One often deals with transactions where a property that is leased to a tenant, is sold. The question then arises as to what the rights of the tenant, seller and purchaser are.
In terms of the South African common law, an existing lease agreement may not be prematurely cancelled by the landlord because of the sale of the leased property. The lease agreement endures until such time that it expires as result of the effluxion of time. This rule is embodied in the maxim “huur gaat voor koop”. Roughly translated, it means that an existing lease agreement trumps a subsequent sale. Therefore, when a property is sold in these circumstances, the purchaser will take over the lease agreement by substituting the seller. The purchaser will generally have the same rights and obligations towards the tenant as the seller had.
Conveyancing attorneys often assist to formalise this arrangement by drafting a cession of the lease agreement, signed by the seller, purchaser, tenant and the managing agent (if applicable).
It is important, when negotiating the sale or purchase of a property, to alert all the parties of the fact that the property is tenanted to avoid future complications between the parties involved in the transaction.