Let’s face it, there are slim pickings when it comes to finding a new home. But every so often, you’ll find a great deal that seems a little too good to be true. It’s priced well, it’s in a good part of town, and it’s not holding offers… the only holdup is that it’s tenanted. Even in very heated markets, tenanted properties struggle to sell because most buyers are not willing to accept the risks. But, some savvy buyers are willing to take those risks if it means getting the home below market value.

In Ontario, the Residential Tenancies Act (RTA) overrides the Agreement of Purchase and Sale (APS), and the buyer, seller, and tenant all must abide by the rules and rights granted to tenants in the RTA when selling a tenanted property. Today, we’re going to discuss how to navigate the rules, manage your expectations, and plan for the best and worst case scenario.

 

Why Buying a Tenanted Property Is Risky

Under the RTA, there are only three ways to ask a tenant to vacate: one, through an N11 (where the tenant and landlord mutually agree to end the tenancy); two, through an N12 (where the landlord gives notice to the tenant to move so the buyer can move in); and three, through a court notice.

Now, the risky part is the timing of these notices, and the delays at the LTB.

After the landlord serves the N12 on the buyer’s behalf, the tenant is within their legal right to request a hearing at the LTB. That hearing can take several months to be scheduled and heard, and the outcome isn’t guaranteed. This is a significant problem for someone who needs a concrete move-in day.

Imagine: you buy a home in June with a September move-in… one week before closing, the tenant tells the landlord, “I decided I want a hearing at the LTB.”

Instead of reacting on closing day, we think it’s better to plan for the worst-case scenario before hand. And to amend the offer so your interests are protected.

 

A Real Example: $100,000 Below Market in Oakville

Back in 2021, when almost every freehold home in Oakville was selling in multiple offers, for tens of thousands more than the last comparable sale, we had a single mom struggling to find a suitable home. Within her budget, it seemed like the only properties available were two-bedroom back-to-back towns, which wouldn’t work for her two kids. However, there was a semi in Glenorchy which no one would touch. It was tenanted, the tenant had half a dozen cameras set up, and she refused almost all showings. It took us several attempts to get in. The tenant had told everyone she couldn’t leave, because she couldn’t remove her kids from the school district.

Our client took a risk, and negotiated a deal more than $100,000 below market value, agreeing to handle the sensitive tenant situation if the tenant decided to stay post-closing. Luckily, once the home was sold firm, the tenant found a suitable rental nearby and moved out before closing.

 

Clauses to Protect Yourself When Buying a Tenanted Property

Every transaction and buyer situation is unique, and a one-size-fits-all clause may not fully protect you. Below is a foundational protective clause that we customize to safeguard our buyer clients:

“The Buyer(s) agrees that they, or their immediate family, intend to move into the property on closing. In this regard, the Seller(s) agrees, when this Agreement becomes unconditional, to provide the Tenant(s) with the applicable notice using Form N12 under the Residential Tenancies Act on behalf of the Buyer, and to pay the Tenant the required statutory compensation under the Act.

The Buyer agrees to provide whatever supporting information may reasonably be required to demonstrate, in good faith, that the Buyer or their immediate family intends to occupy the property for a period of at least one year following closing, and agrees to indemnify the Seller for any damages the Seller may suffer if the Buyer does not do so.

In the event the Tenant disputes the notice, the parties agree to extend the closing date by a period of up to 60 days to allow the eviction process to be completed. If vacant possession still cannot be obtained by the extended closing date, for any reason, the Buyer shall have the right, but not the obligation, to either complete the transaction and accept the Tenant in place, or terminate this Agreement and have their deposit returned in full, without interest or deduction.”

This clause protects both parties. If the tenant does not leave, closing automatically extends by 60 days so the eviction process can proceed. If vacant possession remains unfulfilled after 60 days, the buyer can choose to assume the tenant or exit the deal with their deposit intact.

Strengthening the Clause: The Lawyer Holdback

In strong buyer markets, sometimes buyers can get away with pushing that clause a bit further by including a financial safety net. We call these holdbacks. A holdback requires the seller’s lawyer to withhold a specific amount from the funds of the purchase until vacant possession can officially be delivered. The holdback also has a provision where the buyer can claim some of the holdback for expenses.

Example holdback addition:

“…If vacant possession of the property has not been delivered to the Buyer by the extended completion date, the Buyer’s lawyer shall hold back the sum of $30,000 (the ‘Holdback’) from the funds otherwise payable to the Seller on closing, to be held in trust pending vacant possession being delivered to the Buyer. Any expenses related to the delay in closing date, such as temporary housing costs, furniture storage, and legal fees, shall be deducted from this amount, with the remaining balance released to the Seller once the tenant has vacated.”

In a strong buyer’s market, this can be negotiated even further:

“…In the instance the tenant has not been successfully evicted within 4 months following the extended closing date, the Holdback shall be released in its entirety to the Buyer as liquidated damages.”

Warning: If you assume the tenant as a buyer, you need to re-qualify for your mortgage, and you may become ineligible for a high-ratio mortgage. We highly recommend hiring an experienced realtor (like us) for any real estate transaction, especially trickier ones like this.

 

Long-Term Requirements of the N12

An N12 can only be used if the buyer or their immediate family plan on living in the property for a minimum of 12 months. An N12 can be served by the seller/landlord on behalf of a buyer, provided the buyer guarantees that they will live in the property for 12 months. If the property is vacated, placed for lease, or placed for sale within the 12 months of the tenant vacating, the tenant can claim they were evicted in bad faith.

A bad faith eviction can carry severe penalties, ranging from:

• A lump-sum payment covering up to a year’s worth of the tenant’s previous rent, paid directly to the tenant
• A lump-sum payment of the rent differential between the tenant’s old residence and their new one
• Reimbursement for moving costs, storage fees, utility setups, and other reasonable expenses
• LTB-ordered fines paid directly to the board
• Provincial prosecution through the Rental Housing Enforcement Unit

A note on the exact fine amounts: these numbers have been moving fast. As of July 2026, under Ontario’s Bill 97, the maximum fines for bad faith evictions were doubled to up to $100,000 for individuals and $500,000 for corporations— significantly higher than the $50,000/$250,000 figures that applied previously.

Given how quickly this legislation has been changing throughout 2026, we’d recommend confirming the current maximums with a real estate lawyer or paralegal before relying on any specific figure, ours included.

When to Use an N11 Instead

An N11 is usually considered a more “secure” form to use when buying a tenanted property because the N11 is a mutual agreement between the tenant and the landlord. The tenant has signed the form willingly, so the only risk here is the tenant later claiming they were forced to sign the N11 (which can happen).

Usually, to sweeten up the deal with the tenant, landlords can offer them a lump-sum payment for agreeing to terminate the agreement. We call this arrangement “cash for keys.”

 

What Is “Cash for Keys”?

“Cash for keys” refers to a landlord or buyer directly paying a tenant a lump-sum financial incentive to vacate voluntarily and sign an N11 (Mutual Agreement to End Tenancy), bypassing the N12 requirements and the potential hearing that can come with it.

Quite often, buyers are not in a position to assume a tenant. A tenanted property requires more down payment, and is offered higher interest rates from banks. It also impacts insurance rates. If a buyer cannot or will not assume the tenant, then it’s up to the landlord/seller to negotiate a deal to get the tenant out.

The exact amount for cash for keys is a moving target. It depends on a lot of factors. If the landlord has promised vacant possession, and there are no other clauses in the offer outlining next steps, then the landlord is immediately in breach when the tenant does not move. The landlord then becomes responsible for the buyer’s costs — housing, furniture storage, moving costs, and any other reasonable fee the delay has caused.

Paralegals and lawyers usually suggest that landlords offer tenants cash for keys, to bypass the LTB hearing and accelerate the timeline for the tenant moving out. The idea is that the tenant may be willing to move out for less than the total financial consequences the seller would otherwise face waiting out a hearing.

 

Frequently Asked Questions

Is it a bad idea to buy a tenanted property in Ontario? Not necessarily, but it carries risks surrounding delayed vacant possession. With custom contractual clauses and proper legal guidance, buyers can manage these risks effectively. The real danger comes from treating the purchase of a tenanted property the same as any other purchase.

Who pays the compensation for an N12 when a house is sold? Under the RTA, paying the required compensation for an N12 notice is legally the landlord’s (seller’s) responsibility. While sellers occasionally attempt to negotiate this fee into the purchase agreement, it remains a standard seller cost.

Can a corporate buyer issue an N12 for personal use? No. Corporations, numbered companies, and partnerships cannot issue an N12 notice for personal occupation. The purchasing entity must be an individual human being.

Can a corporate seller issue an N12 on behalf of an individual buyer? Yes, but… We had a sale in 2025 where a corporation sold an individual condo in a newer building to a married couple. The seller’s paralegal and lawyer insisted the N12 could not be served on behalf of the buyer because the seller was a corporation. The buyer’s lawyer insisted it could. The parties both disagreed about the differences between the RTA and specific case law from past decisions. The solution that worked best for everyone was to negotiate a price where the buyers were happy to assume the tenant and file the N12 on their own.

How long does an N12 hearing take at the Landlord and Tenant Board? As of 2026, contested N12 hearings generally take several months to be scheduled and heard by the LTB, and timelines have been shifting alongside recent legislative changes. If a tenant insists on their right to a hearing, physical eviction cannot occur until an official LTB order is issued and enforced by the Sheriff.

Talk to a Professional Before Offering on a Tenanted Property

If you’re considering a tenanted property, the offer structure must be engineered differently than a standard purchase agreement. This is a risk strategy we navigate with our clients from the very first showing — not after an offer is accepted. Reach out to us if you’re planning a purchase in Oakville or the GTA so we can protect your interests at every stage of the transaction.