Residential property investors generally have tenants in place that pay rent to live in their properties. Property is a long-term investment and an owner uses the money from a tenant to pay for the cost of owning the property while they wait for the value of the property to increase.
Sometimes an owner wants to sell while there is a tenant in place. In South Africa, leases are usually for a year at a time. However, when one sells a property, the buyer often wants to move in. What now happens with the tenant who is there? The law protects the lease agreement for both parties, but in this instance, the tenant’s right to stay until the end of the lease is honoured by our laws.
South African law has a centuries-old principle “huur gaat voor koop”, which means “the lease goes before the sale” or “the lease is greater than the sale”. In essence, this principle states that where a property is sold that is currently being rented by a tenant, the sale does not cancel the lease, instead, the new owner or purchaser becomes the landlord and the tenant can stay.
How does this work out in practice?
It is not all doom and gloom. Firstly, some buyers want to buy a property with a tenant in it because they too are property investors. Interestingly enough, the new owner becomes the landlord automatically, and no additional documents need to be signed to do that.
Secondly, selling a property does take time. Transferring a property will typically take 3 months from the day the offer is accepted. This period will assist in reducing the time left on the lease. The sale agreement can also specify a date when transfer takes place which can be set for just after the lease ends.
Lastly, of course, the owner and tenant can agree to cancel the lease earlier than its expiry date.
If you have any queries on this or need assistance with a tenant or to transfer your property, contact us at office@dewarattorneys.com and will help guide you.