The Fundamental Rule: You Inherit the Tenancy

When you buy a property with existing tenants in Ontario, you inherit the tenancy — the existing lease terms, the rent amount, and all rights and obligations that come with it. You cannot evict tenants simply because you're the new owner. You cannot raise rents beyond the guideline (2.5% in 2026) just because you paid more for the building. The tenancy survives the sale.

What This Means for Your Numbers

If the existing tenants are paying below-market rent, you're buying at current income — not potential income. Example: a duplex with existing tenants paying $1,400/month for a unit where market rent is $2,000/month. Your income is $1,400/month until that tenancy ends. Factor this into your purchase price and cashflow projections. Below-market rents are a legitimate negotiating lever — use the income gap to justify a lower offer price.

The N12: Moving In Yourself

If you plan to live in one of the units, you can serve an N12 (Notice to End a Tenancy — Landlord's Own Use) to end the existing tenancy. Requirements: 60 days notice (served on or before the rent due date), compensation of one month's rent to the tenant, and you must genuinely move in and occupy the unit for at least 12 months. Bad-faith N12s are taken very seriously by the LTB and can result in significant financial penalties.

What to Ask the Seller Before Closing

Request: copies of all current leases, last 12 months of rent receipts, confirmation of first/last month deposits (amount and that they're held in trust), any correspondence between the landlord and tenant (repair requests, complaints), and a statutory declaration confirming no N-forms have been filed or received. Also ask: why is the landlord selling? Long-term tenants at below-market rent with an unmotivated landlord is often a sign of management problems you're about to inherit.

The Tenant Cooperation Factor

In an ideal tenanted purchase, your existing tenants become an asset: reliable income from day one, no vacancy period, and a known quantity. Many duplex investors specifically seek tenanted properties because they avoid the risk of a vacant unit. The key is ensuring the tenant relationship starts well: introduce yourself as the new owner by letter on closing day, confirm their existing terms continue unchanged, and be responsive to any repair requests they've been waiting on.