Selling a Tenanted Property in Ontario: N12, Bill 60, and What Just Changed

Selling a Toronto property with a tenant in it is one of the most legally complex transactions in Ontario residential real estate. You generally cannot evict a tenant just because you want to sell. The buyer's only legal path to vacant possession is the N12 process. And Bill 60 just changed the compensation rules — though as of mid-2026, the change hasn't been proclaimed in force yet. Here's what you actually need to know.

The basics — you can't evict to sell

This is the rule most sellers don't understand until they meet with their lawyer. In Ontario, "I want to sell" is not legal grounds for evicting a residential tenant. The tenant's right to remain in the home transfers with ownership. The new owner inherits the tenancy.

That means if you list a tenanted property, the buyer pool divides into two groups: (1) buyers who want vacant possession, and (2) buyers who'd be happy to inherit the tenant (typically investors). Most family-owner buyers in Toronto want vacant possession. The tenant is part of the deal — or the deal-breaker.

The N12 process

If the buyer wants vacant possession and the tenant won't leave voluntarily, the only legal path is an N12 notice. The N12 ("Notice to End Your Tenancy Because the Landlord, a Purchaser or a Family Member Requires the Rental Unit") can be served by you (the seller) on behalf of the buyer, OR by the buyer after closing.

Critical requirements:

• The buyer (or a family member of the buyer) must intend in good faith to personally occupy the unit as their principal residence.
• A signed Agreement of Purchase and Sale must already be in place before the N12 is served.
• The N12 must give the tenant at least 60 days' notice, ending on the last day of a rental period.
• The tenant must be paid one month's rent in compensation (current rule; Bill 60 changes this — see below).
• The compensation must be paid by the termination date stated on the N12 — not after, not at the hearing.

Bill 60 — the change that may be coming

Ontario passed Bill 60 (Fighting Delays, Building Faster Act, 2025) in late 2025. Schedule 12 amends the Residential Tenancies Act. The key change for sellers: if the landlord gives the tenant at least 120 days' notice, the one-month compensation requirement is eliminated. Notices of 60–119 days still require compensation.

However: as of mid-May 2026, Schedule 12 of Bill 60 has NOT been proclaimed in force. The Ontario Cabinet hasn't announced an in-force date. The existing rule (one month's rent compensation by termination date) still applies.

Bad-faith N12 — the risk of breaking the rules

The N12 process exists for the buyer (or family member) who genuinely intends to occupy. Misusing the N12 — serving notice, the tenant moves out, and the buyer then re-rents the property or never moves in — exposes the buyer (and sometimes the seller) to a tenant complaint at the Landlord and Tenant Board.

If the LTB finds bad faith, the buyer can be ordered to pay the former tenant up to 12 months' rent in compensation, plus moving costs and rental top-ups for any new comparable rental. This is a real risk that has been enforced repeatedly in 2024–2026.

If you're selling and your buyer plans to use N12 — make sure their intent is genuine. Your name doesn't appear on the post-eviction conduct, but your reputation can.

Three strategies for selling tenanted property

1. Negotiate "cash for keys" with the tenant

Most efficient option in many cases. You offer the tenant a lump sum to vacate voluntarily by an agreed date. Common amounts: 2–6 months' rent. The tenant signs an N11 (mutual agreement to terminate). Costly upfront, but much faster than the N12 process and zero legal risk.

2. Sell with the tenant in place (to an investor buyer)

Marketing the property as "tenanted, rental income $X/month" attracts investor buyers. You don't deal with the eviction process at all. Trade-off: investor buyers typically offer 10–20% less than vacant-possession family-owner buyers, because they're capitalizing the rent at investor metrics.

3. Buyer serves N12 after closing

You sell with the buyer agreeing to handle vacant possession themselves post-closing. Pricing reflects that the buyer is taking on the eviction risk and process. Make sure your purchase agreement clearly assigns this risk and process.

Tax considerations

If the property was your principal residence at any point, you may be entitled to partial PRE. If it has only been rental property, full capital gains tax at 50% inclusion rate applies on the gain.

Specific issue: depreciation (CCA) you claimed over the years gets recaptured at sale — fully taxable income, not capital gain. Many investor-sellers are surprised by this. Talk to a CPA before listing.

What to do before listing

• Read the lease carefully. Fixed-term vs month-to-month matters. Notice requirements differ.
• Talk to your real estate lawyer before serving any notice. Mistakes can cost months and tens of thousands of dollars.
• Have an real conversation with the tenant. Many tenants would rather take a cash-for-keys agreement than face the N12 process. Try this first.
• Confirm the buyer's intent in writing if N12 is part of the deal.
• Document the property's current rental income for the investor-buyer pool.

When to call me

If you have a tenanted property and you're considering selling, the conversation before listing is the most valuable one. Once the listing is live and offers come in, the rule constraints get tight. Plan 60–90 days ahead. I work this kind of sale regularly.