Selling a rental property with a current tenant: what you need to know

As the tenant in a rental property, there might come a time when the property owner decides that they want to sell. It is important to know how this might affect you and your lease agreement. Seeff gives some guidelines.

If you are renting a property and the owner decides for whatever reason to sell, then you should know that he/she is free to do so, subject to adherence to the important legal principle of ‘huur gaat voor koop’, a Roman-Dutch legal principle which translates to the ‘lease trumps a later sale’.
It often happens that a tenanted property is marketed and sold and the property transferred into the name of the new owner before the lease expires. In this event, the ‘huur gaat voor koop’ principle dictates that the lease precedes the sale.
The tenant is therefore entitled to remain in occupation of the property for the remainder of the lease period. In some instances, this might actually be a selling point for investors looking to invest in a property with a good tenant in occupation.
That means that neither the original nor the new owner will have the right to cancel the lease due to the sale of the property. Only a breach by the tenant can result in the necessary action as prescribed by the lease agreement and law, but it cannot be as a consequence of the sale.
The new property owner will need to continue with the existing lease agreement until the expiry date. The rental may also not be increased outside of the terms of the current rental agreement. It means that the buyer steps into the shoes of your old landlord and the lease continues as it has been and until the expiry date stipulated in the agreement.
It may be that the tenant may want to cancel the lease due to the sale and in such an event, the tenant’s right to cancel their lease will be determined by the lease agreement and law.
In some instances, the lease agreement may already provide the tenant with the option of cancelling the lease in the event of the sale of the property. In such event, there will be no cancellation penalties payable by the tenant.
The lease agreement will also regulate aspects such as ‘for sale’ and ‘sold’ signboards displayed on/at the property as well as access to the property for viewings.
Once the lease period comes to an end, and provided that there is no new lease agreement entered into with the new property owner, then the tenant must vacate the property.
Any rental deposit together with interest must also be transferred by the selling property owner to the new property owner to continue holding it in an interest bearing account for the benefit of the tenant.
When the lease agreement ends, this should then be refunded to the tenant subject to the relevant legal rights and obligations.
It is vital that a new inspection of the property is done with the new owner to ensure that there is agreement on the condition of the property so that there can be no disputes arising at the end of the lease when the rent security deposit needs to be refunded to the tenant.
Finally, if you want to remain in the property as a tenant after your current lease expires, you will need to enter into a new agreement with the new owner and this will contain new terms and possibly a higher monthly rental. The new owner may also require you to top up the security deposit.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Mar 2018
      Located close to the fast growing Fourways precinct, Dainfern continues to attract local and international interest from buyers seeking a secure lifestyle with affordable entry price of approximately R3 million.
    • 20 Mar 2018
      Property owners in the Durban CBD are addressing the affordability challenge that faces many prospective tenants in their area – and reconfiguring the inner city rental market in the process.
    • 20 Mar 2018
      One of the most misunderstood concepts in the process of selling a property is an exclusive or sole mandate.
    • 19 Mar 2018
      If a landlord opts to use a managing agent for the rental of his or her property, the inspection process can be easier as the agent is not emotionally involved and will certainly have concluded an in-depth inspection report in the interests of all parties.
    • 19 Mar 2018
      We all wish we could have the cheat sheet for selling a property – a simple Ctrl+Shift+C code that will magically secure an offer on your home in an instant. Though it is not possible to provide you with this cheat code (sadly, reality does not come with such perks), it is possible to provide you with a list of the most common blunders some of your neighbours have committed in their efforts to sell their homes
    • 19 Mar 2018
      Although property technology is now widely accepted as an established trend, especially in the international real estate arena, the industry has been cautious to advance and smaller markets like South Africa are still hesitantly dipping their toes in the water.
    • 16 Mar 2018
      Strange as it may seem, there is a stock shortage looming now in the luxury sector of the Johannesburg property market, because astute buyers have for the past few months been hurrying to snap up high-end homes being offered at excellent prices.
    • 16 Mar 2018
      No one likes having to claim but having insurance for your household contents is vital, and at the start of a new financial year, homeowners either applying for new household insurance or revising their existing insurance should take a comprehensive inventory of their possessions and keep track of the total value.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us