A situation may arise where a tenant finds him/herself in a situation where the landlord would like to put their property on the market. So just what happens to tenants if this happens, and are they within their rights to breach the lease agreement in this circumstance?, asks Adrian Goslett, CEO of RE/MAX of Southern Africa.
South African law states that a landlord is not prohibited from selling the property to a third party, while the property is housing a tenant and a lease agreement is in place. However, in terms of the legal principle huur gaan voort koop, the lease precedes the sale and therefore the tenant is entitled to retain occupation of the property for the remainder of the lease period. “While a tenant is able to stay in the property for the duration of the lease, some may feel a lot of uncertainty around dealing with a different landlord or the renewal terms of the lease with the new owner. There is also the matter of what the new owner intends to do with the property, as they may not want to continue renting the property out and could want to move into the property themselves,” says Goslett.
He adds that some times in these situations tenants might want to find other accommodation. However, a tenant’s right to cancel their lease will largely be determined by the lease agreement that they signed and the law. “For this reason,” says Goslett, “reading the lease agreement is the first step when it comes to knowing where you stand with regard to your rights and obligations should the property be sold. In some cases landlords and tenants may have agreed to a lease with a sales provision in order to give both parties flexibility should the situation arise. The lease may stipulate that the tenant has the option to cancel their current lease and find another place to stay if the property is placed on the market. If these are the terms and there is mutual consent, the tenant is absolved from any penalties that may arise due to breaking the agreement.”
According to Goslett, all the terms and conditions in the lease before the sale of the property will be carried over to the new owner of the property. What this means is that if nothing is specifically stated in the lease regarding the sale of the property, it will be a lot more difficult for the tenant to break the agreement without suffering the consequences of a penalty. The lease will simply remain in effect under the new landlord and the tenant will be obligated by law to respect the stipulated terms, as will the new landlord. “In certain cases the purchaser will buy a property with an existing tenant with the intention of retaining that tenant. If this is the case they will more than likely not want to release the tenant from their contractual obligations,” says Goslett.
He points out that the Consumer Protection Act (CPA) does allow for the early termination of a fixed term contract within the fixed term on the condition that the new owner is a supplier who lets property in the ordinary course of his business. This is regulated by section 14 of the Act. “In this case a tenant can give a 20 business day notice period during the term of the lease. However, they would then be liable for the notice month and possibly a reasonable penalty fee. It should be noted that the CPA will not be applicable if the parties to a lease agreement are both juristic persons,” says Goslett.
Before making any decisions regarding terminating a lease prematurely, tenants should first speak to the landlord. “Discussing the matter with the landlord could help to alleviate concerns regarding the sale of the property,” says Goslett. “Tenants should also bear in mind that the conclusion of the sale might only be after the end of the lease term, or the new landlord may be better than the current one,” he concludes.