Property Advice: Huur gaat voor koop

When a property is sold with tenants in occupation, what rights do the tenants have when it comes to cancelling the lease or enforcing it?

Michael Bauer, managing director of IHPC estate agents, says that although landlords are well within their rights to sell their properties at any time, the tenants’ rights to their lease remain in place before any rights of the buyer. The ‘huur gaat voor koop’ principle in South African law means the tenants can remain in the property until their lease expires.

“If the property is sold and the lease is passed from one landlord to another, the conditions of the existing lease do not fall away. If the lease has not been cancelled the tenants and the new landlord are bound by the conditions until the lease is renegotiated or expires,” says Bauer.

“The deposit held by the previous landlord must be transferred to the new owner, and as with the previous landlord, the new owner must hold the deposit in an interest bearing account in favour of the tenants, to be refunded to the tenants with interest when they move out.”

On the other hand, he says, if the tenants decide they would no longer like to live on the property if there is a new landlord, the conditions of the lease could also prevent the tenants from leaving the new landlord in the lurch and cancelling the lease.

“If the tenants decide to cancel their lease they may incur a penalty. Although the Consumer Protection Act allows tenants to cancel a lease giving 20 business days’ notice, if the landlord is a supplier according to the CPA and lets property as an ordinary course of business, there is still a “reasonable” penalty the landlord can charge the tenants,” says Bauer.

“If for any reason the landlord or tenants cancel the lease once the property is taken over by the new owner, it must be by mutual consent. The first course of action is to have open communication between the two parties so that an agreement can be reached without either party being put at risk financially.

“Usually the penalty that would be charged to the tenants would be the cost of finding a new tenant plus one month’s rent. This is how long it might reasonably take the landlord to find a new tenant. If the landlord would like to cancel the lease, the tenants should be given enough time to find new premises,” says Bauer.

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