12 Dec 2011
A Property24 reader asks:
I was wondering if you could assist or point my query in the right direction.
I have signed a one-year lease agreement and have just been advised that the property was auctioned off and bought. The new owners have advised us that they don’t have to honour the lease agreement
Alan Levy, an attorney at Alan Levy Attorneys who specialises in evictions, rent recoupment and landlord/tenant law replies:
The scenario seems to be that you signed a 1-year lease agreement with the owner of the property. Thereafter the property was auctioned off and bought by a purchaser. The purchaser has advised you that the lease agreement does not have to be honoured.
In this scenario a legal principal of “huur gaat voor koop” applies. This in effect means that despite the sale, the tenant is entitled to continue to occupy the property until the lease expires.
The purchaser has to therefore honour the lease. The lease may provide for early cancellation or any such other terms that may protect the purchaser in these circumstances, but failing such terms, the lease takes precedence and the purchaser has to honour the lease.
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If the property was sold at a sale in execution (sheriff’s auction) things become murky. Many of the conditions of sale explicitly state that should the bank or its legal representative, or the sheriff, not know of any lease agreement, then the property is sold without any lease agreement that there might be being enforcable. Sometimes, when they do know of a lease, the property is first sold with the lease, and if the price reached is not to the satisfaction of the plaintiff (usually the bank), then the plaintiff may immediately request the sheriff to reauction the property “without the lease”. When this happens, the lease is effectively declared null and void, and the “huur gaat voor koop” principle is waived.The answer of Alan Levy should have mentioned this possibility, as it is not clear whether the reader might find himself in this position. - Francois
I believe the answer is not this simple. If the auction being referred to was a sheriff's auction, and the new owner bought the property "without lease", the lease is no longer valid .- Callie
If the property was sold on an execution sale, the tenant’s rights will depend on when the mortgage bond was registered. If the lease agreement was concluded before the mortgage bond was registered, the purchaser would have acquired the property subject to the lease agreement in terms of the huur gaat voor koop rule. If the lease agreement was concluded after the mortgage bond was registered, the property would first have to have been put up for sale subject to the lease. However if the highest bid was insufficient to satisfy the mortgage debt, the property could then have been put up for sale free of the lease, in which event the lease agreement would have terminated. - Henk
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