Almost Passive · Free weekly email
Most landlords find out about rule changes like this after it's already cost them something.
Once a week: what's actually happening in the London / St. Thomas rental market, what's changing at the LTB, and what I'm learning running Prospera — before it turns into a problem on your end.
Buying a property with tenants already in it sounds convenient. Someone is already paying rent on day one. But the legal reality catches many new landlords off guard.
In Ontario, when you purchase a tenanted property, you do not get a fresh start. The existing tenancy transfers to you automatically under the Residential Tenancies Act. The tenant does not need to sign a new lease. You do not have the right to immediately evict them. Every obligation the previous landlord had — repairs, proper notice, rent deposit interest — is now yours.
This guide explains exactly what to expect before and after closing.
The Tenancy Transfers to You at Closing
Under the Residential Tenancies Act (RTA), buying a rental property does not end the tenancy. The moment you take title, you become the landlord. The tenant becomes your tenant.
This means:
- The original lease terms remain in force
- The rent amount stays the same — you cannot unilaterally raise it outside the annual guideline
- The last month's rent deposit transfers to you (more on this below)
- All repair obligations under RTA Section 20 transfer to you
- The tenant's right to quiet enjoyment continues uninterrupted
Many buyers assume the sale itself gives them grounds to remove a tenant. It does not. An expired lease does not help either — under RTA Section 38, a tenancy converts to month-to-month when the fixed term ends and continues until terminated by a valid notice.
What to Do Before You Close
The work starts before you sign. Here is what to verify during due diligence.
Confirm the rent amount and deposit
Ask the seller for documentation of:
- Current rent being charged
- The last month's rent deposit amount
- When the deposit was collected
- Any interest owed on the deposit
In Ontario, landlords must pay annual interest on the last month's rent deposit every year — calculated using the rent guideline percentage. If the previous owner has not paid this interest, you inherit that obligation. The LTB regularly sees disputes from tenants whose deposits were never given interest for five or ten years. That liability transfers to you.
Also confirm the rent amount matches what the seller claims. If a tenant has been paying below-market rent for years, you are inheriting that rent — not the number you saw in the listing.
Get a copy of the lease or rental agreement
Ask for the actual signed lease. If the tenancy has gone month-to-month and there is no written agreement, ask for written confirmation of the rent amount, deposit, and utilities arrangement.
Check whether utilities are included in rent or paid separately. Confirm what appliances (if any) the landlord is responsible for. These obligations transfer to you.
For a guide on what should be in a proper lease, see How to Write a Lease Agreement in Ontario.
Check for any outstanding repair issues
If the tenant has an open maintenance request or an ongoing dispute, you are inheriting it. Walk through the unit. Ask the seller directly whether the tenant has raised any complaints. A T6 (Tenant Application for Maintenance) or T2 (Tenant Application for Breach of Obligations) filed before closing does not disappear when the property changes hands.
Confirm the City of London rental licence (if applicable)
If the property is in London, check whether the current owner holds a valid Rental Housing Licence under the City of London's program. Licences are not automatically transferred to a new owner. You will need to apply for your own licence before renting the unit. See City of London Rental Unit Licence for the application process.
The Last Month's Rent Deposit: Your Money, Your Obligation
When the seller collected the last month's rent deposit, it became a trust obligation. On closing, it should transfer to you — either as a credit on the statement of adjustments or as a direct payment.
Make sure this is spelled out in the purchase agreement. If it is handled as a credit on closing, you now hold the deposit and owe the tenant the accumulated interest.
If the deposit was never updated when rent increased over the years, the tenant may be entitled to a top-up. Confirm the deposit amount matches the current monthly rent.
Can You Ask the Tenant to Leave?
This is the most common question buyers have — and the most misunderstood.
You cannot simply ask the tenant to vacate because you bought the property. There is no such thing as a "purchaser's right to vacant possession" unless a proper notice has been served and upheld.
Here is what the RTA actually allows:
N12 — Own-Use Eviction
If you or an immediate family member (child, parent, or spouse) genuinely intend to move into the unit and occupy it as a primary residence, you can serve an N12 notice. The notice requires:
- 60 days' written notice
- The notice date must align with the end of a rental period (typically month-end)
- One month's rent as compensation, paid to the tenant before or on the termination date
- You or the family member must actually move in — the LTB takes bad-faith N12s seriously
The 60-day clock starts only after you serve the N12 — and you can only serve it once you own the property. You cannot have the seller serve an N12 on your behalf before closing.
Before you keep reading
This is exactly the kind of thing Almost Passive covers every week.
Local market shifts, RTA/LTB changes that actually affect your properties, and real lessons from managing rentals. One short email. No fluff.
For a detailed breakdown of the N12 process, including compensation requirements and bad-faith consequences, see N12 Notice Ontario: Own Use Eviction Guide.
N4 — Non-Payment of Rent
If the tenant stops paying rent after you take ownership, your options are the same as any other landlord: serve an N4, then file an L1 application with the LTB if rent is not paid. The previous landlord's rent history does not affect your rights here.
What you cannot do
- You cannot change the locks on closing day to force the tenant out
- You cannot stop paying utilities to pressure the tenant to leave
- You cannot tell the tenant the new lease requires them to leave — there is no new lease
- You cannot raise rent immediately — only once a full 12 months have passed since the last increase, with a proper N1 notice
Introducing Yourself as the New Landlord
Once you take ownership, notify the tenant in writing. Include:
- Your name and contact information
- The mailing address for rent payment (or e-transfer details)
- Instructions for submitting maintenance requests
This is also a good time to confirm the rent amount, deposit, and lease terms in writing. It is not legally required to create a new agreement, but a written confirmation prevents disputes later.
For practical guidance on what records to maintain from day one, see Landlord Record Keeping Ontario.
What About the Insurance?
Your existing home insurance policy does not cover a tenanted rental property automatically. You need landlord-specific insurance — property coverage for the structure, liability coverage as a landlord, and typically loss-of-rent coverage if the unit becomes uninhabitable.
Contact your broker before or on the closing date. A gap in coverage on day one is a real exposure. See Rental Property Insurance Ontario for a breakdown of what policies cover and what to ask for.
Common Mistakes New Buyers Make
Assuming vacant possession. Unless the purchase agreement specifically requires the seller to deliver the property vacant and the seller obtains that legally, you will take title with the tenant. Most "as-is" sales of income properties include the tenancy.
Not getting the deposit credited. If the statement of adjustments does not include the last month's rent deposit as a seller-to-buyer credit, ask about it. Do not assume it was handled.
Trying to renegotiate rent on day one. You inherit the existing rent. You can only increase rent after 12 months, with proper N1 notice and only by the annual guideline percentage (unless the unit is exempt from rent control — see note below).
Ignoring the licence obligation in London. A change of ownership triggers a new licence requirement. Operating a rental unit in London without a valid licence exposes you to fines and complications with the LTB.
Serving an N12 before you own the property. An N12 served by the vendor on your behalf before closing is invalid. You must own the property to serve a notice of termination.
A Note on Rent Control Exemptions
Units first occupied for residential purposes after November 15, 2018 are exempt from Ontario's rent control guideline. If the property qualifies, you can increase rent to any amount on a 12-month cycle with proper notice — not just the annual guideline percentage.
Ask the seller when the unit was first occupied. If it was built and first occupied after November 15, 2018, the exemption applies and your rent-setting flexibility is considerably wider.
FAQ
Does buying a property automatically terminate the tenancy? No. Under RTA Section 37, a tenancy can only end through a valid notice, written agreement, or LTB order. A sale is none of those.
Can I require the tenant to sign a new lease after I take ownership? No. The existing tenancy continues on the same terms. You can offer a new lease, but the tenant is not obligated to sign one.
What if the tenant refuses to leave after I serve an N12? If the tenant does not vacate by the termination date, you file an L2 application with the LTB. The LTB will schedule a hearing and issue an eviction order if the N12 meets the requirements.
What happens if I discover the previous landlord never paid interest on the deposit? That accumulated interest is owed to the tenant. The tenant can raise this at the LTB. Address it directly with the tenant — offer a rent credit — rather than waiting for a T1 application.
The unit is occupied but the seller says there is no written lease. Is that valid? Yes. In Ontario, a tenancy can exist without a written agreement. The tenant's rights are the same. You should document the current rent amount and terms in writing as soon as possible after closing.
Can I use the N12 if I want to sell the property again quickly after moving in? Potentially, but bad-faith N12s carry serious consequences: the LTB can order you to pay the tenant up to 12 months' rent. If you serve an N12, move in, and then relist within a year, the LTB may investigate.
Does the LTB timeline change because I am a new owner? No. If you need to file an L1 for rent arrears or an L2 for eviction, the LTB timelines are the same: 8–14 weeks to a hearing in the London/Middlesex area, followed by 4–8 weeks for Sheriff enforcement after an order.
The Bottom Line
Buying a tenanted property in Ontario means buying the tenancy too. That is not a problem — it is a structure. Understand the obligations you are inheriting before you close, get the deposit credit handled properly, introduce yourself professionally, and make decisions about tenancy based on the actual legal tools available to you.
If you are managing tenanted properties in London, St. Thomas, or Strathroy and want someone to handle the landlord-tenant relationship from day one, Prospera Properties works specifically with small landlords who own one to five units. We can take over the management of an existing tenancy or help you set up the relationship with a new-to-you tenant correctly from the start.