It often happens that a house is sold when there are still tenants living on the property. When this happens, tenants often have no idea what their rights are and whether they will still be living on the property.
So what rights do tenants have when it comes to canceling or enforcing the lease?
Landlords are obviously well within their right to sell their properties as they wish and at any time, but the tenants’ right to lease the property will remain in place before the rights of the buyer.
The contract has already been signed with a predetermined amount of time and you should never forget its value. In South Africa, we apply the ‘huur gaat voor koop’ principle.
This means that the tenants can remain on the property until their lease expires without anyone asking them to vacate.
Conditions of the lease
When the property is sold and the lease agreement is passed on from one owner to the next, the conditions of the existing lease do not fall away.
If the lease is not canceled after the house is sold, the landlord and the tenants are bound by the lease agreement unless it is renegotiated or unless it expires.
The deposit that has been paid to the previous landlord must be transferred to the new owner and, just like the previous owner, the new landlord must hold the deposit in an interest-bearing account in favor of the tenants.
And obviously, this will be refunded to the tenants with interest when they move out.
Tenants may also decide that they no longer want to live on the property when the house is sold to a new owner. The lease agreement will also protect the landlord in this case. The tenants will be bound by the lease and the conditions thereof will prevent them from leaving the landlord in the lurch and canceling their rental agreement.
If tenants do decide to cancel their lease, they may incur a penalty. The Consumer Protection Act does allow tenants to cancel their lease if they have given a 20-business day notice.
And if the landlord runs the property as a so-called ordinary course of business, there might still be a reasonable ‘penalty’ that the landlord is entitled to charge his tenants.
Usually, the penalty that might be charged to the tenants would be the cost of finding new tenants before they move out plus one month’s rent paid in full. This is how long it might reasonably take a landlord to find a new tenant. If it is the landlord who wants to cancel the lease, the tenants should be given enough time to find another place to stay.
A situation might occur where the landlord or the tenants cancel the lease before the new owner buys the house, but this must be done with mutual consent between both parties. The first thing that has to be done is to have open communication between the two parties so that a fair agreement can be reached without any of the parties losing money or being put at financial risk.
Knowing your rights as a tenant, as well as a landlord, can make the future a lot more stable and you know what you can fall back on if the proceedings turn out to be unfair.
The best thing to do would be to keep your relationship with your landlord open and honest so any miscommunication can quickly be dealt with before things get escalated unnecessarily.