Buying a Tenanted Property in Ontario: The Rent Clauses That Decide It

Last updated 11 September 2026. Written by Jatin Dua, Broker of Record at RE/MAX Quantum Realty, 799 The Queensway, Etobicoke · For Ontario registrants · 10 min read

What goes wrong on a small multiplex file

Your buyer purchases a legal triplex on an income approach. The schedule you drafted says the seller warrants the rents. Four months after closing one tenant files at the Board, produces a rent history, and establishes the rent has been increased without proper notice for years. The rent gets rolled back. The income the purchase was underwritten on was never lawfully collectable.

Your buyer reads their own agreement and finds a warranty that extends to actual rents only and not to their legality. They call you. The honest answer is that the clause did exactly what it says, and nobody chose the second clause that would have addressed the problem.

This is the most consequential misunderstanding in the whole rent section of the guidelines, and I see it in agreements written by experienced agents most months. Pull RENT-6 and RENT-7 side by side from your own OREA member copy and read them as two different products.

Three warranties, three different jobs

RENT-6 (Rent – No Warranty Re: Legality of Rents) gives the buyer a unit-by-unit table of current rent and the date and amount of the last increase, warranted to the best of the seller’s knowledge and belief. It expressly limits itself to the actual rents. It is a statement about what money is coming in.

RENT-7 (Rent – General Warranty by Seller) is the compliance warranty. It covers the seller’s period of ownership, and what it promises is compliance: the tenancies were run the way the landlord and tenant statute requires, and any increases followed the rent review rules. Note the boundary built into it: it covers the seller’s ownership, not whoever came before. On a building that has changed hands twice in ten years, that boundary matters.

RENT-8 (Rent – Seller Warranty Regarding Disputes) finds the open file. It warrants that no tenant is currently in dispute with the landlord — over repairs, over unpaid rent, over a breach of the residential rent review rules, or over anything else material in the lease — unless the agreement spells that dispute out. That last phrase is an invitation: the exceptions get written into the agreement, and a seller with a dispute who says nothing has a problem.

All three expressly survive and do not merge on completion, and all three apply to circumstances existing at completion. That is useful drafting and worth pointing out, because plenty of clauses say no such thing and what survives closing when a document is silent is a real legal argument.

The tension inside every one of these warranties

Read the qualifiers carefully, because there are two of them and they point in different directions. The warranty is given to the best of the seller’s knowledge and belief. And it applies to circumstances existing at completion.

So whose knowledge, and as of when? Coppendale v. Mills, 2025 ONSC 5192 is the decision every agent doing this work should know. As reported, buyers waived their inspection condition, found basement moisture before closing and refused to complete, relying on a warranty qualified by the seller’s knowledge. The court read it as speaking to what the seller knew at signing. The buyers forfeited a $20,000 deposit and were ordered to pay $206,703.56 in damages.

The rent warranties carry an express completion-date reference, which was not the position in Coppendale, so I will not tell you the outcome would be the same. What I will tell you is that knowledge-qualified warranties are consistently narrower than clients assume, that the interaction between a knowledge qualifier and a timing qualifier is exactly what lawyers argue about, and that a warranty is a poor substitute for documents. Verify, then warrant.

RENT-1: the clause that turns a shortfall into money

RENT-1 (Adjustment of Purchase Price Due to Shortfall in Rental Income) is the most commercially interesting clause in this group and the one agents use least. The mechanism: if the actual rent at completion, including any planned increases declared in the agreement, comes in below a stated figure, the seller pays the difference multiplied by a stated factor, either as an adjustment to the purchase price or as a separate payment, at the buyer’s election.

The factor is negotiated and commonly derived from the relationship between purchase price and gross rent — a gross rent multiplier. The logic is that a dollar of annual rent is worth some multiple of a dollar of price, so a shortfall should reduce the price by that multiple rather than by the raw difference.

Two cautions. The clause describes the payment as liquidated damages, and whether a particular figure holds up or is attacked as a penalty is a question for the lawyers on the numbers involved. And the clause depends on the stated floor being written into the blank accurately and on planned increases being properly declared. If the seller’s declared increases never get served, the floor was fiction.

The notices, and the paperwork that has to exist afterwards

If your buyer wants higher rents in place at closing, RENT-3 is the clause — and the operative words are the ones about proof of proper service. A notice prepared but not properly served has no effect, and the buyer inherits the rent lawfully in place. Ask for the notices and the service evidence.

If your buyer intends to do something else with the units, RENT-4 keeps the seller out of the way. What a buyer may lawfully do with a tenancy after closing is not a question you answer. Terminating a tenancy, or taking possession for a particular purpose, is governed by legislation and by the Landlord and Tenant Board, and advising on it is beyond our licence. Send them to a lawyer who practises in that area before they buy.

RENT-5 (Notices to Tenants of New Owner) handles the transition: on completion the seller provides a notice to all tenants advising of the new owner and directing future rent as the buyer specifies, and pays over any rent received in error for a stated number of months. Fill that blank. One month on a twelve-unit building where two tenants pay by pre-authorised debit is not enough time, and you will field the calls.

Rent deposits and the interest on them are handled by the lawyers through the adjustment process. That is their work, not yours — but it only happens if the agreement and the disclosure package tell them the deposits exist.

RENT-11 and the exemption nobody should be opining on

RENT-11 (Tenant Acknowledgement No Rent Increase Limitation) is a landlord-and-tenant document rather than an agreement of purchase and sale clause. It records a landlord notifying a tenant, and a tenant acknowledging, that the premises are not subject to the limits on rent increases prescribed by Ontario’s residential tenancies legislation.

Here is the point to take from this section. Whether an exemption from those limits applies to a particular unit is a legal question determined by the legislation and the facts of the building, and a tenant’s acknowledgement does not create an exemption that does not exist. The buyer who relied on it is the one exposed.

I have heard agents give confident summaries of which buildings are exempt. Do not. It is a legal opinion, it is outside our licence, and the cost of being wrong is a rent roll that collapses. Tell the buyer to get the question answered by a lawyer before the condition period ends, and put that instruction in writing.

Your exposure as the registrant

The rule reaching this work most directly is the advertising one. Under RECO Bulletin 5.1, a misleading statement is one that causes someone to have a wrong idea or impression, and it does not matter that not everyone would be misled. A listing advertising gross annual income where a unit is not legal, or where the stated rent exceeds what is lawfully collectable, creates exactly that impression. So does a cap rate calculated off rents nobody verified.

On seller disclosure, be careful which framework applies. RECO Bulletin 7.4 addresses facts a seller has a legal obligation to disclose: patent defects generally need not be disclosed under caveat emptor, although actively concealing one removes that protection, and latent defects rendering a property unfit for habitation or dangerous must be disclosed — duties from case law rather than the TRESA regulations. An unlawful rent is not a latent defect. A unit with no second means of egress may be a different conversation, and it belongs with the seller and their lawyer.

Small investment properties also produce self-represented sellers more often than any other category. Under Bulletin 2.4, confirm the person intends to proceed unrepresented, deliver and explain the RECO Information Guide and the Information and Disclosure to Self-Represented Party form, state plainly you represent your client and not them, and make reasonable efforts to obtain written acknowledgement of that form. Then do not advise them on price, terms or clauses.

How I have my agents run the diligence

1. Get the leases themselves, and where there are too many, make the offer conditional on inspecting the tenancy agreements instead.
2. Get the increase notices and the evidence of service for every increase in the seller’s ownership, not a summary.
3. Get the rent deposit amounts and interest position to the buyer’s lawyer for the adjustments.
4. Ask in writing about Board applications, arrears, repair disputes and maintenance orders, and get the answers written into the agreement as exceptions to RENT-8.
5. Expand the RENT-6 table where the deal warrants it — unit, tenant, type of tenancy, expiry, rent due date, prepaid rent and what is included.
6. Choose between RENT-3 and RENT-4, and between RENT-9 and RENT-10, and delete the one you did not choose.

None of this is exotic. It is a document request list and the discipline to send it on day one of the condition period rather than day six. For the clauses governing assumption at closing, see the tenancy assumption post and the vacant possession clauses.

Questions agents actually ask

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• Electronic Signature Consent in Ontario Real Estate: What the Clause Does and Does Not Cover
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• Every clause and condition guide in one place

This is professional commentary from a Broker of Record on drafting and diligence practice, not legal advice. Whether a rent is lawfully collectable, whether an exemption applies, and what a buyer may do with a tenancy after closing are questions for the client’s own lawyer. This is general professional commentary from a Broker of Record on drafting practice. It is not legal advice, it is not a substitute for your own brokerage’s policies, and it does not create any professional relationship. Clause codes refer to OREA’s Guidelines for Residential and Commercial Clauses, an OREA member resource — the clause wording itself is OREA’s and is not reproduced here. Always work from your brokerage’s approved forms, and send your client to a lawyer for anything turning on interpretation, enforceability or remedy. Legislation, regulator guidance and case law all change; verify anything you are relying on.