While the new tenancy notice period may protect tenants it most certainly does not protect the seller nor buyer. If you are involved in a real estate transactions this is an excellent summary of the changes, impact & untended consequences of the change provided by one of our associations, the Canadian Mortgage Brokers Association of BC.
New Tenancy Notice Periods & Impact On Mortgage Approvals
- Effective Date: July 18, 2024, BC will increase the notice period for tenants to vacate when a buyer intends to occupy the property.
- Notice Period Extension: Notice period will extend from two to four months, beginning from the next rental period date.
- Dispute Period: Tenants will have 30 days (up from 15) to dispute the notice.
- Compensation: If the buyer/landlord doesn't fulfill the occupancy purpose within 12 months, they owe the tenant 12 months' rent.
- Mortgage Impact: Extended notice periods could negatively affect buyers financing their purchase to occupy the property.
Implications for Mortgage Approvals
- Extended Notice Period: The 4-month notice can exceed typical 90-120 day interest rate holds, leading to uncertainty about the final rate & payment buyers will face.
- Approval Uncertainty: Mortgage approvals are based on current rates at the application time, which can change if the interest rate hold expires, risking buyers’ eligibility.
- Owner-Occupied Purchase: Lenders may not approve loans if tenants are still in place, complicating owner-occupied purchases.
- Insured Mortgages: Presence of a tenant reclassifies the property as a rental, which can lead to financing declines for insured mortgages, impacting first-time buyers.
- Investor Challenges: Extended notice periods and tenant issues make it harder for investors to sell properties, worsening the housing supply shortage.
Potential Unintended Consequences
- Fewer sellers renting out their properties.
- Decreased buyer interest in tenant-occupied properties.
- Fewer accepted offers due to longer closing periods.
- Increased last-minute transaction collapses.
- Higher mortgage rates from lenders to cover risks.
- Reduced financing for transactions.
- Ultimately, less housing constructed or available, countering the goal of increasing housing.