Legalities of selling a tenanted property in South Africa
Selling a property with tenants in place is common, but it comes with specific legal obligations in 2024. Both landlords and buyers must understand tenant rights, the lease agreement’s impact, and the steps involved in a smooth property sale. This article covers the key legal aspects and practical considerations of selling a tenanted property.
1. Tenant rights during the sale
Under South African law, a tenant's rights remain protected, even when a property is sold. This is due to the principle of huur gaat voor koop (the lease takes precedence over the sale). It means that tenants have the right to stay in the property until the end of the lease, regardless of the change in ownership. The lease automatically transfers to the new owner, with all contract conditions intact.
2. Lease agreement transfer
The new owner must honor the existing lease agreement until it expires, unless the agreement includes a sales provision allowing for early termination. Additionally, some leases may fall under the Consumer Protection Act (CPA), providing tenants with the right to cancel the lease under certain conditions. Both parties should review the lease thoroughly to ensure all terms are understood.
3. Sales provision and flexibility
Certain lease agreements may include a sales provision, which allows tenants to cancel the lease if the property is sold. This clause offers flexibility, enabling tenants to move out without breaching the contract. If no such provision exists, the tenant must continue with the lease unless an agreement for early termination is negotiated.
4. Importance of communication
While there is no formal legal requirement to notify tenants of a property sale, clear and transparent communication is crucial. Notifying tenants of the sale, their rights, and any upcoming changes will help prevent misunderstandings and ensure a smooth transition for both the buyer and tenant.
5. Viewing the property
Landlords must respect the tenant's right to privacy and provide adequate notice before property viewings. Typically, a 24 to 48-hour notice period is considered reasonable. It’s important to ensure the tenant’s right to quiet enjoyment is not infringed upon during the sales process.
6. Dealing with difficult tenants
Sometimes tenants may refuse to move out after the lease has expired, creating challenges for the new property owner. When purchasing a tenanted property, ensure the sales agreement documents how long the lease has to run and avoid assuming that the tenant will vacate simply because the property has been sold.
7. Impact of illegal tenants
If a tenant becomes illegal by refusing to vacate after the lease term ends, the new owner must bear the costs of legal eviction. Any such expenses, including bond and storage fees, will fall on the buyer. It’s essential to assess these risks before completing the sale.
8. Security deposit transfer
The tenant’s security deposit, along with any interest accrued, must be transferred to the new owner when the property is sold. Both the buyer and seller should ensure that this transaction is well-documented to avoid any disputes in the future.
9. Should you take legal action?
Taking legal action to remove a tenant should always be the last resort, given the costs and time involved. To avoid this, buyers should verify the lease details, including the lease duration and tenant obligations, before signing the sales agreement. Tenants cannot be removed without following due process, and assuming otherwise could lead to significant delays and financial losses.
10. Negotiating with tenants
In some cases, the new owner may wish to occupy the property themselves. In this scenario, it’s possible to negotiate with the tenant for an early lease termination. Offering incentives such as relocation assistance or reduced rent may encourage the tenant to leave before the lease ends.
Conclusion
In 2024, selling a tenanted property in South Africa requires landlords and buyers to carefully consider tenant rights and legal obligations. The huur gaat voor koop principle ensures tenants are protected, and clear communication is key to a successful sale. By following these legal steps and ensuring transparency throughout the process, landlords and buyers can avoid costly legal disputes and ensure a smooth property transaction.
