Photo: File
Photo: File

What happens to a tenant when landlords sell

By Opinion Time of article published Jul 28, 2020

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By Adrian Goslett

The current strain on household incomes as a result of the national lockdown has led some landlords towards making the decision to cash in on their investment by selling their rental properties. This often raises concerns among both the tenant who is renting the property as well as the future homeowner: what happens to the tenant when the landlord decides to sell the home?

Simply put, because the lease agreement is legally binding and was in place before, it still stands – regardless if the owner of the home decides to sell. The lease agreement goes with the home. Essentially this means that purchasing the home automatically makes whoever buys it a landlord, whether they planned to be or not. It also means that if you are the tenant, you will only need to leave once your lease agreement expires.

Anyone who purchases the property will only be able to take occupancy of the home once the lease agreement has expired and the tenant moves out. For this reason, it is best to go over the details of the lease agreement and see how long the tenant can stay in occupation before deciding whether it is worth your while to purchase the home.

It is possible that the tenant refuses to move out, even once the lease agreement has run its course. Apart from having to deal with the delay, the new owner may also have to take legal action to have the tenant removed, which will cost money. If possible, before purchasing the property, it is advisable to speak to the tenant and see what their intentions are, as this could save both time and money in the long run. A communicative, obliging tenant will make the process far smoother and pleasant.

I also caution buyers of the respective obligations that are imposed on the lessor in a lease agreement.

It is important to understand the implications of buying the home with an existing tenant from the outset. For example, if there was a security deposit paid at the initiation of the tenancy, this will need to be refunded to the tenant at the end of the lease. The new owner of the home must ensure that they get this money from the seller. Otherwise, they will find themselves out of pocket. Another aspect to check is whether the landlord is required to pay back any money that the tenant has paid for improvements to the property during the tenancy – this is money that should also be recovered from the seller during the sales process.

Lastly. if the property is being bought as an investment or as part of a rental portfolio, the fact that the home is occupied by a reliable tenant should actually be seen as a drawcard.

However, if the property has been purchased as a primary residence and the new owner intends to live there, it could be a problem. If you’re uncertain of the implications of such a purchase, or are a tenant who is feeling uneasy about the sale of your rented home, get some free advice by reaching out to a real estate practitioner.

Adrian Goslett is the Regional Director and CEO of RE/MAX Southern Africa.

PERSONAL FINANCE

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