Selling a rental in Alberta when the tenant is staying

A tenant who stays does not stop the sale, and the lease does not end because the house changed owners. What moves on closing day is the landlord's side of that lease, and five specific things have to move with it.

Most writing on this subject stops at whether you can end the tenancy. That question is answered in our guide to selling a rental property with tenants in Alberta. This page is about the other path, the one more sellers actually take: the tenant stays, the buyer inherits them, and nobody has told you what the handover involves.

The lease survives the sale, with its terms intact

Whoever acquires the landlord's interest steps into the existing agreement. Alberta's Residential Tenancies Act handbook puts the deposit side of it plainly: "Any person who acquires the landlord's interest in the residential premises is subject to the same rights and obligations concerning security deposits as the previous landlord."

So a fixed term keeps running to its end date under the sale, and a month-to-month tenancy keeps going month to month. The rent stays the rent. A promise you made in writing stays a promise the buyer is now holding.

This is the part that surprises sellers who expect a sale to reset things. It does not reset anything, and that cuts both ways: the buyer cannot impose new terms on a sitting tenant, and you cannot promise the buyer terms the lease does not contain. It is also why a tenanted property gets priced on its paperwork rather than on what the rent could be.

What the buyer has to send the tenant, and how soon

The handover has a piece of paperwork that is the new owner's job, not yours, and it is worth knowing because tenants usually ask you about it first.

The handbook says a new owner taking over a tenancy "must give the tenant a notice of the owner's name, and a statement of the tenant's security deposit balance within a reasonable length of time." It adds that "7 days are suggested for consistency" and that this must be provided at no cost to the tenant. The notice is how the tenant learns the owner's name and the address for service in Canada, which is where notices go from then on.

Until that arrives, the tenant keeps paying rent the way they always have. A tenant who stops paying because they heard the house sold and nobody told them where to send money is a problem the buyer created, not the tenant.

The deposit moves on paper, and the buyer owns it either way

The security deposit is not yours to keep. Section 47 of the Act deals with the new landlord's obligations, and Service Alberta's statutory references on security deposits set out what happens: "the new landlord has to deposit any security deposits that are turned over by the prior landlord, into a new security deposit trust account," and must, "within a reasonable time and at no cost to the tenant, give the tenant a statement setting out the amount of the security deposit and interest that has accumulated as of the date title transfers."

Then comes the sentence that decides who carries the risk. "If the prior landlord does not turn the security deposits over, the new landlord is still responsible for the security deposit refunds," and failure to receive the deposits from the prior owner "cannot be used as grounds for non-return of a security deposit."

Two practical consequences:

• A buyer's lawyer will insist the deposit and its accrued interest are credited on closing, because the buyer is liable for that money whether or not it arrives.
• If you have never paid out deposit interest, that gap shows up here. Interest "must be paid to the tenant annually unless the landlord and tenant agree in writing that it will be paid when the tenancy ends."

A buyer who wants a larger cushion is out of luck on a sitting tenant. The deposit cannot exceed the first full month's rent, and the handbook is blunt that it "cannot be increased during a tenancy for any reason."

Work the actual interest figure out with your own lawyer or accountant before you agree to a credit on the adjustments.

The closing month's rent gets split, and the tenant plays no part in it

Rent you collected on the first of the month is not all yours if possession changes mid-month. The portion from the possession date to the end of that month belongs to the buyer, and it lands on your lawyer's statement of adjustments beside the property tax adjustment, the same way.

Nobody asks the tenant to pay anyone twice, and nobody asks them to pay a part-month. The arithmetic happens between the two lawyers; the tenant pays one full rent to one landlord as usual.

How that adjustment is actually worded is a matter of your purchase contract rather than the Act, so have your lawyer show you the line before closing rather than after. If the tenant is in arrears, that is a separate conversation, and it belongs in the contract rather than in the adjustments.

The paperwork the buyer will ask for, and the item most sellers cannot find

A buyer taking on a tenancy is underwriting a stream of payments from a person they have never met. Expect to produce:

• the signed tenancy agreement, plus every renewal, addendum and side agreement
• the deposit amount, the date it was taken, and the interest paid out so far
• a payment history showing what was paid and when
• any notices either side has served, and anything still outstanding
• the move-in inspection report
• how utilities are arranged, and who holds the accounts

The last two are where this usually stalls. The move-in inspection report is the document that decides, at the end of the tenancy, what the deposit can be held against, and a landlord who never completed one has handed the buyer a deposit they cannot defend deducting from. If it does not exist, say so early. It is a price conversation when it surfaces in week one and a deal problem when it surfaces three days before closing.

The rent the buyer is underwriting cannot be raised for a while

This one changes what a buyer will pay, so it is worth saying out loud rather than letting them discover it.

Under section 14, rent "cannot be increased unless 365 days have passed since the commencement of the tenancy or the last increase in rent, whichever is later." For a month-to-month tenancy the written notice has to run "three full tenancy months before the date on which the increase is to be effective," and the notice needs the effective date, the landlord's signature and the date it was signed.

A sale does not restart that clock. So if your rent sits well under market, a buyer is not buying an immediate correction, they are buying the wait. Expect that to be reflected in the number, and check the dates with your own lawyer before you quote a tenant's rent history to anyone.

When selling with the tenant in place is the wrong answer for you

We buy houses in Calgary and across Alberta, including tenanted ones, and there is a version of this where we are not the right call.

If the tenant pays on time, the rent is near market and the building is in decent shape, you are holding something an investor wants and a normal listing to investor buyers will usually net more than any as-is offer, ours included. The tenancy is an asset in that case, not a complication.

The as-is route earns its keep in the narrower cases: a tenant in arrears you would rather not litigate, a unit that will not survive a lender's inspection, records you cannot reconstruct, or a property you need gone on a date certain rather than whenever a financed investor's conditions clear. Our four steps and how we work out a price on a tenanted property are both written out, and what we pay and why is set out rather than left implied.

One thing to do this week either way: find the move-in inspection report and the record of deposit interest. Those two pieces of paper decide how smooth the back half of this gets.