Selling a tenanted property
Category Rentals
Owning a tenanted property can be a rewarding investment. However, if you find yourself in a situation where you need to sell your property while tenants are still in residence, it is essential to understand the unique considerations involved.
Legalities of selling a tenanted property
While a property owner is free to sell a tenanted property at any time, there are certain legalities which apply. The first, is the legal principle known as "huur gaat voor koop" in terms of which the lease stays in place for its duration, and automatically transfers to the new owner with all contract conditions as they are. Once the lease expires, the new owner is then free to either renew it or to let it terminate.
Benefits of selling a tenanted property
In many instances, a property with an existing tenant in place is an attractive proposition for buyers, especially if they are looking to buy with a view to renting out the property, or if they want to buy now, but only move at a later date.
There are, however, often instances where the buyer needs to occupy the property, and this is one of the reasons why it may be advisable to wait until the end of the lease before putting the property up for sale.
Importance of a professional lease agreement
Under no circumstances may a lease agreement be cancelled due to the sale of the property unless that is specifically provided for in the lease agreement. Including a clause relating to the sale of the property during the lease is therefore always advisable. Failing that, the lease would simply transfer to the new owner on the same terms and conditions.
The new property owner/landlord cannot cancel the lease, except in the event of breach. The tenant would, however, still have the option of cancelling the lease in terms of the Consumer Protection Act by giving 21 days' written notice and paying the stipulated or agreed upon cancellation penalty to compensate the property owner/landlord.
Arranging of viewings
Selling of a tenanted property may be unsettling for tenants. It is therefore important to advise the tenant well ahead of the time. It is also for this reason that including provision for this in the lease is important. The tenant should be well aware of provisions around viewings and show days inlcuding ensuring the property is neat and not being present during these times so that the agent and prospective buyers can freely view and discuss the property.
Ensure the property is well maintained
In the event of a tenanted property especially, we would recommend that the owner/landlord undertakes maintenance and repaints the property prior to putting it on the market. This is also one of the reasons why it may be better to wait until the end of the lease before putting the property up for sale.
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Author: Gina Meintjes
