When you buy a tenanted bungalow in Ontario, the tenancy comes with the house. You become the landlord on closing, on the same rent and terms the tenant already has. Ontario’s rental rules changed on September 21, 2026, but the change that got the most attention, a compensation-free own-use notice with 120 days’ warning, applies to existing landlords and not to purchasers. Here is what buyers need to know.
Key takeaways
- A sale does not end a tenancy. You inherit the tenant and the lease.
- You can keep the tenant, ask the seller to deliver vacant possession, or pursue a purchaser’s own-use notice.
- The new 120-day, no-compensation option does not apply to purchaser’s own-use notices.
- Verify the rent, deposit and legal status of the suite before you waive conditions.
- Lenders and insurers treat tenanted homes differently.
Your three options
1. Assume the tenant
Often the simplest route, especially if you want the income. You take over on the existing rent and terms. Any last month’s rent deposit must be credited to you on closing, along with interest owed to the tenant.
2. Ask for vacant possession
The seller can only deliver vacant possession if the tenant agrees to leave or the tenancy is ended lawfully. A seller cannot simply promise it. If your offer requires vacant possession, your lawyer should make clear what happens if the tenant has not left by closing.
3. Purchaser’s own-use notice
If you, a close family member or a caregiver genuinely intend to live in the unit for at least a year, the seller can give the tenant an N12 notice on your behalf once there is a firm agreement. It requires at least 60 days’ notice to the end of a rental period or term, and one month’s rent in compensation. It applies only to properties with three or fewer residential units. If the tenant does not leave, a Landlord and Tenant Board hearing is needed, which can take months.
What changed in 2026, and what did not
| Rule | Applies to buyers? |
|---|---|
| 120 days’ notice with no compensation for landlord’s own use | No. It is for an existing landlord’s own use only |
| Occupant must move in within 60 days or bad faith is presumed | Plan to move in promptly and keep records |
| 7-day N4 notice for unpaid rent | Yes, once you are the landlord |
| Persistent late payment defined as 3 times in 6 months | Yes, once you are the landlord |
Bad-faith own-use notices carry serious penalties. Do not use one unless the plan to move in is real.
Due diligence checklist
- Get the lease. If there is none in writing, ask for a signed tenant acknowledgment of the rent, what is included and the deposit held.
- Confirm the rent is lawful. Ask for the history of increases. An improper increase can come back on the new owner.
- Check whether rent control applies. Units first occupied as a residence after November 15, 2018 may be exempt from the annual guideline. Many older suites are not.
- Verify the suite is legal. Ask for the registration or building permit records, and have your inspector look at exits, fire separation and alarms.
- Ask about disputes. Are there any outstanding notices or Landlord and Tenant Board applications?
- See the unit. Tenants must get 24 hours’ written notice of a showing. Do not skip viewing the basement because it is occupied.
- Check utilities. Who pays, and are there separate meters?
Bungalow tip: In many bungalows the owner lives upstairs and rents the basement, or the reverse. If the owner’s level will be vacant on closing and that is the part you want to live in, you may not need to end the tenancy at all.
Financing and insurance
- If you will live in part of the home, most lenders treat it as owner-occupied and may count some of the rent as income.
- If you will not live there, it is a rental purchase and needs a larger down payment.
- Tell your insurer about the tenant from day one.
Frequently asked questions
Can I raise the rent when I take over?
Only as the law allows: once every 12 months with 90 days’ written notice, and within the guideline if the unit is rent controlled.
Can I offer the tenant money to leave?
Yes, a voluntary agreement is allowed and is often faster. It should be documented on the proper form, and the tenant is free to say no.
Where can I read about the 2026 rule changes?
See our article on Ontario’s new rental rules and our guide to the Landlord and Tenant Board.
Find bungalows with income potential
Browse bungalows for sale with a separate entrance, and read about house hacking with an Ontario bungalow.
This article is general information as of early October 2026, not legal, tax, mortgage or insurance advice. Rules and numbers change, so confirm the details for your situation with a licensed professional.
