The client
A buyer under contract on a $335,000 property in Saint-Georges planned to move in personally at closing, financing the purchase as an owner-occupied insured mortgage at 10% down.
Purchase price
$335,000, Saint-Georges
Original plan
10% down, owner-occupied
Insured structure, move-in intended at closing
Sitting tenant's rent
$1,350/month
Under the lease the repossession process left in force
Buyer's income
$6,800/month
Own qualifying income
Other debt
$210/mo car loan
The problem
Quebec's Civil Code gives a landlord the right to repossess a leased dwelling for their own use, but only through a defined process -- prior notice to the tenant, a minimum notice period, and the tenant's right to contest the repossession before the Tribunal administratif du logement. It is not something a buyer can simply assume will clear by closing day.
What the repossession process actually required
- ▸The property had a sitting tenant under an existing lease when the purchase agreement was signed
- ▸Repossessing for personal use required formal notice to the tenant well in advance, with the tenant free to contest it
- ▸The notice period ran past the buyer's planned closing and move-in date, so the tenancy continued in force with no vacant possession available at closing
Nothing about the tenant's lease or the repossession process was irregular -- the buyer's plan had simply assumed a timeline the Civil Code's own process didn't support.
The numbers
Once it was clear the tenancy would outlast the planned closing, the file had to be repriced around the property it actually was on closing day: a non-owner-occupied rental, not a vacant home waiting to be occupied.
| Owner-occupied plan versus rental reality | Amount |
|---|---|
| Down payment at the original 10%, owner-occupied | $33,500 |
| Down payment at the corrected 20%, non-owner-occupied | $67,000 |
| Additional cash required | $33,500 |
| The corrected rental purchase | Figure |
|---|---|
| Mortgage at 80% of purchase price | $268,000 |
| Payment at the minimum qualifying rate (7.05%) | $1,885/mo |
| Tenant's rent, offset at this lender's 50% convention | -$675/mo |
| Total debt service | 26.8% |
The extra $33,500 in down payment was real money the buyer had to find on short notice, but the ratio math itself was never the hard part -- 26.8% left plenty of room. The hard part was recognizing, before closing, that the property being financed was not the one the original plan described.
The solution
A courtier hypothécaire licensed under Quebec's Act respecting the distribution of financial products and services worked with the buyer's notary to confirm the tenancy's actual status before financing assumptions hardened into a closing date nobody could meet.
First, confirmed directly with the notary and the existing lease how the repossession-for-personal-use process was actually proceeding. Established the realistic timeline rather than the buyer's original assumption.
Second, restructured the financing from an owner-occupied insured purchase to a non-owner-occupied conventional one. Moved the down payment to 20%, since CMHC's owner-occupied product no longer fit a property with a tenant remaining in place.
Third, counted the tenant's actual $1,350/month rent in the qualifying math, at this lender's own offset convention. Priced the file on the property as it stood on closing day, not on the buyer's original move-in plan.
The outcome
The purchase closed as a non-owner-occupied conventional purchase at 20% down, with the sitting tenancy and its $1,350/month rent counted from day one, at 26.8% total debt service -- a workable number against the tight rental vacancy rates much of Quebec is seeing.
Because this is a conventional, non-owner-occupied purchase, CMHC's ratio maximums don't apply directly; the 26.8% figure is informational.
What to take from this file
- 01A signed purchase agreement doesn't override a tenant's statutory rights. Quebec's Civil Code repossession-for-personal-use process runs on its own timeline, regardless of the buyer's closing date.
- 02Confirm the tenancy's real status before the financing structure hardens. An owner-occupied insured plan built on an assumed vacancy can collapse the moment the tenant's actual timeline becomes clear.
- 03Restructuring from owner-occupied to non-owner-occupied changes the down payment, not just the paperwork. Have a plan for where the additional cash comes from before it's needed on short notice.
- 04Count the rent that actually exists, not the vacancy that was planned. Once the tenancy continues, the property's real carrying-cost math includes it.
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:
- ▸5.05% contract rate — rates move daily; not a quote.
- ▸the 50% rent-offset convention — each lender publishes its own treatment of rental income against carrying cost; there is no single national convention.
- ▸the TDS figure — this is a conventional, non-owner-occupied 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.