When a property is sold and it has a tenant in occupation, the questions often raised are:

  1. What happens to the tenant if the landlord sells the property?
  2. What rights do the tenant have with regards to cancelling the lease or enforcing it?

Our law has an old Roman Dutch legal principle called HUUR GAAT VOOR KOOP.
In terms of this principle, the lease agreement supersedes the sale of the property.

The conditions of the existing lease do not fall away, and if it has not been cancelled by the previous owner, both the tenant and the new landlord are bound by these until such time that the lease is renegotiated or the lease expires. 

When an owner sells his property which is subject to a lease agreement, it is important that there is full disclosure to the agent or the purchaser. Important facts to disclose are:

  1. Is the existing lease agreement in writing or is it a verbal agreement?
  2. If it is a written agreement, a copy of the lease agreement should be obtained and provided to to the agent or the prospective buyer. Long term lease agreements should be in writing.

It is recommended that the either the Offer to Purchase or the MDF refer to the lease agreement: 
If it is a verbal agreement, the terms must be disclosed.  If it is a written agreement, a copy of the lease agreement must be attached. 

The question now is how should the clause which refers to OCCUPATION in the Offer to Purchase be completed when there is a tenant in the property:

There are 3 scenarios:

  1. If there is an existing lease agreement with a fixed period, the clause must read that occupation will be granted at registration subject to the existing lease agreement.
  2. If the lease agreement is on a month-to-month basis and the purchaser is willing to take over the tenant, you can follow the same wording that occupation will be given at registration subject to the existing lease agreement. 

If the purchaser insists on vacant occupation, the Seller has to give notice to the tenant to vacate – this is in the case of a lease agreement on a month-to-month basis.  The Seller must communicate with the conveyancing attorney to make sure that the tenant is out at registration.