Condo Buyers Can't Close

🔥 Hot off the press

Our last newsletter highlighted:

• Evictions on fake arrears which has spawned an entire CBC News investigation. Check out CBC reporter Mike Smee’s latest story.

• A camp catered to “Financial Independence, Retire Early” which Co-Founder Vishal and I got invited to by SuperFans Chris and Leslie. A little more about that can be found in The Globe and Mail’s Camp FIRE article by Reporter Meera Raman (Paywall).

👩🏻 Top insight to share from me, Co-Founder Weiting

Openroom SuperFan shared a surprising story with me - they are a property manager at a leading condo development company in Toronto.

Condo buyers who can’t close are defaulting and, under tenancy laws, are effectively becoming non-paying tenants.

🤯 Wait, what?

I drew a little graphic to make sense of it.

💿 Let’s rewind - how did we get here?

RBC published Navigating Toronto’s Frozen Pre-Construction Condo Market by Robert Hogue, Assistant Chief Economist at RBC (yes, the same RBC sponsoring today’s newsletter).

This analysis talks about how buyers who initiated pre-construction deals years ago are now struggling to close as the market and financing environment have shifted dramatically.

😳 Tell me more…

In Ontario, buyers often move into their condo during “interim occupancy,” paying monthly fees until final closing (where ownership of your condo unit legally transfers to you).

But if they can’t close and the purchase agreement is terminated, the law recognizes them as tenants under the Residential Tenancies Act (RTA).

Even if the purchaser stopped paying, the condo developers nor their property management teams can reclaim the unit.

Instead, the teams must file at the Landlord and Tenant Board (LTB) using an N8 Notice, Reason 4: Your tenancy was created in good faith as a result of an Agreement of Purchase and Sale for a proposed condominium unit and that agreement has been terminated.

Until the LTB issues an eviction order, the defaulting buyer is legally a tenant and may potentially get away with not paying rent.

🥴 Oh wait, that’s not all!

Sometimes a pre-construction condo buyer rents out their unit before closing. If their purchase collapses, their tenant’s lease doesn’t disappear - it transfers to the developer or property manager.

It should be pretty straight forward, but it’s not.

We’ve got situations where the Condo Developer/Property Management team says, “Tenant, we are the new landlords, please start paying us the rent going forward” because the buyer has already defaulted and stopped paying their interim-occupancy fees.

The original landlord insists, “No Tenant, keep paying me. I don’t know who the Condo Developer/Property Management team is.”

The tenant has no idea who the real landlord is.

It’s messy and confusing.

🎤 What do you think about all of this?

This SuperFan shared that over the next six months, these 2 situations are likely to increase:

1. the buyers defaulting in interim occupancy become “tenants” protected by the Residential Tenancies Act.

2. the responsible renters suddenly dealing with new landlords they never signed with.

Friends, this is kind of wild.

What you see and experience matters

Co-Founder Vishal and I built Openroom from a bad tenancy dispute because we were uneducated and uninformed small-scale housing providers.

Now, I spend thousands of hours learning what I wish I knew. I do it to help better the rental ecosystem for both the great tenants and great landlords - it’s not just one side.

I learn from each of you so I can reshare the knowledge back out to our growing community. Let’s continue to make more informed decisions together.

Honestly, it’s one of the best parts of my job!

If you’ve got interest stories or insights that the media didn’t care about, treat me as your best friend who will listen.

I read every message and try to respond, but sometimes I fall really behind - if you don’t hear back, please resend.

Weiting Bollu
Mom, Rental Housing Provider, Rental Housing Advocate, Educator, and Openroom Co-Founder & CEO

What does my team at Openroom do?

At Openroom, we aggregate tenancy court orders across Canada, extract information from them, and put it to public use (e.g. public record search for tenant screening, rental debt reporting to Equifax, legal research for all, reduce delinquency risk while renters get to build credit).

We also educate about rental housing, provide free resources, and we advocate for a more transparent and connected rental ecosystem to support both responsible housing providers and residents.