Serving it right – following the rules when ending tenancies

Terminating a lease agreement

 

A quick overview of governing legislation

Tenancy matters are governed by the RTA. A landlord can only terminate a month-to-month tenancy on two months’ notice for the reasons set out in section 49 of the RTA. This article will focus on two of the most common reasons:

The landlord or a close family member intends, in good faith, to occupy the rental unit; or
A buyer of the rental unit asks the seller landlord, in writing, to give notice to end the tenancy because the buyer or a close family member intends, in good faith, to occupy the rental unit.

The landlord must compensate the tenant an amount equal to one month’s rent when giving the two months’ notice. However, if the landlord or buyer who ended the tenancy does not within a reasonable period undertake the stated purpose for ending the tenancy the tenant is entitled to compensation equal to 12 months’ rent.

A tenant must apply to the Residential Tenancy Branch (the “RTB”) for this additional compensation. The onus at the hearing before the RTB will be on the landlord to prove that the tenancy should end for the reason given on the notice. A landlord may only be excused from these requirements in extenuating circumstances where it would be unreasonable and unjust for a landlord to pay compensation.

Faced with such serious financial consequences, it’s not surprising that landlords and buyers look to licensees to recover this compensation as damages if they feel they’ve received improper or inadequate advice, typically from trading licensees or property managers.

Scenario #1: Notice timing is key

The buyer and her family intended to move into the tenanted property on the possession date of March 15th. To ensure the tenant had moved out in time, the buyer’s agent requested in writing that the landlord have the tenant move out no later than March 10th. The landlord served the tenant with the notice on January 5th. The tenant refused to move out until March 31st.

A landlord must give a tenant the proper amount of notice to end a tenancy. If a tenant pays rent on the first day of each month, the effective date must be the last day of a month. In this scenario, since the tenant had paid rent on January 1st, the effective date of the notice was March 31st. If the landlord uses an incorrect effective date on the notice to end tenancy, the effective date is the earliest date that gives proper notice.

The licensees involved in this sales transaction could face a claim for any damages and expense incurred by the buyer or seller arising from the incorrect effective date because they failed to explain the RTA requirements for notice and failed to ensure the possession date was after the two-month notice period.

Scenario #2: What’s a close family member?

A buyer told his agent he wanted to remove the tenant from the property he was purchasing so his brother could move into the rental unit. The buyer’s agent said that wasn’t a problem and he asked the landlord sellers in writing to give the notice because a close family member would be occupying the rental unit. The tenant subsequently filed an application with the RTB, claiming that the buyer failed to act in good faith by moving a non-immediate family member into the rental unit. The tenant was awarded 12 months’ compensation and the buyer brought a provincial court action of negligence against his agent seeking this amount as damages.

“Close family member” is a defined term in the RTA. It means the parent, spouse or child of the landlord or the parent or child of the landlord’s spouse only. In this scenario, the buyer’s agent gave improper advice to the buyer as he failed to appreciate that that a landlord cannot end a tenancy under section 49 so their brother, sister, aunt, niece, or other non-immediate relative can move into the rental unit.

Scenario #3: Acting in good faith

A landlord was frustrated because his tenant was paying far below market rent. The landlord told his property manager he intended to move into the rental unit with his wife, make a few cosmetic upgrades and relet the rental property at a higher rent in a few months. While the property manager felt uneasy about these instructions, he did as his client instructed and issued a notice to the tenant because the unit would be occupied by the landlord.

The landlord must intend in good faith to act consistently with the reasons set out in the notice to end tenancy and not in fact have another ulterior purpose for ending the tenancy. If a tenancy is terminated because a landlord, buyer, or close family member intends to occupy the rental unit, they not only need to move into the unit within a reasonable amount of time after the tenancy ends, but they must also live in the unit for at least six months.

In this scenario, the landlord risks a disgruntled tenant successfully being awarded 12 months’ compensation by the RTB. The property manager could in turn face a claim from the landlord for failing to properly advise the landlord about the RTA requirements and the financial risk of terminating a tenancy for an improper purpose. Further, following client’s instructions that are contrary to the law may result in a BCFSA complaint against the licensee.

Key practice tips to help avoid this type of claim

Confirm client instructions – in writing and ensure the instructions include the reason for the two months’ notice to end the tenancy. For example, if buyers intend to occupy the rental unit, have them review and initial a copy of the notice to confirm their instructions before providing it to the tenant.
Check dates closely – to ensure the proposed completion and possession dates provide enough time to serve a tenant with the notice required under the RTA so the property is vacant by the possession date if the buyer intends to occupy it.
Speak up if advice is contrary to the RTA – don’t stay silent if you believe your client’s instructions and reason for terminating a tenancy for landlord, buyer, or close family member’s use of property are contrary to the RTA. Explain why their instruction is contrary to the RTA and unlawful, along with the risks of this conduct. If your client disregards your advice, strongly recommend in writing that your client, seek independent legal advice. If they insist on proceeding, consider terminating your agency relationship.
Leases should be between landlord and tenant – property managers should always ensure that leases are between the tenant and landlord and not in the name of the property management company. Licensees who make themselves parties to a lease have a greater risk of being named in an application to the RTB and such applications are not covered under the Indemnity Plan, as per Exclusion 14.
For more information on tenanted properties, see C. Spratt’s article “Residential property transactions involving a tenancy”.

 

 

By Cheryl Spratt, Staff Lawyer

www.reeoic.com
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