UPDATE: In response to CMBA-BC's advocacy efforts, effective August 21, 2024, the notice period required when a landlord issues a notice to end tenancy on behalf of a purchaser will be reduced to three months, with a dispute period of 21 days. This amendment fortunately negates the previously discussed ramifications regarding rate hold timelines and potential buyer appeal.

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Good morning,

British Columbia is introducing new changes to The Residential Tenancy Act that will come into effect as of July 18, 2024. While the government's motive is to hopefully better protect renters and provide clearer guidelines for landlords, there are notable ramifications for homebuyers requiring financing; specifically regarding rate holds and pre-approvals.

In the case of a sale-purchase transaction, a tenancy can only be terminated if the landlord, purchaser, or close family member intends on occupying the rental space, OR the space will be converted to a different use, majorly renovated or demolished.

CHANGES TO THE RESIDENTIAL TENANCY ACT

• If a landlord, purchaser, or close family member is moving into the rental space, the amount of notice the landlord is required to give has increased from 2 months to 4 months. If the space will be converted to a different use, majorly renovated, or demolished, the amount of notice the landlord is required to give has increased from 2 months to 4 months.
• Notice countdown starts on the next rental period (ex. notice was given July 22 for a month-to-month tenancy that starts on the 1st of each month, the tenant is not required to vacate the property until November 30)
• The amount of time a tenant has to dispute a tenancy termination and apply for a resolution has increased from 15 days to 30 days.
• The stated purpose for ending a tenancy must be initiated within a reasonable amount of time after the tenant vacates, and be used for the stated purpose for a minimum of 12 months (previously 6 months), otherwise the vacated tenant may be eligible for compensation.
  

IMPACT ON MORTGAGE FINANCING

Rate holds and Preapprovals

Typically, a rate hold or pre-approval is held for 120 days. After the 120 days have lapsed (or if a buyer is closing outside of that guarantee window), a buyer is required to requalify at current rates. Meaning, buyers may not know the ultimate rate and whether they can truly qualify at the time of entering into an offer.

Owner - Occupied Purchase

Most lenders will not allow an owner-occupied purchase if there is an existing tenant. If an existing tenant remains after the date of possession, the home is deemed a rental property. There are some exceptions to this rule that may be specified on a case-by-case basis.

Mortgage Insurance 

Purchasing a home with an existing tenant will likely result in it being classified as a rental property by the lender and therefore may impact the ability to qualify for an insured mortgage (when purchasing with less than 20% down).

Find more information about these upcoming changes HERE.

If you'd like to run through specific situations we would be more than happy to help. If you have any questions regarding the changes to the Residencial Tenancy Act we recommend you connect with a lawyer who specializes in tenancy law. 

OAC, E&O