VACANT POSSESSION — WHY IT MATTERS MORE THAN EVER
- johnathanmcquoid
- Jan 18
- 2 min read
DISCLAIMER: This post is written for buyers.
It is not suggesting tenant rights be ignored or violated.
If you are planning to purchase a residential property this year, there are two words that matter more than ever:
👉 VACANT POSSESSION
Your purchase agreement must clearly state it.
Here’s why 👇
🏦 Lenders don’t care about your future plans — only the current reality
Even if you fully intend to move into the property…
Even if you plan to give notice as soon as you take possession…
Even if you only need 30–60 days to have the tenant move out…
None of that matters to the lender.
If the property is tenanted at the time of closing, the lender will classify the purchase as a rental property, not owner-occupied.
That means:
✔️ minimum 20% down
✔️ higher rates
✔️ stricter qualification rules
✔️ limited lender options
Even if you only have 5% down, lenders cannot make exceptions under today’s federal guidelines.
🚫 “But we only have 5% down — can’t they make an exception?”
No.
Due to federal mortgage rules and insurer policies (CMHC, Sagen, Canada Guaranty), lenders cannot approve owner-occupied financing if the property is tenant-occupied at closing.
It doesn’t matter what you plan to do after you get the keys.
The rules are rigid.
🏠 What if you actually WANT to buy it as a rental?
Even then, inheriting an existing tenant is usually a disadvantage.
You need to ask:
• Is the lease valid and properly written?
• Does it protect you as the new landlord?
• Is the rent at market levels, or is it drastically underpriced?
• Are annual rent increases allowed under provincial rules?
• What notice rules apply under the Residential Tenancies Act?
Under Ontario legislation, you cannot simply raise rent to market levels if the tenant is protected by rent-control guidelines.
You could be stuck with a tenant paying way below market rent for years.
⚠️ Why is the seller refusing to provide vacant possession?
This is a red flag.
It usually means:
✔️ they don’t want to give proper notice
✔️ they know the tenancy is problematic
✔️ they want YOU to deal with the issue
Don’t inherit those headaches.
💡 Bottom line:
Whether you’re buying to live in the home OR as an investment…
👉 Demand vacant possession — or walk away.
💬 Have questions about vacant possession or tenancy-related financing? Message The Frontline Mortgage Group. We’ll help you protect yourself and make sure your financing doesn’t get derailed on closing day. 💬