The client
Buyers purchasing a $395,000 triplex in Trois-Rivières, Quebec, inheriting three sitting tenancies under Quebec's rule that a lease survives the sale of the building -- a new owner cannot simply reset rent to market on closing.
Purchase price
$395,000
Trois-Rivières, non-owner-occupied
Down payment
$79,000 (20%)
Conventional, uninsured
Unit 3's actual legal rent
$850/mo
Under a sitting lease, no TAL-sanctioned increase filed in years
Appraiser's market-rent opinion, unit 3
$1,300/mo
Used in the buyers' own pro forma
Units 1 and 2 combined
$2,650/mo
Ordinary continuing tenancies, unaffected
The problem
Quebec's principle that a lease follows the building — le bail suit l'immeuble — means a change of ownership does not reset what a sitting tenant legally owes. Unit 3's tenant had lived there for years under a lease whose rent had never once been taken through a formal increase application at the Tribunal administratif du logement, so its rent had simply never moved while comparable units around it did.
Two numbers for the same unit
- ▸The buyers' own pro forma: $1,300/mo, the appraiser's market-rent opinion for a comparable unit
- ▸The actual legal rent: $850/mo, what the sitting tenant is legally obligated to pay under their existing lease
- ▸A future TAL-sanctioned increase is available to the new owner eventually -- it is not automatic, and it is not something a lender can credit at closing
A lender qualifying this file on the appraiser's optimistic figure would be crediting rent the buyers could not actually collect on day one. The gap wasn't a red flag on the file's soundness -- it was a documentation question about which number was real.
The numbers
Running the offset against the actual legal rent instead of the assumed market figure showed the buyers a real, if modest, gap between what they had budgeted for and what the building would actually pay them at closing.
| Qualifying on the rent actually owed | Amount |
|---|---|
| Qualifying payment at 6.95%, 30 years | $2,071/mo |
| Property tax and heat | $470/mo |
| Rent recognized -- buyers' pro forma ($1,350 + $1,300 + $1,300), 50% offset | $1,975/mo |
| Rent recognized -- actual legal rent ($1,350 + $1,300 + $850), 50% offset | $1,750/mo |
| Total debt service | Buyers' assumed pro forma | Actual legal rent |
|---|---|---|
| Housing cost after rental offset | $566 | $791 |
| Car loan | $250 | $250 |
| Total debt service | 11.8% | 15.1% |
Neither number was close to a decline — this purchase was comfortable on the mortgage either way. What the correction actually protected was the buyers' own cash-flow expectations going into ownership, not the file's approval.
The solution
A courtier hypothécaire licensed under Quebec's Act respecting the distribution of financial products and services treated the sitting lease, not the appraisal, as the controlling document for unit 3's rent.
First, pulled unit 3's actual lease and its full rent history. Confirmed directly that no TAL-sanctioned increase had ever been filed against it, rather than assuming the appraiser's comparable-unit figure was already being collected.
Second, priced the purchase and the mortgage's rental offset against the real $850 figure. The only rent a lender could actually rely on at closing, not the appraiser's opinion of what a comparable, unencumbered unit could fetch.
Third, flagged a future TAL rent-increase application as its own separate step. A path the new owners could pursue after closing, on the TAL's own process and timeline — not a closing-day assumption baked into the file.
The outcome
The purchase funded conventionally at 4.95%, qualified on unit 3's actual legal rent at 15.1% total debt service, with Quebec's welcome tax on the purchase coming to $4,036.
This is an uninsured, non-owner-occupied purchase, so CMHC's ratio maximums don't apply here; both total-debt-service figures are informational, and neither was ever close to the file's actual approval threshold.
What to take from this file
- 01A Quebec lease survives the sale of the building. Le bail suit l'immeuble means a new owner inherits the tenancy exactly as it stands, rent included — a sale is not a rent-reset event.
- 02An appraiser's market-rent opinion is not the same as what a sitting tenant legally owes. Only the lease, checked against its own increase history, answers that question.
- 03A rent that never moved for years is a signal worth chasing before closing, not after. Confirm whether any TAL-sanctioned increase was ever filed against a long-static lease.
- 04A future increase is a separate project, not a closing-day number. Quebec's TAL process for raising rent has its own notice and timeline; it cannot be assumed into today's qualification.
- 05Protecting the buyer's cash-flow expectations matters even when the mortgage clears comfortably either way. This file was never in doubt on approval — getting the real number right was still the job.
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%.
- ▸Gouvernement du Québec — Droits sur les mutations immobilières — Quebec's transfer duties ('welcome tax') — 2026 indexed brackets.
- ▸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% rental-income offset — each lender publishes its own offset percentage against rental income; there is no single published rate.
- ▸the total debt service figures — this is an uninsured, non-owner-occupied purchase, so there is no CMHC ratio ceiling -- the numbers are 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.