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How long must I pay occupational rent?

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04 Feb 2013

A Property24 reader asks:

A reader asks how long a buyer is expected to pay occupational rent, supposing the transfer could take months to go through.

Is there a set period for how long an occupational rent agreement should be honoured after signing the sales agreement? For example 1, 2, 3 months or must a buyer keep on paying occupational rent until the transfer of the property takes place? 

Arnold Maritz, co-owner of the Lew Geffen Sotheby’s International Realty franchises in the Southern Suburbs and False Bay, Cape Town, advises:

No, there is no statutory limit for the period for which occupational interest may be paid. It is generally a term of a deed of sale that occupation will take place on a particular date and if the transfer takes place after the date of occupation, occupational interest is paid at an agreed amount for the period from occupation until transfer. It is important to have a market related occupational interest, or otherwise the purchaser might be tempted to delay the transfer. 

Typically, the deed of sale will provide that the transfer must take place on a particular day or as soon as possible thereafter. There is no limit to how far in the future that day may be. Alternatively, the deed of sale may merely provide that the transfer must take place on or as soon as possible after occupation. 

The point the question is really getting at is, what happens when the transfer is delayed long beyond the date of occupation and stipulated date for transfer? Is there a cut-off point after which occupational interest is no longer payable, assuming that the seller is causing the delay? 

Again the answer is no. One has to look at the circumstances. If the transfer has been delayed for an unreasonable length of time under the circumstances the seller may be in breach of the agreement. The purchaser would not be entitled to stop paying the occupational interest. He would have to "put the seller to terms" by, in writing, pointing out to the seller that by not having passed transfer within a reasonable time, he is in breach of the agreement, which would require the seller to rectify the breach by a particular date. Should the seller fail to rectify the breach, the purchaser would be entitled either to cancel the transaction and claim any damages which he may have suffered, or approach the courts for an order of "Specific Performance" where the court orders the seller to pass transfer.  

Readers may submit questions to Property24’s Guest Expert panel and/or comment below. We may not be able to answer all questions received, but all will be considered. 

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