Over the past year, the Province has made several changes to the Residential Tenancy Act (the “RTA”) to provide new protections and compensation for renters in British Columbia who might otherwise face eviction as a result of repair, renovation or demolition of residential properties.
In this blog post, we first provide a summary of the changes to the RTA which have come into force over the past year or so. We then discuss the practical effects of these changes for developers and residential landlords.
Summary of Changes
Tenants now have more time to find alternate housing if their landlord ends a tenancy in order to demolish, renovate, or convert a unit and requires the unit to be vacant. The Province has increased the notice period for a landlord giving a tenant notice to end a residential tenancy for demolition, renovation, or conversion from 2 months to 4 months. The notice may not be given until all development approvals and building permits are in place.
Upon receiving a notice to end a tenancy for these reasons, tenants now have more time under the RTA to dispute the notice. The time period for a tenant to dispute such a notice has been increased from 15 days to 30 days.
Absent extenuating circumstances, landlords must now pay 12 months’ rent (instead of two months’ rent, as previously required under the RTA) to a former tenant if the landlord ends a tenancy for demolition, renovation or conversion, and then (i) the landlord does not take steps to accomplish its stated purpose for ending the tenancy within a reasonable period of time, or (ii) the unit is not used for the landlord’s stated purpose for more than six months, such period to begin within a reasonable period of time after the effective date of the landlord’s notice to end the tenancy. The RTA does not specify what will constitute “extenuating circumstances” or a “reasonable period of time”, but we expect future case law to clarify these terms.
Right of First Refusal
Tenants now have a right of first refusal to enter into a new tenancy agreement for the same rental unit if the landlord gives notice to end the tenancy to renovate or repair a residential property containing five or more units. This requirement to offer units to the original tenant will allow the tenant to confirm that the repair or renovations did, in fact, occur.
Absent extenuating circumstances, if a tenant exercises a right of first refusal and the landlord does not provide the tenant a new tenancy agreement for the same unit at least 45 days before completing the renovations or repairs, then the landlord must pay the tenant the equivalent of 12 months’ rent. The RTA is silent on the rental rate that a landlord may charge under a new tenancy agreement, and on that basis it’s clear that a landlord may charge market rates under the new tenancy agreement.
Fixed Term Tenancies
The Province also abolished the use of “fixed term tenancy agreements”, that provided the tenant had to vacate the property on a specific date, unless a new tenancy agreement (often with higher rent) is established. Any such tenancy agreement automatically converts to a month to month tenancy upon the expiry of the fixed term.
Practical Effects of Changes
Obtaining Vacant Possession
With the doubling of the notice period for a landlord giving notice to end a residential tenancy for demolition, renovation or repair, and the period for a tenant to dispute such a notice, it will take considerably more time for developers and landlords of residential properties to obtain vacant possession in order to demolish, renovate, or convert existing buildings. As such, developers and landlords will need to forecast and manage timelines for permitting and demolition or construction work, to the extent they can. These changes are particularly significant for developers engaging in land assemblies. If a developer wishes to give notice to end a residential tenancy as part of a land assembly, the developer will have to anticipate four months in advance that it will have all the necessary permits and approvals to begin demolition or conversion on the date on which the tenancy ends, in order to avoid having to pay the penalty of 12 months’ rent to the former tenant.
Often, when purchasing a strata property development as part of a strata windup or a home or homes during a land assembly, developers will want the sellers to remain in possession after closing. This is often part of the total incentive package offered to the sellers and the continued occupancy also potentially prevents the property from being subject to the vacancy taxes imposed under the Speculation and Vacancy Tax Act and the Vancouver Vacancy Tax By-law. With the abolishment of fixed term tenancies, care must be taken to establish and document the nature of the post-closing relationship to ensure a seller in possession will vacate the unit when the developer requires it.
Right of First Refusal
Developers wishing to renovate or repair existing residential properties containing five or more rental units will be impacted by the newly introduced right of first refusal. Instead of renting the newly renovated units to new tenants, the developer will be required to rent out the units to tenants who exercise their right to enter into a new tenancy agreement in respect of the original unit. Given the heavy penalty for not providing a new tenancy agreement in a timely manner to a tenant who exercises a right of first refusal, landlords need to carefully manage correspondence with tenants and keep track of applicable notice periods.
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