EXPLAINER | What happens to a tenant when the landlord sells the property?

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Due to the coronavirus pandemic, some landlords are selling their rental property. (Getty Images)
Due to the coronavirus pandemic, some landlords are selling their rental property. (Getty Images)
  • Due to financial strains caused by the economic impact of the coronavirus pandemic, some landlords are selling their rental properties.
  • This raises concerns among both tenants and potential buyers about what happens when the property is sold.
  • In some cases, tenants may unlawfully refuse to move out once the lease agreement has run its course.


Due to financial strains caused by the economic impact of the coronavirus pandemic, some landlords are deciding to cash in by selling their rental property investments.

This may raise concerns among both existing tenants and potential future homeowners about what happens when the property is sold.
 
"Because the lease agreement is legally binding and was in place before, it still stands regardless if the owner of the home decides to sell. The lease agreement goes with the home," explains Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

"Essentially, this means that purchasing the home automatically makes whoever buys it a landlord, whether they planned to be or not. It also means that, if you are the tenant, you will only need to [move out] once your lease agreement expires."

Anyone who purchases the property will only be able to take occupancy once the lease agreement has expired and the tenant moved out.

Goslett suggests it is best to go over the details of the lease agreement and see how long the tenant can stay in occupation before deciding whether it is worth purchasing the home.

If, on the other hand, the property is being bought as an investment or as part of a rental portfolio, the fact that the home is occupied by a reliable tenant, could be seen as a drawcard.

"If possible, before purchasing the property, it is advisable to speak to the tenant and see what their intentions are, as this could save both time and money in the long run. A communicative, obliging tenant will make the process far smoother and more pleasant," says Goslett.

Furthermore, it is important to take note that if there was a security deposit paid at the start of the tenancy, this will need to be refunded to the tenant at the end of the lease. The new owner of the home must ensure that they get this money from the seller, otherwise, they will find themselves out of pocket.

Another aspect to check is whether the landlord is required to pay back any money that the tenant has paid for improvements to the property during the tenancy – this is money that should also be recovered from the seller during the sales process.

Eviction

"It is possible that the tenant refuses to move out, even once the lease agreement has run its course. Apart from having to deal with the delay, the new owner may also have to take legal action to have the tenant removed, which will cost money," says Goslett.

Should it boil down to a landlord wanting to evict a tenant, attorney Simon Dippenaar explains that it very important to follow the correct procedure. Failure to do so can result in "very unpleasant" consequences and even criminal action.

"It's important to understand the distinction between cancelling a lease and evicting a tenant. A lease cancellation is the conclusion of a civil contract between two individuals, for a valid reason. Either party may cancel the lease, and the terms under which this can be done should be set out in the lease," says Dippenaar.

"The landlord may cancel the lease due to a breach of the rental agreement by the tenant. In this case, the landlord must give the tenant notice of the breach and a chance to rectify it. For example, if there are rent arrears, an opportunity to make good the rent due."

If the breach is not remedied, the next step is a letter of cancellation served on the tenant by the landlord. This is still not eviction. The need to evict only arises when the tenant does not vacate the premises in accordance with the lease cancellation.

"Eviction can be a long process. It's in your interests, if at all possible, to avoid going to court. It may mean cutting your losses, for example if your tenant is in rent arrears, and reaching an agreement with your now unlawful occupier," says Dippenaar.

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