Tenants and landlords alike are probably aware that, in BC, there are a limited number of ways and reasons to end a tenancy. One of those ways is by agreement between the tenant and the landlord, usually referred to as a Mutual Agreement to End Tenancy. This type of agreement can be entered into at any time during a tenancy, regardless of what has transpired between the parties. Ordinarily, the landlord and tenant will formalize such an agreement in writing using RTB-8 Mutual Agreement to End Tenancy. However, this document cannot always be taken at face value, and parties can often feel pressured into signing. Particular care should be taken by purchasers of tenanted property when relying on a Mutual Agreement.
What is a Mutual Agreement to End Tenancy?
Quite simply, a Mutual Agreement to End Tenancy is a written agreement between the landlord and the tenant that ends the tenancy on an agreed upon date. The parties can enter into this agreement at any time and for any reason. There are lots of reasons why a landlord or tenant may wish to enter into such an agreement, some common reasons include:
the tenant has suffered a hardship or change of circumstances, such as illness in the family or a career change, and needs to move closer to family or out of town before the end of a fixed term tenancy;
the landlord would like to reclaim the property for reasons not permitted by the Residential Tenancy Act, such as to move a grandchild or sibling into the suite, or to make the property more marketable for an upcoming sale; or
the relationship between landlord and tenant has deteriorated and the parties have decided to part ways to resolve or avoid disputes.
Unlike a notice to end tenancy, which is issued unilaterally by either the landlord or tenant, a mutual agreement is entered into freely by both parties. For this reason, it provides the most flexible and desirable way to end a tenancy.
While Mutual Agreements sometimes involve one party paying another in exchange for their signing the agreement, this is not necessarily required at law. However, it is neither uncommon nor improper for one party to offer the other a financial incentive to sign a Mutual Agreement to End Tenancy.
Once signed by both parties, a Mutual Agreement is legally binding and cannot be revoked by one party unilaterally; both parties must agree to cancel the Mutual Agreement in writing. Because of its legally binding nature, both parties should carefully read the entire agreement and seek legal advice before signing.
When should a tenant be cautious?
Tenants should remember that they are never required to sign a Mutual Agreement to End Tenancy simply because their landlord asks them to. This is especially the case where the Mutual Agreement is presented by the landlord as merely a “formality”. Tenants should be especially cautious where the landlord has previously issued a Notice to End Tenancy, as signing a Mutual Agreement may mean the tenant loses the protections and compensation rights to which the tenant may otherwise be entitled if they have received a Notice to End Tenancy from their landlord.
The following scenarios are examples of instances where a tenant should seek legal advice before signing a mutual agreement:
The landlord is pressuring the tenant to sign a Mutual Agreement when the tenant does not truly wish to leave.
The landlord is telling the tenant they must sign a Mutual Agreement as a formality where the landlord has issued a Notice to End Tenancy for Landlord’s Use of Property under s. 49 of the Residential Tenancy Act and the tenant wishes to vacate prior to the move-out date provided by the landlord on the Notice to End Tenancy.
The tenant has asked the landlord in writing to carry out necessary repairs to the rental unit to which the landlord is refusing, and the landlord is requesting the tenant sign a Mutual Agreement.
There are other terms to the agreement between the parties, such as a payment from the landlord or a waiver of the tenant’s rights, which terms are not reflected in the standard form agreement on RTB-8.
The above scenarios do not necessarily mean that it is not advisable for a tenant or landlord to mutually agree to end the tenancy, but tenants should be sure that they understand both the benefits and consequences of signing a Mutual Agreement, which includes the value of the landlord’s offer, and the tenant’s rights under the Residential Tenancy Act.
When should a landlord be cautious?
For landlords, a Mutual Agreement to End Tenancy can be an effective tool – but only if it is genuinely voluntary. Anything that could reasonably be perceived to be coercion or pressure may undermine the validity of the agreement. Good practices to avoid this include:
allowing the tenant a reasonable amount of time to consider the agreement and seek advice;
explaining that signing the agreement is voluntary and the tenant is under no obligation to sign;
recording any compensation or other terms to the agreement; and
ensuring all parties receive a fully signed copy.
A properly documented agreement with clearly drafted terms provides certainty and clarity between the parties, which is key to reducing the possibility of costly disputes later on.
Buyer beware: purchasers of tenanted property
Purchasing a tenanted property can be risky, especially if you are the buyer and you are evicting the tenant. All parties should be extremely cautious when considering a Mutual Agreement after a Notice to End Tenancy for Purchaser’s Use of Property has already been issued. If you are the purchaser, a signed Mutual Agreement to End Tenancy may not be binding, despite the plain language of the RTB-8.
Purchasers should take care to ensure:
important terms are included in the contract of purchase and sale to compel the seller to properly document the terms of any agreement between the seller and the tenant;
the seller and the purchaser agree who will bear the liability for any future claims by the tenant; and
the seller provides the purchaser with all the relevant information and documents related to the tenancy before the contract is binding.
Most often, the purchaser will never meet the tenant they are evicting when they purchase the property. Due to the lack of any contractual or practical relationship with the tenant, independent verification of the terms of the agreement can be challenging for a purchaser, who is then dependent on the seller’s honest and full disclosure of all relevant information about the tenancy. These transactions can be risky, and with 12 months’ rent compensation on the line, poorly documented agreements can be extremely costly.
Key Takeaways
A Mutual Agreement to End Tenancy can be a valuable tool to both tenants and landlords where the parties freely wish to end the tenancy. It can be a means to achieving flexibility which may not otherwise be provided to the parties by the Residential Tenancy Act.
However, there can be severe risks involved for all affected parties including tenants, landlords, and purchasers. Tenants should be sure they understand what they are giving up, and that the parties’ respective obligations are clearly documented. Landlords should avoid any appearance of coercion or pressure. Purchasers should carefully assess the reliability of any agreement before relying on it.
When questions arise about a Mutual Agreement to End Tenancy, seeking legal advice before signing – or before entering into a real estate transaction – can help avoid costly mistakes later and can provide valuable peace of mind for all parties.
Written By: Rachael Walsh
Current to date of publishing.
