When considering buying or selling a property, both parties must understand the implications of dealing with tenanted properties. The principle of huur gaat voor koop, which translates loosely to "lease comes before sale," plays a critical role in this context. This article explores this principle, its implications, and key considerations for both parties.

Huur gaat voor koop is a legal principle derived from South African common law that protects tenants in lease agreements when a property is sold. Essentially, it means that any lease agreement concluded before the sale of a property would remain in effect until the lease term expires. Upon registration of the property, the new owner automatically takes over the landlord's rights and responsibilities from the original owner. This means the new owner must allow the tenant to occupy the property, and the tenant would still be responsible for paying rent and should honour the terms of the lease agreement. 

It is essential to include a clause in the offer to purchase wherein the seller declares there is a tenant currently occupying the property, with a valid existing lease agreement. Prior to the signing the offer to purchase, the purchaser should conduct thorough due diligence on the current lease agreement and familiarise themselves with the terms of the lease agreement.

The current landlord is responsible for any tenant deposits at the end of the lease, regardless of who holds the deposit. Therefore, it's wise for the purchaser to include in the offer to purchase that any deposits or pro-rata rent held by the seller should be transferred to the new owner/landlord by the conveyancers upon transfer of the property.

If the purchaser intends to move into the property on the date of transfer, this must be agreed upon by both parties and explicitly stated in the offer to purchase. It’s important to remember that the seller must still adhere to the notice period and cancellation terms outlined in the lease agreement to ensure compliance with its provisions.

The huur gaat voor koop principle does, however, have limitations. If a mortgage bond was registered on the property before the lease was signed, the bank's rights take priority over the tenant's rights. Additionally, if the lease agreement includes an option for the tenant to buy the property, this option is only valid against the original landlord, who granted the option, and cannot be exercised against the new landlord.

Both parties need to be aware of their rights and obligations under the existing lease agreement, when buying or selling a tenanted property, to avoid any potential challenges that may arise. For guidance regarding the above, please don’t hesitate to contact our conveyancing department.

Written by Nicole Chanel van Jaarsveld

We trust that you found this article informative, please email info@hjwattorneys.co.za for assistance with all your legal queries.

This article is provided for informational purposes only and should not be substituted for legal advice on any specific matter. Any opinions expressed herein are subject to the law as at the time of writing and will change in accordance with any change in the law. We recommend that you contact HJW Attorneys & Conveyancers  at info@hjwattorneys.co.za directly for advice applicable to your specific matter.