Landlord is Selling - What Are My Options?
If a landlord decides that they would like to sell their rental property, do tenants have to move out? According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, the law does not prevent a homeowner from selling their property while it is being rented out to a third party. However, the lease agreement precedes the sale. “Essentially this means that the tenant can remain in occupation of the rental property until the lease agreement lapses,” he adds.
While there is no obligation for the tenant to move out of the property, the change in ownership could bring about anxious feelings at the prospect of having to deal with another landlord or the renewal terms of the lease with the new owner. There is also the matter of the new owner's intentions. If the home was not purchased as an investment property, but rather a primary residence, the new owner will not want to renew the lease as they will want to take occupation as soon as possible.
“Instead of waiting out the lease, some tenants may want to find alternative accommodation sooner rather than later. If this is the case, they will need to read through the lease agreement to see what it says about early termination. It is possible for there to be a sales provision made in the agreement for such a situation,” says Goslett. “If agreed upon at the signing of the lease, there might be a stipulation giving the tenant the right to cancel the contract should the property be sold. If these are the terms and there is mutual consent, the tenant is absolved from any penalties that may arise due to a breach of the agreement.”
If no such sale stipulation exists, then all terms and conditions of the lease before the sale of the property will be carried over to the new owner, making it far more difficult to get out of for the tenant. The lease agreement will remain in effect under the new landlord, and the tenant will be obligated by law to respect the stipulated terms, as will the new landlord.
If the tenant decides to leave before the lease ends, they will be regarded as being in breach of the contract and could face paying a penalty of some kind. “An investment buyer may have purchased the property with the intention of retaining the tenant. In this situation, they will be less likely to release the tenant from the lease agreement,” says Goslett.
Regarding the Consumer Protection Act (CPA), a fixed term contract within the fixed term can be terminated early on the condition that the new owner is a supplier who lets property in the ordinary course of their business. Section 14 of the Act regulates these matters. In these circumstances, a tenant can give a 20 business day notice period during the term of the lease. However, they would then be liable for the notice month and possibly a reasonable penalty fee. It is important to bear in mind that if the landlord and tenant are both juristic persons, the CPA cannot be applied.
“Before making any decisions regarding cancelling the lease agreement, tenants should discuss the matter with the new landlord. Communicating will ensure that both parties are on the same page and will help put certain issues to rest. There could be little or no need for concern. The sale of the property might only take place after the lease agreement has expired, or the new landlord may be better than the current one,” Goslett concludes.
Author: RE/MAX of Southern Africa