As British Columbia implements significant amendments to the Residential Tenancy Act (RTA) this spring and summer, the real estate market is poised for some adjustments. Buyers and sellers of tenanted properties need to be aware of the potential risks and challenges these changes may introduce. Understanding these risks can help all parties navigate transactions more smoothly and make informed decisions.

 Here's a comprehensive list of these changes and what they entail:

 1.      Protecting Growing Families

When a tenant adds a child under 19 to their household, a landlord cannot increase the rent. Rent may only be increased by the annual allowable rent increase amount even if there is a condition in the BC tenancy agreement that states rent will increase with new occupants.

 2.      Web Portal for Personal-use Eviction Notices

Going forward, landlords must use a web portal to generate notices for personal-use evictions. Personal-use evictions include when a landlord plans to occupy a unit, if a close family member of the landlord intends to occupy a unit, or when a property is sold and the new buyer or a close family member of the new buyer intends to occupy a unit. By using this portal, it will ensure that landlords are informed about the required conditions that need to be met in order to properly evict a tenant, and the risks involved with improperly evicting a tenant. The new process will also include post-eviction compliance audits and provides data on eviction frequency.

 3.      Notice to End Tenancy Increasing to 4 months

Currently, when a tenant is served a Notice to End Tenancy they are given 2 months to secure a new home. As of July 2024, pending Royal Assent (i.e. the formal approval required prior to making a bill passed by the legislature into law), tenants will now be given 4 months to find a new home when the reason is for the landlord’s personal-use.

 4.      Increased Time for Tenants to Dispute Evictions

This amendment provides tenants with more time to dispute a Notice to End Tenancy by extending the dispute period from 15 days to 30 days. This extension gives tenants a better chance to seek legal advice, gather necessary documentation, and prepare a case if they believe the eviction notice is unjust.

 5.      Increased Occupancy Requirement for Landlords

The amount of time a landlord must occupy a rental unit after ending a tenancy for personal occupancy will be increased from the current 6 months period, to 12 months. This change is intended to deter landlords from using personal occupancy as a pretext to evict tenants and then re-renting the unit at a higher rate. By doubling the occupancy period requirement, the amendment aims to ensure that claims of personal use are genuine and not a means to circumvent rent control regulations.

 6.      Prohibition of Personal Use Evictions in Larger Rental Buildings

Landlords can no longer evict tenants in purpose-built rental buildings with five or more units, for personal occupancy. This change aims to protect tenants from displacement due to personal use claims, which were sometimes misused to bypass rent control and to increase rates. By restricting these evictions, the amendment enhances housing stability and security for tenants in larger rental complexes.

 7.      Restrictions on Converting Rental Units to Non-Residential Uses

Lastly, the amendments include a prohibition on evicting tenants for the conversion of rental units to specific non-residential uses. This change addresses concerns about the loss of rental housing stock due to conversions into commercial or other non-residential spaces. By prohibiting such evictions, the amendments aim to safeguard the availability of residential rental units and ensure that tenants are not displaced to accommodate non-residential developments. This measure is crucial in maintaining the supply of affordable rental housing in the face of increasing demand.

These changes, aimed at enhancing tenant protections and ensuring fairer practices, introduce new challenges that could impact property transactions.  

Here is a list of possible risks to buyers and sellers of tenanted properties:

 1.      Potential for Prolonged Tenancies

Enhanced tenant protections and dispute services can lead to longer tenancies, as tenants have more resources to contest evictions and negotiate disputes. Buyers and sellers/ landlords should be prepared for the possibility that existing tenants may remain in the property longer than initially anticipated, potentially affecting any plans for redevelopment or personal use. These complications could impact a potential buyer’s decisions and the overall transaction timeline. Sellers need to take all these factors into consideration when planning their sales strategy.

 2.      Marketability of Tenanted Properties

Selling a tenanted property can be more challenging under the new BC RTA amendments. The extended notice periods, and increased tenant protections, may deter potential buyers who are looking for immediate occupancy or redevelopment opportunities. This can reduce the pool of interested buyers and potentially lower the sale price.

 3.      Obtaining a mortgage for tenanted properties

Banks and mortgage lenders often operate on strict timelines for approving and finalizing mortgages, which may not align with the new, longer timelines introduced by the amendments. Because of this, buyers may consider assuming an existing tenancy for a short period of time in order to secure a mortgage at a particular rate. However, purchasing a tenanted property requires a 20% down payment regardless of the property's purchase price, and may lead to securing financing at a higher interest rate. This requirement may substantially impact a buyers ability to purchase a tenanted property.

Conclusion

The amendments proposed to British Columbia’s Residential Tenancy Act, which are expected to take effect at various times over the course of the next few months, represent a significant shift in the rental housing landscape, as well as the real estate market. By understanding these changes and preparing accordingly, both tenants and landlords, buyers and sellers, can navigate this new era of residential tenancy with confidence. These reforms aim to create a more balanced and fair rental market, ultimately benefiting the community. However, the real estate market will likely face greater challenges with the implementation of these new regulations.

Let’s see how it all pans out.