AZ Real Estate Partners
Selling with Rental Hot Water Tank, Furnace, AC in Ontario: Why Buyers Refuse to Assume & 3 Fixes
A $25/month Reliance rental hot water tank seems trivial — until a buyer makes its buyout a closing condition. Buyout costs $1,200–$3,500 each. How to handle it before listing, during, and at closing.
Why is rental HVAC equipment an issue when selling?
Rental hot water tanks, furnaces, AC units, and water softeners are typically tied to 5–15 year contracts with companies like Reliance, Enercare, EcoSmart, and Right Time. When selling, if the buyer refuses to assume the rental contract, the seller must buy out the equipment before closing. Buyout costs run $1,200–$3,500 per item, with multiple units totaling $3,000–$10,000 against net proceeds. Source: Ontario Consumer Protection Act 2002; Trust in Real Estate Services Act, 2002 (TRESA, formerly REBBA); OREA Form 100 (Agreement of Purchase and Sale), section 6 Rental Items; Personal Property Security Act s. 54 (as amended in 2024).
A Markham client of mine sold his home last year at $1.42M after a clean offer — until home inspection revealed three rental contracts (hot water tank, furnace, AC bundle). Buyer made buyout a closing condition: $7,800 deducted from proceeds. The deal closed, but the seller lost most of his negotiating margin. This is the most common hidden cost at GTA closings.
What Equipment Might Be Rented?
How to Identify What's Rented
Check: (1) Enbridge / Toronto Hydro bill third-party charges; (2) bank statements for monthly Reliance / Enercare auto-debits; (3) original closing documents for ‘Rental Equipment Contract’. Many longtime owners forget — a $60/month furnace rental signed 10 years ago can go unnoticed.
Why Buyers Refuse to Assume
Old NOSIs: How to Handle Them Now
Ontario’s 2024 Homeowner Protection Act ended NOSI registrations for consumer goods, and every consumer-goods NOSI in effect on June 6, 2024 is deemed expired. Old registrations still sit on title until someone removes them, so run a title search before listing. If an old NOSI shows up, your lawyer can apply to delete it from title (the rental contract itself still has to be dealt with separately). Handling it before listing avoids a last-minute scramble at closing.
Three Solution Strategies
Buyout Negotiation Tactics
Listing Agreement Disclosure Checklist
OREA Form 200 Section 6
Schedule A of listing agreement must list rental equipment: (a) Hot water tank rented from ___; (b) Furnace rented from ___; (c) AC rented from ___. Failure to disclose at listing → buyer’s lawyer title search reveals → legal claim against seller for non-disclosure post-closing. Disclose fully or buy out before listing.
Real Case Study
Case: Richmond Hill seller, list price $1.65M house, 2024. Post-inspection buyer demanded buyout of: Reliance hot water $32/mo (8 years left) + Enercare furnace $78/mo (11 years left) + AC bundle. Total $6,800 deducted from proceeds at closing.
Counterfactual: If seller had bought out before listing ($6,800), ‘owned equipment’ in listing description could have supported a $5,000-15,000 higher sale price (buyer preference + cleaner closing). Net effect of pre-listing buyout: likely positive $10K+ on the bottom line.
FAQ
Reliance vs Enercare — which is harder to deal with?
<strong>Pre-2018 Reliance is harder</strong> because it registered NOSIs more often, though since June 6, 2024 those old NOSIs are deemed expired and only need a lawyer to apply to delete them from title. Enercare historically used unsecured rentals — cleaner. Both companies have standardized post-2018, so newer contracts behave similarly.
If I buy out, can I recover the cost in higher sale price?
Indirectly yes, directly no. Buyers don't itemize 'owned equipment' as a $1-for-$1 premium, but cleaner listings with 'owned hot water tank / furnace' typically command $3,000-15,000 more in the final offer. Pre-listing buyout = potential positive ROI. Closing-stage buyout = direct deduction with no premium recovery.
How do I find out if there's a NOSI on my property?
Three options: (1) Call Reliance/Enercare and ask 'Is there a NOSI registered on [address]?'; (2) Have your real estate lawyer run a preliminary title search ($150-300); (3) Use Service Ontario online PIN search ($30). Resolve any NOSI 30+ days before listing.
If buyer assumes the rental, what's my risk?
<strong>Low risk with proper documentation</strong>. Post-closing, ownership/responsibility transfers to buyer. Some companies require buyer to re-sign (credit check) — if buyer fails, buyout reverts to seller. Best practice: include 'Equipment Transfer Notification' in closing documents to equipment company, with effective date + buyer info.
If furnace rental is only 1 year old, do I still pay full buyout?
Yes — buyout formula is typically 'remaining months × monthly rent × discount factor (~0.65)'. New 15-year furnace contract with 14 years remaining at $50/mo = ~$5,460 buyout. <strong>This is the 'cheap monthly, expensive exit' trap</strong> common in new builds and post-renovation equipment installs.
Discover more from GTA Real Estate Broker | Arthur Zhao
Subscribe to get the latest posts sent to your email.
