Important pointers when selling a rental property with a current lease
Category Rentals
There may come a time when a rental property owner decides to sell a property with a current tenant in occupation.
According to Seeff's rental legal counsel, the principle of 'huur gaat voor koop' which emanates from Dutch Law is well-established within SA law and means that where a property is sold with a current tenant, the provisions of the lease agreement carries through transfer of the property.
That means that the lease agreement remains in full force and effect and the new owner in effect becomes the new landlord. The purchaser simply "steps into the shoes" of the landlord on transfer. This takes place automatically and there is no need for a new agreement, cession or addendum.
The deposit (together with interest earned thereon) which was paid by the tenant must be transferred to the new property owner/landlord who will have to invest it until the termination of the lease. The conditions for repayment of the lease will then be as directed by the lease agreement.
The tenant would only need to vacate the property once the lease agreement has come to an end. If there is an option to renew, the owner/landlord will need to honour this and it will be up to the tenant whether to accept any new terms and a higher rental, but any conditions set in the original lease would need to remain unless otherwise agreed.
Only the tenant would have the right to give notice in terms of the Consumer Protection Act should they decide to rather move out. The tenant would need to give 20 business days' notice to terminate and would have to pay penalties stipulated in the lease agreement.
Our recommendation is always that a watertight lease agreement is vital for any rental property owner. It should not only comply with the latest legal requirements, but should make provision for eventualities such as the penalty payable should the tenant decide to terminate early.
The agreement could also stipulate what might happen should the owner/landlord decide to sell the property. This could include a termination provision. It is also best to stipulate that the tenant must make the property available for viewings among other arrangements.
If you are selling on the basis that the property will be vacant upon transfer, it is vital that you ensure that the lease has come to an end and that the tenant has vacated in time. Failing this, you could be left with costly, and time consuming legal battles associated with eviction. This is why it is often recommended that you wait until the lease has ended and the tenant is out of the premises before putting it on the market.
Home is our Story and property our passion. The Seeff Property Group offers advanced skills and systems and over five decades as a market leader to ensure you get the best property services possible. For the best advice and service, please feel free to contact us at any time regardless of your property needs.
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Author: Gina Meintjes
