Tenant landlord obligations when selling

Posted On Monday, 18 June 2012 12:10 Published by eProp Commercial Property News
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In SA law provision has been made to protect a tenant in the event of an owner selling his property while a lease in still in place.  “Huur gaat voor koop” comes into effect to protect the tenant’s right to the property while his lease still stands.

Lanice StewardThis was done to protect tenants from eviction if a property was sold and they can exercise their right to remain on the property for the full duration of their lease.

Lanice Steward, MD of Anne Porter Knight Frank (APKF), has drawn attention to the issues that may arise in these cases.
 
It is often said that the purchaser steps into the “shoes” of the landlord, there is no need to draw up a new lease, all the conditions will remain the same and it will automatically transfer to the new owner, but to what extent?
 
SA courts say (as upheld in the court case Spearhead Property Holdings v E & D Motors, in a recent law update provided by Smith Tabata Buchanan Boyes) that an option to purchase clause in the lease does not form an integral part of this relationship, i.e. if the home is on the market and the tenant decides that he wants to buy the property, in the conditions of the lease he might get an option to purchase but he cannot exercise this right once the property has already been transferred to a new owner.  If he does want to buy the property he must make his intentions known as soon as the property comes onto the market.
 
In cases where the rental agent is due commission, which is usually paid on a monthly basis for the duration of the lease by the landlord, the new owner is bound by the old contract.
 
It would, however, be advisable for the seller, the agent and the purchaser to enter into a new contract between them to avoid any misunderstandings.
 
“In cases where there is a residing tenant,” said Steward, “it is always advisable that the offer to purchase ensures all parties are fully informed and that there is absolute clarity.  It is of particular importance that as a purchaser, if there is a tenant in the home, that you insist on getting a copy of the lease or where necessary the signed letter giving notice to the tenant.  This will form part of sale agreement.”
 
Steward mentioned a case that APKF had come across recently where everything seemed fine between all parties until the property was sold and the tenant could not find suitable accommodation elsewhere.
 
“The tenant exercised his right to stay and the seller had to pay for rented accommodation for the purchaser as well as pay for the storage of his furniture for the remainder of the lease as this remained his responsibility,” said Steward.  “A costly exercise like this can be avoided by clear communication between all the people involved, and this should preferably be in writing.”

Last modified on Monday, 19 May 2014 16:30

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