A few weeks ago we looked at the subject of evicting a dreaded Tenant From Hell. It’s unfortunate, but many landlords find themselves in the horrible predicament of signing a deal with a tenant who at first seems like a model example, but later turns out to be a nightmare. Many landlords have understandably labeled these individuals as “professional tenants”. But do people like this really exist? Are they really that bad? Or are the landlords simply looking at the situations through a distorted lens? While the landlord/tenant relationship is very complex, and points can be argued on either side of the fence, it is true that these “professional tenants” exist…and they milk their landlords and milk the system for all it’s worth. How about an example? Funny you should ask.

Just this past September there was an article published on CBC News that highlighted precisely such a case. Robin Ennis, a Toronto landlord claimed she had been conned by a “professional tenant” who had been living in her high end Yorkville home since July of this year, and hasn’t paid a cent in rent. The story reads like a landlord horror novel, and is unfortunately 100% real. The tenant in question is a 62 year old man named James Regan. And James has a very thorough understanding of the Landlord and Tenant Boards rules and regulations. The matter is currently in the process of being heard by the board, but this is 4 months into the rental agreement, and Robin hasn’t seen a single penny of rent. James on the other hand, is not attending his first rodeo; he had a similar dispute at the board earlier this year relating to another property that he was occupying. The board ordered his eviction, but only after months of unpaid rent: “Regan appealed that eviction and lost in Ontario Superior Court, a process that took eight months, during which he lived rent-free in the condo near Old Mill Road and Bloor Street West.”.

Even at the time of eviction (a second eviction that finally was enforced on June 29^th2016), he never paid any of the money he owed. Rent was $3200 a month, and James had compiled a whopping $25, 000 in back rent that court documents show he never paid. James was too busy setting his sights on his next victim; Robin.

Robin met with James on June 30^th 2016, the very next day after his eviction. Robin has a second-floor apartment in her home on Avenue Road, and James showed up well dressed, well groomed and polite. Now, Robin may have jumped the gun a little, or perhaps she was simply fooled by James’ façade.  Robin and James signed an agreement prior to Robin doing her due diligence. She had intended to, but she took James’ word as he promised to pay first and last month’s rent, provide proof of insurance, as well as credit and criminal background checks. Robin’s mistake was not requesting these documents prior to signing the agreement.

The very next day, Friday July 1^st, James showed up unannounced with the perfect story to get the key. He claimed that he had valuable art that was in urgent need of storage. Robin’s second mistake was entrusting James, who she hardly knew, and providing the keys. Needless to say, James never gave them back. By July 2^nd, he had already completed his move into the apartment. Robin, at this point, confronted James for the first and last month’s rent, at which point James reportedly showed his true colors.

It wasn’t until Sept 8^th that Robin had finally received her first hearing by the board. However, the matter had to be pushed back as James claimed he never received the proper documentation in the mail; he knew very well how to play the system by claiming he was never served with the notice of the hearing.  The next hearing is in November, 5 months after James initially moved into the apartment.

Once the case is finally heard, the first step is often for the board to order payment of rent, but tenants typically default. Months can pass before the board finally orders an eviction notice, which can also be immediately appealed. Tenants cannot legally be evicted until an appeal in the decision is made. By the time all is said and done, it can be 8-9 months into the agreement with thousands upon thousands of dollars in unpaid rent that may or may not ever be paid.

To read the entire story, click here.

So there you have it. Professional tenants exist, and they will make your landlord experience a living hell. Your best bet is to follow a rigid screening process with zero room for exceptions. Better yet, work with a professional management company, like CMG Toronto, who are privy to these types of tenants, and understand the importance of the screening process.

If you’re in the market for a pre-construction condo purchase, you’ll want to make sure you do your research first. Pre-condo purchases can be hit or miss, and it’s very important to cross your T’s and dot your I’s throughout the process. A well thought out and properly executed purchase, can be a very lucrative endeavor. On the flip side, there are plenty of horror stories related to pre-construction purchases. So what are the ins and outs? What do you need to know? Here are some points to be aware of when considering such a purchase:

If you need help with property management, tenant management services, or looking into a property investment – contact CMG Toronto today. The best property management company in Toronto.

Positives:

Let’s start with the good stuff. There is a reason why investors swarm by the dozens when a new project development is announced. Pre-construction units typically come at much lower prices VS standard re-sale units. This is largely due to the risks associated with buying pre-condo, which we’ll touch on in the “Negatives” section of this post. But the thing to remember is that buying pre condo will cost you much less than a general re-sale unit, and the best part: once the unit is registered and available for resale, it will likely have seen a massive increase in equity. This is why so many investors partake in pre-construction purchases. Many of them intend to sell the property as soon as it’s registered. Others intend to rent out the unit while sitting on the equity and making a monthly income. But this is also a nice option for a first time home buyer, as the prospect of a large increase in equity over a short period of time can be very enticing.

You’ll also be given a cooling off period that will allow you to reassess your purchase, and get your finances in order; you have 10 days after giving the initial down payment to reconsider your offer. This can be a big positive for those of us who make impulsive decisions.

Another positive is the fact that you’ll be the first one to inhabit the unit. This is a brand new unit, so you don’t have to worry about wear and tear that goes unnoticed in the screening process. You are the first owner, meaning all new appliances and designs. What’s more is that you may be given the opportunity to customize certain aspects of the unit, differentiating it from the other units in the building. In turn, this will aid your resale value when you’re ready to sell.

Negatives:

Ok, on to the bad. The biggest issue with pre-construction: time delays! If you need a place to live now, you can forget pre-construction. Time delays are a common occurrence, and can last anywhere from 6 months to a few years. More importantly, sometimes a project is called off all together. This is rare, but it is a risk associated with pre-condo.

On the subject of down payment, you will require a full 20%. Now, this can actually be viewed as a positive or a negative; on the down side, a resale unit can have you paying as little as 5% up front; on the positive side, a bigger down payment means a smaller mortgage which ultimately saves you interest charges, gives you a smaller monthly fee to maintain, and it also allows you to avoid the CMHC Fees associated with deposits that are less than 20%. Moreover, the 20% down payment is typically broken into smaller incremental payments, which gives you more time to source the entire 20%. These incremental payments are referred to as a deposit structure. You will generally be paying something like 3-5K up front, with the balance of the initial 5% in 30 days, another 5% in 90 days, another 5% in 180 days and the final 5% at occupancy (the day you move in).

Lastly, the big negative tied into pre-condo is something often referred to as Phantom Rent. There is a period of time in which you can officially move into the unit, however the building itself is not yet registered, and as a result, you do not yet own the unit. This is referred to as Interim Occupancy.  Interim occupancy can last as short as a few months, or as long as a few years, and you are required by law to pay the occupancy fees. These fees are calculated to be more or less what your mortgage payments will be once the unit is officially yours, but the issue is this: those occupancy fees do not go towards your mortgage. Hence the term “Phantom Rent”.

So, pre-condo purchases can be a very smart investment. With that said, do yourself a favor and work with a professional when considering such a purchase. Be aware of the good, the bad and the ugly. CMG Toronto can help!