How to sell a rental property occupied by tenants

Selling a rental property involves certain legal considerations. A solid understanding of the applicable rules and careful planning will help facilitate the transaction while respecting your tenants' rights.

1. Prepare a complete file

Before listing your property, take the time to gather all relevant documentation. Unlike an owner-occupied residential property, a rental property is evaluated not only for its physical characteristics but also for the income it generates. Prospective buyers will therefore want to assess its profitability and gain a clear understanding of its operation.

Be sure to compile the current leases and all related documents (such as lease addenda and building or condominium rules, where applicable), lease renewal notices, income and expense statements, municipal and school tax bills, invoices for major work that has been completed, and any warranties that remain in effect. You should also identify any vacant units and disclose any ongoing or planned work that may be of interest to a prospective buyer.

A complete file inspires confidence and often allows you to respond more quickly to buyers' questions.

2. Plan showings with your tenants

The presence of tenants does not prevent you from showing your property, but certain rules must be followed.

The Civil Code of Quebec provides that a tenant must allow showings when a dwelling is being offered for sale. Except in urgent situations, however, the landlord must provide at least 24 hours' notice, and visits must take place between 9:00 a.m. and 9:00 p.m. (section 1932 of the Civil Code of Quebec). CORPIQ members also have access to a sample letter for this purpose. Please note that a tenant may refuse access if the landlord or the landlord's representative is not present during the showing. In addition, if you are considering holding an open house, it is advisable to discuss it with your tenants beforehand to minimize any inconvenience.

Beyond the legal requirements, respectful communication generally makes the process much smoother. Keeping your tenants informed and giving them as much advance notice as possible will often help maintain a positive relationship during this period of transition.

3. Understand the effects of the sale on existing leases

Both buyers and tenants often wonder what will happen to existing leases after the sale.

In Quebec, the sale of a rental property does not terminate existing leases (section 1886 of the Civil Code of Quebec). The purchaser automatically becomes the new landlord and assumes all of the rights and obligations under the existing leases. In other words, a change in ownership does not, by itself, allow a lease to be terminated.

In certain circumstances provided for by law, however, the new owner may exercise a right of repossession or eviction. These procedures are subject to specific legal conditions and deadlines. A seller cannot undertake these steps on behalf of a prospective purchaser.

4. Ensure a smooth transition

On the closing date, it is advisable to provide the purchaser with all documents and information required to manage the property. Copies of the existing leases, notices previously sent to tenants, keys, access codes, and any other relevant documentation will help ensure continuity in the property's administration.

It is also recommended that tenants be informed of the change in ownership so they know where to send their rent payments and whom to contact regarding any future matters relating to their lease.

A well-prepared sale inspires confidence

Selling a rental property is more than a transaction between a seller and a buyer. It also involves the tenants, whose rights must be respected throughout the process.

By preparing your documentation carefully, communicating clearly with your tenants, and organizing the transition effectively, you will help ensure a smoother sale for everyone involved.