Selling a Rental Home – A Whole Different Story from Selling your Own Home
In 11 years of being in professional property management, the most disappointing experiences have not come from our tenants nor our staff. Our most disappointing and frustrating ‘property management’ stories are about our clients (the owners) who want to SELL their properties.
Property management is a difficult business to run. It’s an interesting thing to hear successful investors speak at courses or forums about the dreaded ‘tenant horror stories’. Everyone knows it’s a difficult task – managing tenants. I, myself, sit back and enjoy these ‘tenant horror stories’ because the fact is, this reputation is good for our business. There is also the stories about dishonest and incompetent property managers which don’t make me happy at all, but I know bad property managers do exist and are a reality across the country. However, an owner/client that wants to sell their rental property can be our worst nightmare. They can turn on a dime from being a happy, appreciative client to a desperate, unthinking person the minute they decide to sell their property.
This is what usually, or potentially can happen that causes a chain of bad feelings and anger between the owner, the property manager, the tenant, and the real estate agent when an owner decides to sell their rental house.
Sometimes, the owner calls us up informing us that they are going to sell the house, or sometimes they don’t even bother to call. In the latter case, the tenant calls us up confused and upset that unexpectedly there is a ‘For Sale’ sign on their front lawn. Both scenarios can and do happen.
We then confirm with the owner if in fact they are selling, in which case they either want the tenant to move out, or do not want the tenant to move out. Usually they want the tenant to NOT move out because they need the income until it sells, the their agent, almost always wants the tenant to move out. This is where is starts to get complicated.
The law here in our jurisdiction (Saskatchewan), states that a landlord cannot evict a tenant for the purposes of listing a property for sale, and can only evict the tenant (that is on a month-to-month lease agreement), with one full calendar month’s notice once a firm sale and a possession date has been determined. Most agents either don’t know this rule, or they have a few rental properties themselves and they didn’t do that when they sold. However, because we are a property management firm, we are expected by the Rentalsman and the Commission to follow the law at all times.
To complicate matters further, if the tenant is in a term lease and has some months remaining on their term, the landlord cannot evict them until the term is finished. Some owners are complete ‘landlord amateurs’ and no nothing about the Residential Tenancies Act and don’t even know to check this little fact with the property manager before deciding to sell.
Needless to say, the owners are generally not happy when they realize they cannot evict the tenants before listing the house or that there are some months left on the tenant’s term lease. This of course poses obvious challenges to the real estate agent who can be the next source of negativity.
What usually happens next is the realtor goes to see the house, and inevitably reports back to the owner, who may live in another province, that the house is a complete disaster and has been ‘trashed’. Everyone loves that word ‘trashed’ with respect to tenants, although I have never seen a house ‘trashed’ in 11 years of professional property management. Extremely dirty! Yes! But ‘trashed’, Never!
The owner then calls us in a panic. So we rush over to the house to see what is going on. We always send the same long-term employee who showed the house since Day 1 of the owner’s contract and who also does the regular 6-month smoke-detector checks so he can compare the damage over time. In every case where this has happened, the employee returns to the office with a report something like this: “there are a few dirty dishes in the sink and some recycling or garbage piled up by the back door, and dirty clothes lying around the bedroom. It needs a good cleaning.” Unbeknownst to some real estate agents, this is all normal and acceptable behavior and well within normal tenant living standards and is not considered to be ‘trashed’. Homeowners selling their own home would definitely clean up a little before the agent comes over, but tenants generally will NOT tidy up for an agent.
What happens next is almost guaranteed in every case. The tenant insists on their right for 24 hours notice for showings, and the agents are upset because sometimes this is too long, especially in a hot market. Meanwhile, tenants are calling us, their property manager, complaining of rude agents constantly bothering them and blocking off 3 hours of time to show the home etc.. Simultaneously, the real estate agent is calling their client (who is also our client) complaining that the tenants don’t leave the house during showings making it impossible to show the house, or that the house doesn’t show well because of the tenant’s simple or ugly furniture, that there is too much junk in the house, strong cooking smells, or a scary, grouchy dog or two. The negative comments can be endless. Meanwhile, the owner is still worried about his monthly rental income disappearing if the tenants choose to move out before it is sold so they ask us to boss the tenants around and tell them how to live their lives and clean up their mess. This doesn’t exactly go over well with the tenants.
There are acceptable reasons a landlord can evict a tenant. It is perfectly acceptable to evict a tenant if the owner intends to do major renovations to the property (before selling), but it’s hard to justify major renovations on a property that doesn’t look like it needs major renovations. In most cases, the tenants will give one month’s notice to move out once that ‘for sale’ sign goes up, which is the chance the ‘desperate owner’ has to be willing to take. We have even had owners want us to re-rent the property while it is for sale. We absolutely will not do this. In fact, we will not rent any property without disclosing to the tenant that the owner intends to sell or re-occupy the property within the next year. It’s completely unethical and sneaky for any landlord to rent a property that is going to be sold within the year.
Finally, the property sells and the tenant can legally be evicted with proper notice. Although most agents are pretty good these days with possession dates, we have had the odd huge dilemma where the agent made the possession date before the tenants could be legally evicted, which caused a whole other host of problems that had to be fixed.
However, the worst story was this one – the one that went from bad to worse. The Alberta owner had contracted us on an up/down duplex a few years previous. It had been so mismanaged and it was clear the tenants ran the show. Eventually, we got things under control and we were the ‘best thing since sliced bread’ in the owner’s eyes. Things ran smoothly until he wanted to SELL. Being that the owner was a real estate agent in Alberta, he knew that it’s possible that tenants could be uncooperative during the sale process. So being proactive, he got his real estate agent to go over and cut a ‘verbal deal’ with the tenants that they would get ‘half off their rent’ and completely failed to inform our office of this deal (even thought we absolutely would not have approved of any ‘deals’ with tenants). We don’t agree with bribing tenants and we especially don’t agree with verbally deal-cutting . So the top floor tenant paid only half her rent the following month. When tenants don’t pay their rent in full, we start sending notices of demand payment and eventually an eviction notices by the 15th of the month. By the time we realize, the tenants have been given a ‘verbal deal’, the situation is already a big mess. The basement tenant was a man on ‘mental disability assistance’ so his cheque had arrived in full from the government, but he wanted half his rent back in cash. Suddenly, the owner was calling us explaining that this wasn’t ‘the deal’. The deal was for only a half month’s rebate on the ‘last month – if they stayed until it sold.’ The agent swore up and down that this is what he had said to the tenants. The tenants disagreed – they heard ‘pay only half every month until it’s sold’. It was a completely unnecessary and ridiculous situation that went from bad to worse in a day. We ended up firing the client and let him deal with his tenants by himself so we don’t know how the story ended, but I can only assume ‘not good’ since he had already proven to be a poor manager a few years previous.
There is no reason for these types of scenarios when an owner is selling a rental property. A few years ago we found an agent from another brokerage (before we had our own agents on board) who was excellent in dealing with tenant-occupied houses for sale. She knew the rules and abided by them to a tee. She was respectful to the tenants and didn’t report inaccurate mistruths to the owner because she knew the acceptable living standards approved by the Residential Tenancy Act. The tenants rarely moved out before the house was sold and she even wiggled her way in to do a few open houses. Tenants liked her. We liked her. The owners liked here. She got the property sold and the rent money kept coming in. There is definitely a skill set and a certain personality that works to get this job done right.
Owners and agents have to understand that this house is the tenant’s home, and they have been good-paying customers who have increased the wealth of the investor, and they should be treated with respect and some compassion when being asked to get out because the owner wants to sell. A few years ago, we had a couple of sets of excellent families that were displaced from one house to the other as owners sold in a hot market. I think this family moved every year for 3 years in a row. They were the cleanest and nicest people, and even they were treated somewhat badly by some agents. Moving is an expensive and huge inconvenience for tenants which is all a part of life as a tenant, but for them being evicted because of a sale is always a huge disruption in their busy lives, and we, as agents should be a professional and compassionate as possible. It just makes for a more tolerable experience for everyone involved.
by Kathy Berner
August 2014
