Advice from our Real Estate Lawyer:
Buying a Property with a Rental Suite
Written by: Cole Ferencz, BA, JD is an Associate Lawyer specializing in Real Estate Law | Nuraney Law Group, Vancouver, BC.
Cole Ferencz, is a real estate lawyer in Vancouver and a key member of the Nuraney Law Group. He primarily practices in the areas of real estate, residential tenancy, wills and estates, family, commercial, and corporate law. Cole prides himself in delivering honest and straightforward advice to his clients.
In this blog, Cole is providing some free real estate law advice and considerations for those looking to purchase a property with a rental suite.
In Vancouver’s hot real estate market, buying a property with an income suite is a good idea for many, as it allows them to obtain a larger mortgage. While buying a property with a rental suite has some definite benefits, there are many important considerations.
Buying a home with a tenant
If you are thinking about buying real estate with a tenant already residing in a suite, it is important to understand how this affects the property.
One of the things I am asked most often as a real estate lawyer is, if a new owner can increase a tenant’s rent when they take ownership. If a tenant has been living in the suite for an extended period, often they are paying below market value. Many new owners are under the impression they can raise the rent when they take over. However, when you take over ownership of real estate with an existing tenant, you are responsible for upholding the lease that has already been established. Depending on when the rent was last raised, there may be an opportunity to look at an increase, however this is generally limited to the rate of inflation.
Secondly, one cannot remove the tenant if they do not intend to use the suite personally for at least six months. If you purchase a house with a tenant who is paying below market value it may be very difficult or impossible for you to raise rent or remove those tenants. This makes it extremely important to make sure you are happy with the tenants, and what they are paying before you agree to purchase the property.
Real Estate Lawyer Tip #1: Review the lease agreement for the tenancy before you agree to a purchase.
Acting as a Landlord
Being a landlord is not an easy job, even when you are dealing with a tenancy with the perfect tenant. It is important that you are honest with yourself about whether you are ready for the responsibility. Some of the important things you need to consider are:
- There will be repairs that need to be made
- The potential of difficult tenants that cannot legally be removed, just because they are difficult
- The potential of dealing with noise, when you live in the same building
Real Estate Lawyer Tip #2: If you are thinking about buying a property with a rental suite, we recommend talking to someone who is familiar with residential tenancy law and real estate law.
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