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Monday Jun 11, 2018

What happens to a tenant when a property is sold?

When a property is sold when it has a tenant in occupation, the questions often raised are: "What happens to the tenant if the landlord sells the property?", and what rights the tenant will have with regards to cancelling the lease or enforcing it, says Sunell Afrika, rentals manager for SAProperty.com.

In typical situations the lease has precedence over the sale and the clause "huur gaat voor koop" is in force, which means that the lease takes precedence over the sale of the property and the tenant has a right to remain for the full duration of that lease.

The conditions of the existing lease do not fall away, and if it has not been cancelled both the tenant and the new landlord are bound by these until such time that the lease is renegotiated or expires, she said.

What needs to be done, however, is that the deposit held by the previous landlord must be transferred to the new owner, and the same rule would apply as with the previous landlord, that he must hold the deposit in an interest bearing account in favour of the tenant, to be refunded to the tenant with interest when he moves out, said Afrika.

On the other hand, she said, if the tenant decides he would no longer like to live on the property if there is a new landlord, the conditions of the lease could also prevent him from leaving the new landlord in the lurch and cancelling the lease.

If the tenant does decide to cancel his lease he may incur a penalty and although the Consumer Protection Act allows him to cancel (if the landlord is a supplier according to the CPA and lets property as an ordinary course of business) giving 20 business days' notice, there is still a "reasonable" penalty that the landlord can charge the tenant.

"If for any reason, whether on the landlord or tenant's part, the lease is to be cancelled once the property is taken over by the new owner, it must be by mutual consent and the first course of action is to have open communication between the two parties so that an agreement can be reached without either party put at risk financially."

"Usually the penalty that would be charged to the tenant would be the cost of finding a new tenant and one month's rent, which is how long it might take the landlord to find a new tenant - which is reasonable. In the case of the landlord being the one who would like to cancel the lease, the tenant should be given enough time to find new premises, which should perhaps also be one month," said Afrika.

SAProperty.com Press Release

 
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