Written by Mari van der Walt
25 May 2022
When a landlord elects to sell the property currently occupied by a tenant, it can cause a lot of uncertainty and fear for the tenant and might cause an impasse between the landlord and the tenant. This article will examine the rights and obligations of each party to the sale, the purchaser, tenant, and landlord.
Is the landlord allowed to sell the property I am leasing?
Yes, as the property owner, the landlord may sell the property as and when he deems fit. However, the rights and obligations created by the lease agreement are not automatically terminated, as the tenant is protected in terms of common law.
What protection does a tenant have if the leased property is being sold?
The common law principle “huur gaat voor koop” loosely translates to “lease goes before sale” and affords tenants protection where the landlord elects to sell the leased premises whilst a lease agreement is still in place. Accordingly, in terms of hierarchy, the terms of a lease agreement take precedence over sale agreements. Consequently, the tenant will be able to stay in the property for the duration of the lease, regardless of the change in ownership.
Who will be the landlord if the property is sold?
The purchaser will “step into the shoes” of the current landlord and, accordingly, will have to assume all of the landlord’s rights and responsibilities. Thus, the lease agreement’s terms and conditions will still be enforceable against the purchaser until the lease agreement is terminated or the terms thereof are renegotiated.
Is there an exception to the “huur gaat voor koop principle?
Yes, the common law principle only applies in normal sale conditions, where the application of the principle will be limited. The exceptions include:
- Mortgage bond execution
The principle is not applicable where the property is sold in execution by the bank and/or the sheriff. In such an event where the bid covered the outstanding amount owed to the bank, the lease must be honoured. However, the lease agreement may be cancelled if the bid is not sufficient to cover the outstanding amount owed to the bank.
- Sureties
Any rights vested in the previous landlord pertaining to sureties will be transferred to the purchaser. Accordingly, the previous landlord’s rights are just assigned to the purchaser, and the purchaser will be entitled to act against such sureties if and where the tenant fails to comply with its obligations.
- Long term lease
A long-term lease refers to any lease agreement that exceeds 10 years. The requirement for these lease agreements to be enforceable against third parties is that the agreement must be registered in the deeds office. Accordingly, the huur gaat voor koop – principle will only find application to a lease of this nature where it is duly registered.
- Deposits
As highlighted above, any obligations that the previous landlord might have had in terms of the lease agreement now need to be fulfilled by the purchaser, including the return of the deposit. Accordingly, it is of paramount importance that the deposit paid by the tenant be negotiated in the deed of sale, as the tenant is entitled to hold the purchaser liable for the repayment thereof.
- Option to purchase
Where the lease agreement extended an option to purchase to the tenant, this option shall lapse where the property is sold because it is not considered to be an essentialia of a lease agreement.
The sale of a property can have various implications, especially where a tenant is still residing in the property. Should you wish to sell your property or find yourself in a situation where your landlord is selling the property, and you are uncertain about your rights, contact the specialist team of litigation lawyers at Burger Huyser Attorneys to assist you in proceeding lawfully.
DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE
