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17 Dec 2019

SELLING A PROPERTY WHICH HAS A LEASE IN PLACE:

Herewith a few “rules of the road”

  1. General Golden Rule #1 – “Huur gaat voor koop”- your tenant’s lease takes preference over any sale agreement. As such you can sell, but the tenant can remain on the property and the buyer can be forced to take over the lease.
  2. If your lease is still in a FIXED TERM period (i.e. it is a 12 or 24 month lease for example) then ONLY THE TENANT may give 20 business days’ notice to terminate at any time during the lease. A landlord does not have this right as well even if the lease says so! WHY? Because the Consumer Protection Act (CPA) says so. If your tenant does not agree to terminate before the lease expires, your buyer will have to take over the lease unless transfer is delayed to coincide with the termination date of the lease.
  3. If the fixed term is coming to an end make sure proper notice is given to effect termination in terms of the CPA – not less than 40 business days before termination, and not more than 80.
  4. If it is MONTH to MONTH lease, ensure that notice of termination is given properly (usually one FULL calendar month unless the contract provides otherwise) and in accordance with the lease agreement’s requirements. A full calendar month means that notice must be given BEFORE THE 1st of the month, and NOT ON THE 1st!
  5. ALWAYS check whether the lease makes provision for the tenant to have an OPTION TO RENEW – this is a unilateral right the tenant has and only the tenant can waive it. It allows the tenant the right to renew the lease for another period of time, and the landlord/buyer will be bound to this.
  6. ALWAYS check whether the lease makes provision for a RIGHT OF FIRST REFUSAL – this right, places an obligation on a landlord to first offer the property to the tenant before being able to commit to any other offers.
  7. If your sale agreement promises VACANT OCCUPATION ON TRANSFER make 100% sure you have given proper notice to the tenant!
  8. If your tenant refuses to vacate by the time you must give occupation / date of transfer, you have no choice but to start with eviction proceedings. Some common questions we get:
    • May I change the locks and remove the tenant’s furniture? – NO
    • May I disconnect water / electricity? NO
    • May I place other tenants in to make life difficult for the tenant? NO
    • May I do ANYTHING to try and force the tenant out without going to the trouble of getting an eviction order? NO
  9. How long does an average eviction take? Sometimes a tenant will do a midnight run a week after receiving an application for eviction. But most tenants stick it out to the bitter end and then it can EASILY take 3 – 4 months – or more.
  10. What does an eviction cost? It can cost as little as a couple of grand, up to around R30 000 depending on how much time and effort it takes. There is no way of knowing in advance.
  11. Can I recover these costs from the tenant? Theoretically YES – but good luck with that one!

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