It is not uncommon for a rental property owner or landlord to decide to put the property up for sale. The question then arises as to what happens to the tenant. While it is usually advisable that landlords or property owners wait until the end of the lease before they sell the property, that is not always possible.
According to rental agents from the Seeff Property Group, tenants should be aware of their rights in such a case. There are certain legal rights, but the rental agreement should also make provision for this as a safeguard.
The first aspect is that the property owner is always free to sell at any time, but the lease agreement will remain valid and in full force until its expiry date. The property owner cannot cancel the lease because of the sale. Only a breach on the part of the tenant can result in legal action and cancellation.
The tenant’s right is guided by the legal principle of ‘huur gaat voor koop’. This is a Roman-Dutch legal principle which translates to the ‘lease trumps a later sale’. The tenant is therefore entitled to remain in the property until the lease expires.
The tenant could, however, in terms of the Consumer Protection Act, cancel the lease giving 21 days’ written notice and follow the cancellation procedure which will include payment of a cancellation penalty as prescribed in the rental agreement, or as may be reasonable.
The lease agreement may in any event include a provision to allow the tenant the opportunity to cancel the lease on certain conditions, usually the payment of a reasonable penalty. If there is no such agreement or cancellation, then the lease simply transfers to the new owner and continues.
Once the property owner decides to put the property up for sale a number of activities will likely need to take place. The owner should discuss the sale with the tenant before the time. There should also be a clause in the rental agreement which sets out what happens when the property goes up for sale.
This should include access to the property for viewings and possibly also for photography and an inspection by the listing agent. The lease agreement will usually state that the tenant should be amenable and provide reasonable access, but this should be arranged for a convenient time and with minimal disruption to the tenant.
There may also be a need to put agency boards such as ‘for sale’ and ‘sold’ signboards up at the premises, as well as those which would be displayed during viewings.
Show days will require the tenant to be out of the property and these should preferably also be provided for in the lease agreement. The property owner or landlord should ensure they make appropriate arrangements with the tenant.
If no new lease agreement is entered into with the new owner, the tenant will simply vacate the property. Prior to moving out, an outgoing inspection should be done to verify the condition of the property. The rental deposit must be refunded to the tenant, net of any deduction for damages agreed to.