Ontario’s extremely tight housing market has made it much more difficult for realtors to sell tenant-occupied properties and to find rentals for certain tenants, realtors say.
They report everything from tenants refusing to allow showings of their homes to racism with well-qualified, visible minority tenants having to jump through hurdles to find a rental.
The fear of existing tenants
Renters know it’s a tough rental market and will sometimes make it as difficult as possible to show a property because they fear they’ll have to find a new place to live if their property is sold, says Sheldon Christian, a realtor with iProRealty in Brampton, Ontario. Christian has had situations in which he’s received a confirmation but later the tenants open the door and say, “No, I didn’t agree to a showing.”
In such cases, “I don’t want to be part of a transaction that is not going to close or end well. If I don’t have 90 or 100 per cent confidence the tenant is going to leave, I tend to say to the client, ‘Let’s move on to the next property.’”
Many realtors won’t even bring their clients to tenanted properties for sale because tenants are willing to stay in their homes until they get a Landlord and Tenant Board (LTB) hearing, which can take 12 to 18 months, says Nicole Slade, a realtor with Revel Realty in Brantford, Ontario and part of The Kate Broddick Team. As a result, “We’re seeing houses that are tenanted selling for quite a bit less if they’re even getting showings.”
Cash for keys deals: More expensive and harder to come by
Last year, a report by the office of Ontario’s ombudsman found the LTB has a backlog of more than 38,000 cases awaiting a hearing, 90 per cent involving landlords.
Slade adds tenants who have been in the same property for years are frequently paying rents that are substantially below market rates. So, they’ll often refuse cash for keys deals of several thousand dollars because they can’t find similar properties due to the housing shortage.
In January, a report by CBC Television’s The National noted some tenants in Toronto are seeking more than $100,000 in cash for keys deals.
Tips for working with tenanted properties
Christian says before taking on a client selling a tenanted property, realtors should get a sense as to whether a tenant is going to be a problem. Will the tenant allow showings? What’s the probability the tenant will leave when the house is sold?
If you get a sense the tenant is not going to leave, “It’s almost as if you’re wasting not only time but resources,” he says. “Why would I spend three or four grand to list this property and there isn’t a likelihood that I’m going to be able to close on the transaction?”
Whether representing buyers or sellers of a tenanted property, realtors must ensure they know the rules, regulations and rights of each party — and be able to realize when a paralegal that specializes in landlord-tenant relations should be consulted, Slade says.
Discrimination against visible minority tenants
The situation is no easier for visible minority tenants, says Christian, who is black.
Last year, his twin sister sold her house in Brampton and decided to rent for a year in nearby Milton before buying a new construction home. Christian provided realtors with three months of her bank statements, the listing for her sold property, proof of employment and solid credit.
Then the requests came, starting with one realtor asking for her mortgage statement, and they just got stranger, he says. An exasperated Christian told one realtor: “If you need her blood type let me know, and we’ll send it over.”
To get a rental in Milton, his sister had to pay 12 months upfront (first and last months’ rent plus a certified cheque for 10 months) – or more than $40,000 for the $3,400 monthly rental. “She was flabbergasted.” (Although his sister could subsequently have applied to the LTB to get 10 months’ rent back, she decided against it.)
Another recent client seeking a rental, who owns a Jamaican restaurant in Toronto, provided three months of bank statements showing a $57,000 balance, an Equifax credit report with a credit score of 840, proof of a 4 per cent credit card utilization rate and three years of tax return notices of assessments. In response, “I was told they were concerned about (his) financials.”
Finally, a landlord agreed to do an in-person interview and asked his client to log in to his bank account. When the landlord saw the balance was real, he agreed to rent to the client, but only after paying three months upfront. Although asking for additional months’ rent is illegal according to the LTB, “A lot of that is happening in our marketplace today, especially for visible minorities.”
“TRREB should be collecting data to see if there’s a problem with rental discrimination”
In another case, when Christian called a realtor for an update, the realtor said, “Oh yeah, the black people, right?” Later, the realtor phoned him and said, “My client doesn’t want to rent to any black people.”
“I couldn’t believe what I was hearing,” Christian says.
He adds that realtors often ask for IDs from visible minority clients: “The moment you get that question, you know what’s about to happen. Once you send that ID, the phone stops ringing.”
Christian believes the Toronto Regional Real Estate Board “should be collecting data to see if there’s a problem” with rental discrimination. “They’re basically saying there’s no problem and when you talk to agents, there is a problem.”
“Right now, agents are part of the problem”
While realtors take instructions from clients, “We should be pushing back to say, ‘Hey you can’t discriminate based on race.’ When you have an agent saying, ‘My client doesn’t want to rent to black people,’ there’s a problem,” he stresses. “Right now, agents are part of the problem.”
Danny Kucharsky is a contributing writer for REM.