing and waiting until the fall.  As I said – I don’t see any buyer purchasing the unit and agreeing to a September 1st closing.

Ever two days, the listing agent would call or email me to say, “We’re still working on it,” and our offer actually expired well before we even came close to reaching an agreement.

It was eight or nine days after we made our initial offer that the listing agent called me and said, “I think we have something here.”

The tenant agreed to leave for $7,000 in combined cash and free rent, and the seller/landlord agreed as well.

The tenant signed the Form-N11, and my buyers and the seller signed the Agreement of Purchase & Sale.

I had told them from the start, “This could be really, really drawn-out,” and it was almost two weeks from when we first went in to see the unit to when we had an accepted Agreement, but it was all worth it.

Is it cheesy to say that everybody wins?

The tenant got a whack of cash.

The owner/landlord got his condo sold, and was able to close four months sooner.

And my buyers got the condo they wanted all along.

Cheesy, fine.  But you can’t argue that it’s not all true!

A current client of mine wants to see a unit at Market Wharf this Saturday that is on the market for sale, and is tenanted until……wait for it………April 30th, 2016.

Maybe THAT is stretching things a bit.

But if you’re an active buyer, and there’s a unit you have your eye on that is tenanted for several months, don’t automatically dismiss it.  There are ways to get vacant possession of a tenanted condo, if the parties involved can work towards it, and agree on fair compensation for all.

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Paully

    at 7:51 am

    “Would you have sex with me for a dollar?”


    “Would you have sex with me for ten million dollars?”


    “Okay, now that we have determined what you are, we are just haggling over the price!”

  2. SardineQueen

    at 8:16 am

    There are a lot of inexperienced landlords out there imo. Greedy and without any business sense. You need to budget for 1 month (min) vacancy. Example: If it costs $24,000 annually to carry the property, divide by 11 instead of 12 to get your monthly rent. Tenant pays $2,180/month instead of $2,000/month and you’re covered in case of vacancy. Of course, you can’t charge $2,180 if comparable rental spaces in the area top out at $1,900. In other words, there are other factors that need to be taken into consideration when determining whether a particular property is suitable to rent. Suitable = cash neutral or cash positive. Landlords/Investors should be crunching these numbers before ever purchasing a rental property in the first place. Instead, they *whistle past the graveyard* hoping that the unit will never be vacant, listing the property tenanted and ultimately taking a greater loss.

    1. Mike

      at 11:06 am

      A bit off topic but I think that a new landlord should be able to cover at least 3-4 months of expenses without rent. If you ever have a problem tenant and need to evict, you’re looking at a minimum of 3-months and banks don’t care that you’re tenant is a deadbeat.

      Hard to put that kind of cost into the rent and not deter quality tenants. The one who tend to pay higher rents, no questions asked, tend to be the ones who don’t have the intention to make the payments.

      1. Amelia Haynes

        at 1:49 pm

        Planning for a deadbeat … hmm. Not my style. If you aren’t a good judge of character, you need to hire someone who is. No landlord can “afford” a deadbeat.

        1. Mike

          at 4:16 pm

          I looked at a house in Rosedal that was owned by a commercial litigator, needed to rent out the house while he was away on business so he hired an agent at one of the carriage trade firms. They met with the tenant a number of times, credit check, background check, employment check, everything was fine. Problem was the $25k deposit (first and last) was the only money they seen for an entire year they spent before the LTB.

          Sit in any LTB hearing an you will hear about great tenants who just one day stopped paying their rent. You can plan for it or you can wait until the banks call and then talk to them about ‘style’.

          1. Friday Night Amelia

            at 8:53 pm

            Meh … people who look good on paper don’t necessarily make the best tenants. The better they look on paper, the more suspicious you should be and the more work you’re going to have to put in to ensure they are the “real deal” …

            Mistake #1: Well paying job, money in the bank, good credit and hefty deposit DO NOT = good character. Saying all the right things? Seems too good to be true? Might just be!

            Agent met with the tenant several times but were they actually skilled or experienced when conducting an investigation into someone? Did they ask tough questions? Did they go beyond the numbers?

            Mike, you didn’t mention references. I’m sure there were some. What kinds of questions were they asked? Tenant still coming up rosy? They shouldn’t be. After you’ve talked to the references, (assuming you’ve asked the right questions) there should be some information that makes the prospect less than ideal, but not out of the question.

            How many times had the landlord successfully chosen previous tenant(s)? What’s their track record? Did they even meet the tenant before leasing the property or were they too busy making money in some other city to bother? Intuition is HUGE. If the landlord chooses not to meet the prospect, for any reason, they’re taking a risk. Skype baby! Skype!

            Question – how many other renters were willing to put the 25k deposit up on the Rosedale property you give in your example? Perhaps the landlord simply accepted the only offer.

            I’m going to stick with my basic argument here – You can’t plan your way out of losses that result from a deadbeat tenant. Landlords make money when the rent is paid. When the rent is not paid, it’s a f*cking nightmare. You can’t plan your way out of that kind of nightmare. Sure, you can sock extra money away in the event you get screwed, but that’s not a business plan. Your better off hiring a PI (or me!)

            Worst case scenario – There’s more than one way to, ahem, encourage someone to GTFO … perhaps paying them to leave as David suggests? Perhaps something less accommodating?

    2. Paully

      at 2:03 pm

      I think two months would be more prudent. You also have to budget for the one-month-rent RE Agent commission if you use an agent and MLS to find your new tenant.

      A friend of mine is a paralegal and does a fair bit of Landlord/Tenant work. Actually, he only takes landlord clients in general, since the tenants tend not to pay him. He says that he has seen a surprising number of instances where the tenant intentionally trashes the rental property, and then uses the (now) horrid state of the unit to justify not paying any rent. Sadly, it takes months to get the tenant out, the back rent is seldom recovered, and the landlord has to repair the damage. The professional tenant moves on to screw over some other landlord. Rinse. Repeat.

      1. Appraiser

        at 4:43 pm

        @ Paully:

        As a paralegal, it can be assumed that your friend deals exclusively with landlord / tenant situations that have gone awry. It would be incorrect to infer that this is the norm. In reality, professional tenants, a.k.a. fraud artists, are extremely rare.

  3. I like logic

    at 8:27 am

    ““Investors,” and by that I mean buyers who are not looking to occupy the unit as a primary residence, but rather would rent the unit out, probably make up less than five percent of the overall buyer pool.”


    1. IanC

      at 9:09 am

      “Probabably” and “about” tell me David did not have a source and was going from expericence.

      I thought 5% was very low as well, but he said 5% of the buyer pool, and not 5% of the purchasers.

      Perhaps non-investors stay in the buyer pool longer waiting to pull the trigger.

      5% of the purchasers being investors would seem low to me. There are 10, 20, and 30 year old condos out there. Do 30 year old condos have barely 5 % investors (minus original purchasers)?

      It’s true older condos tend to be more owner occupied than newer condos, but it would be interesting to see how the owner / renter ratio changes over time.

      I’m in a 11 year old condo, and I have to idea what my ratio is right now, and I also wonder how the ratio has changed over the years. I know when my condo was built, some individuals owned as many as 5 units.

      1. Chroscklh

        at 12:23 pm

        So much use of quote mark. I have much to learn about write “the english” it wud seem. But I think David estimate sound correct because maybe 30 percent NEW BUILD by investor – make sense fewer percent look at secondary. Also, stat came out recent which said very low % condo owner no live there – logic of method questionable (mailing address diff than condo for owner) but result include stock of 10, 20, 30 yr old condo which few investor invest in.

  4. Chroscklh

    at 9:02 am

    Chroscklh think tenant got great deal here. For 7k$, when I was young renter, I would choke grizzly bear, no glove (usual to wear thick glove). The Queen of Sardine above haz good analysis. Problem is invest in rental barely cash-flow positive these day – throw in big incent for leave tenant, expensive purchase price – all profit burn up like log cabin with wood stove actual made of wood. I tell u one story – sometime, can get co-operate by tenant. I no pay incent BUT I did pay for cleaner twice week for 2-3 week and I pay for weekend at Sangri La for open house. Tenant very happy. Maybe he want ask more but I get tatoo of big man (me) crushing small man on my forearm – it no coincident small man look like him – he very accomodate

  5. IanC

    at 9:17 am

    Also – $7200 is four months rent of the unit.

    It’s almost like the owner had to buy four months rent in his own unit for May,June, July, and August, but rip up the tenancy and give his key so the buyers had it to them selves.

    And the renter got the incentive. Smart renter !

    And the Seller probably made the best decision for himself as well.

  6. Pingback: Buying A Tenanted Property – And Getting Vacant Possession! |
  7. Den

    at 11:14 am

    If I see a property in thr mls and it has a tenant. I don’t even look at it. Next.

  8. Den

    at 11:15 am

    That was supposed to be the (Crap. lol. )

  9. Squidward

    at 9:16 pm

    I was in the opposite situation not too long ago when my landlord announced his intention to sell. I was month to month and started looking for a new place almost immediately–preferring to have my next home lined up on my timeline rather than his. Funny thing, apparently on the advice of his (part-time) agent he refused to let me go with one month notice rather than the required two. I was pretty puzzled because I figured he would be pleased to have the place vacant for showings. Instead, he was going to have to deal with a unit full of boxes and half disassembled furniture, 24 hr notice for viewings and one fairly skittish cat. Didn’t take his agent too long to realize this was bad news and I ended up getting the one month refunded. After reading this, I feel like I should have negotiated harder!

  10. RAY

    at 1:10 am


    1. D

      at 5:48 pm

      N12 cannot be served while the tenant is in a lease. Only if they are month-to-month. That is why it was not suggested in this circumstance. Even if they had waited until the lease was up it is 60 days notice, one month rent compensation, and tenant can wait for hearing at LTB which can take more time on top of that.

  11. Alexandre

    at 12:47 am

    This is incredibly useful – merci!

  12. Ad

    at 7:48 am

    What if the buyer buys the property as investment and it is tenanted.. the tenant is willing to stay but he has very bad credit and his income is so low… buyer already asked for vacact possession in schedule A however tenant cant leave as he has nobody accepted his paper

    1. D

      at 5:51 pm

      If the buyer is looking to rent out the property they must inherit any current tenants. They cannot evict current tenants only to raise the rent and find new ones… can only evict if they are moving in themselves, or their family. If they do this in bad faith (say they are moving in and then rent it out again instead), they can be taken to LTB by the previous amount and will have hefty fines (up to $25,000).

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