What happens to a tenant when a property is sold? And what rights will tenants have to cancel a standing lease or enforce it?
These are common questions asked when tenants still have lease agreements in place, but the properties in which they live are bought by new owners.
In typical situations, the lease has precedence over the sale and the clause “huur gaat voor koop” is in force. This means that the tenant has a right to remain for the full duration of that lease, says Sunell Afrika, rentals manager for SAProperty.com.
“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 them until such time that the lease is renegotiated or expires,” she says.
However, the deposit held by the previous landlord must be transferred to the new owner.
As with the previous owner, the deposit paid to him or her needs to be held in an interest-bearing account in favour of the tenant, and then refunded to the tenant with interest when he moves out.
Similarly, in cases where the tenant chooses to move out when the property ownership changes, 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, the landlord can still charge the tenant a “reasonable” penalty.
“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,” says Afrika.
“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. 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,” Afrika says.