What To Do When A Tenant Walks Away From A $20K 'Cash for Keys' Offer

Selling a tenanted property in Ontario to a buyer who wishes to occupy for own use sometimes requires more complicated negotiations.

It's important to understand that when a landlord selling a tenant a property in Ontario, a landlord cannot simply evict the tenant because they want to sell the property. (See my previous video on the rules governing landlord and tenant relations when buying or selling a property for full details.)

If the buyer wants to move into the property for their own use, then they can add a clause in the agreement of purchase and sale (APS) that says the seller will give the tenant notice because that is basically one of the few ways you can legally evict a tenant. In this instance, a tenant needs to be given a notice called an N12 notice which notifies the tenant about the end the tenancy for the purchaser or the landlord's own use and for which the tenant will receive one month's rent compensation.

However, in during the Covid pandemic, buyers increasingly faced instances of tenants refusing to move out, citing health concerns and high rental prices and the Landlord-Tenant Board was too back logged to assist with this disputes.

This gave rise to the so-called 'cash for keys' trend, in which a landlord negotiates with the tenant to have the tenant to voluntarily agree to vacate the property by signing an agreement to end the tenancy through a form called the N11, for which the landlord compensates the tenant a certain amount of money. This arrangement offers more security for a potential buyer who is more confident that a tenant will vacate as they've agreed to versus just receiving a notice to vacate.

Recently, a seller client and I entered complex negotiations with their tenant and a buyer in trying to arrive at this type of agreement, which resulted in us having to come to a different type of arrangement when our 'cash for keys' offer of $20,000 was refused by the tenant who asked for more money.

Our alternate arrangement, which entailed a compensatory agreement between the seller and buyer in the event that the tenant didn't move out, reduced potential costs for the seller and provided the buyer with security and underscores the need for skilled and experienced negotiation in this more complex situation.

Watch my video for the full details of this transaction:

To watch the video above, just click the "play" button
To watch the video on our Move Smartly YouTube channel, click here
Or listen to this episode when it becomes available on the Move Smartly podcast (new episodes go live on Tuesdays)

John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).

A leader in real estate analytics, Realosophy educates consumers at Realosophy.com and MoveSmartly.com and helps clients make better decisions when buying and selling a home.

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March 19, 2024

Buying | Selling | Advice | Renting |

What To Do When A Tenant Walks Away From A $20K 'Cash for Keys' Offer

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What To Do When A Tenant Walks Away From A $20K 'Cash for Keys' Offer

Toronto’s most authoritative real estate insights, delivered right to your inbox.

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