Terminating a residential tenancy due to demolition, conversion, substantial repair & renovation

Terminating a residential tenancy due to demolition, conversion, substantial repair & renovation

This article discusses the termination of a residential lease when the landlord is looking to demolish, convert, or substantially renovate and/or repair the property. In these situations the landlord will require vacant possession before construction can begin. The relationship between tenant and landlord is governed by the Residential Tenancies Act, 2006 (“RTA”). The RTA recognizes that property redevelopment is often contrary to the needs of the tenant(s) currently inhabiting the property.  The RTA outlines the procedure for a property owner to obtain vacant possession before demolition or substantial renovation occurs. Property owners, developers, and landlords need to abide by the RTA and provide adequate notice to the tenant(s). Failing to abide by the notice provisions and timelines in the RTA could result in costly consequences.

120-day Notice

A residential landlord may require vacant possession in order to [1] demolish their building, [2] convert their building for a purpose other than residential, or [3] complete substantial repairs or renovations that require a building permit[1]. In each situation, the landlord must provide a notice to terminate tenancy (the “Notice”) which indicates that the termination date is at least 120-days from the date that notice was provided[2]. The Landlord Tenant Board requires that Notice be provided on the standard “N13” form. Landlord Tenant forms can be found on the Board’s website.

Tenant’s rights after receiving N13 Notice

Providing Notice on the N13 form triggers certain rights for the tenant, and obligations for the landlord.

In situations where the landlord requires vacant possession for the purpose of completing substantial repairs or renovation, the current tenant(s) must be provided a right of first refusal to reoccupy the premises once the repairs or renovations are complete. This right of first refusal must be highlighted on the Notice[3], and tenant(s) must indicate whether they are exercising this right before they vacate the unit. If the tenant(s) decide to exercise their right of first refusal, their rent after the repair or renovation cannot be more than what the landlord could have charged if there was no interruption to their tenancy[4].

Furthermore, a tenant that receives a N13 form indicating 120-day notice to terminate the tenancy has the option of terminating the tenancy at least 10 days after receiving the N13[5]. I.e. 10-days after the N13 is delivered, the tenant may decide to terminate their existing lease agreement even if the lease’s expiry date is outside the 120-day notice period. The landlord should be prepared for tenants that wish to immediately terminate their lease after receiving the N13. When this occurs, the landlord may not receive rent for the full 120-day notice period.

Tenant Compensation

In certain situations, a landlord may be required to compensate a tenant or offer them an alternative unit. A landlord will be required to compensate a tenant with 3-months’ rent or acceptable alternative unit if [1] a tenant is provided 120 day Notice due to a demolition or conversion making the building inhabitable for residential purposes, and [2] the residential unit is part of a complex with at least five residential units[6].

In situations where a tenant is being forced to vacate due to substantial renovations and/or repair, the landlord will be required to compensate the tenant with 3-months’ rent or an alternative unit if [1] the tenant does not wish to exercise their first right of refusal to reoccupy the unit after repairs or renovations are complete, and [2] the residential unit is part of a complex with 5 or more residential units[7]. If a residential complex has more than five units and the tenant does exercise their right of first refusal to reoccupy the unit after repairs and renovations, the landlord will be required to compensate them with the lesser of three months and the period that the unit is under repair or renovation[8].

In conclusion, the RTA allows landlords to terminate a lease if the property is going to be demolished and/or redeveloped. Landlords must terminate a lease in good faith; i.e. landlords cannot initiate a termination under the pretense of redevelopment if the landlord’s intentions were to purely evict a problematic tenant. If a landlord has initiated the termination of a tenant’s lease due to demolition, conversion, or substantial repair and/or renovation, the landlord should be able to show their intentions were genuine (e.g. by furnishing plans of the demolition or redevelopment).

A lawyer specializing in property redevelopment can assist landlords looking to demolish, convert, or substantially renovate/repair their property. The lawyer’s role in these situations is to help the landlord navigate the law and make the landlord aware of their rights and responsibilities at each step of the process.