The client
An investor buying a $455,000 rental property in Vernon at 20% down was told the existing fixed-term lease's vacate clause would let them end the tenancy at its stated term-end -- a detail the listing presented as settled.
Purchase price
$455,000, Vernon
20% down, conventional
Existing tenancy
$1,900/month
Fixed-term lease with a vacate clause the listing described as enforceable
Buyer's income
$9,600/month
Own qualifying income
Other debt
$260/mo car loan
The problem
A fixed-term lease's vacate clause once let a landlord end a tenancy simply because the term expired -- but BC's Residential Tenancy Act amendments have made most such clauses unenforceable since January 2024, with only narrow exceptions (such as the landlord's close family moving in).
What the listing's vacate clause could no longer do
- ▸The existing lease's vacate clause was written before BC's amendments took effect and no longer falls within one of the narrow surviving exceptions
- ▸Under the current Residential Tenancy Act, the tenancy simply continues past the stated term-end, on the same rent and terms, unless a proper notice provision applies
- ▸The listing had described the unit as available to the new owner at the lease's term-end -- a description the current law does not support
The tenant did nothing wrong and the lease itself was never invalid -- the clause the listing relied on to promise vacant possession simply stopped being enforceable years before this purchase.
The numbers
Qualifying the file on the tenancy actually in force -- ongoing, not ending -- was a straightforward correction once the legal point was confirmed.
| The rental purchase, correctly qualified | Amount |
|---|---|
| Base mortgage (80% of purchase price) | $364,000 |
| Payment at the minimum qualifying rate (6.95%) | $2,538/mo |
| Tenant's rent, added back at this lender's 50% convention | +$950/mo |
| Total debt service | Figure |
|---|---|
| Mortgage payment at the qualifying rate | $2,538/mo |
| Property tax and heat | $470 |
| Car loan | $260 |
| Buyer's income plus 50% rent add-back | $10,550/mo |
| Total debt service | 31.0% |
The math itself was never complicated -- once the tenancy was correctly understood as continuing, the file simply counted the $1,900/month rent as ongoing income the way any other tenanted rental purchase would.
The solution
A submortgage broker registered under BC's Mortgage Brokers Act confirmed the lease's legal status before letting the listing's description of vacant possession drive the financing plan.
First, reviewed the actual tenancy agreement and its vacate clause against the current Residential Tenancy Act. Confirmed the clause fell outside the narrow surviving exceptions and could not be relied on.
Second, corrected the buyer's expectation before the purchase closed. Made clear the unit would remain tenanted at the same rent and terms, not become vacant at the lease's stated end date.
Third, qualified the purchase on the continuing tenancy's real rent. Added the $1,900/month rent back into the qualifying income at this lender's own convention, rather than treating the unit as soon-to-be vacant.
The outcome
The purchase closed with the existing tenancy continuing on its original terms, the $1,900/month rent counted from day one, and total debt service at 31.0%, against a backdrop of tight rental vacancy rates across much of BC.
Because this is a conventional rental purchase at 20% down, CMHC's ratio maximums don't apply directly; the 31.0% figure is informational.
What to take from this file
- 01A vacate clause in an existing lease is not automatically enforceable. BC's Residential Tenancy Act amendments have restricted most fixed-term vacate clauses to narrow exceptions since January 2024.
- 02A listing's description of vacant possession is not a legal conclusion. Confirm the actual lease and current tenancy law before financing assumes the unit will be empty.
- 03A continuing tenancy is simply a rental, financially. Once vacant possession isn't available, qualify the file on the real rent the way any tenanted purchase would be qualified.
- 04This file was kept to one straightforward rent treatment. The legal question -- whether the tenancy continues -- was the real issue; once resolved, the ratio math itself was routine.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸4.95% contract rate — rates move daily; not a quote.
- ▸the 50% rent add-back convention — each lender publishes its own treatment of rental income; there is no single national convention.
- ▸the TDS figure — this is a conventional rental purchase at 20% down -- there is no CMHC ratio ceiling; the number is informational.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.