A Property24 reader asks:

What if the property was sold at a sale in execution and not simply via the auction process - can the lease be cancelled?

After reading this article ‘Can new landlord cancel my lease?’ where a reader queried the new owner’s right to break the lease he had with the previous landlord after the property was auctioned, this reader felt that the matter should be further clarified.

“What if the property was sold at a sale in execution and not simply via the auction process?”

Alan Levy, an attorney at Alan Levy Attorneys who specialises in evictions, rent recoupment and landlord/tenant law replies:

The Scenario where a property is sold via a sale in execution (a sheriff’s sale) is not the norm. The norm is where a property is sold on the open market. 

Should the property have been sold at a sheriff’s sale, then a number of scenario’s (gleaned from the law reports) may arise as to whether the lease agreement needs be honoured or not. Some of these scenarios are:

  • Where there is no mortgage bond and the party taking the property to auction (the creditor) as well as the sheriff are aware of the lease – the lease must be honoured;
  • Where there is no bond and the creditor and the sheriff are unaware of a lease and should it emerge after the sheriff’s sale, that there is a lease. In my view (depending upon other factors), the lease must be honoured;
  • Where there is a bond and the party taking the property to auction is the mortgagee (the bank), but the bond was registered after the conclusion of the lease, then it appears that the bank has no special right as regards this issue. What has been stated above applies. The lease must be honoured;
  • Where there is a bond and the party taking the property to auction is the bank and where the bond was registered prior to the conclusion of the lease, and where the bank or the sheriff are aware of the lease, the property is first sold subject to the lease. Should a bid sufficient to cover the bank’s claim not be received, the property is then sold without the lease. Here the lease need not be honoured;
  • Where there is a bond and the party taking the property to auction is the bank and the bank or the sheriff are unaware of the lease and should it later arise that there was a lease in place, then if the bid received was sufficient to cover the amount outstanding to the bank, the lease needs to be honoured, but if the amount was insufficient to cover the amount outstanding to the bank, the lease need not be honoured.

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