The Effect of Unforeseen Events in Property Transactions - Tenant not Vacating Property
Category Property Transaction
It goes without saying that there are various unexpected events that can arise at some point within the transfer of property. Unfortunately, a lot of these unexpected events are far beyond our control.
This third article in the series is about the a tenant not vacating the property on expiry of a lease and the effect it will have on a sales agreement. In order to explain the issues at hand in more detail, the following 3 topics will be discussed:
1. Explanation of the unforeseen event – i.e. tenant not vacating the premises?
2. The effects of the unforeseen event
3. How to ensure that this does not affect your sale
1. THE UNFORESEEN EVENT OF A TENANT NOT VACATING THE PROPERTY ON EXPIRATION OF THEIR LEASE AGREEMENT
The settled legal principle of “Huur gaat voor koop” means that, despite the sale and even the transfer of a property to a new owner, the tenant of the property that has been sold is entitled to continue occupying the property until his/her lease expires. The Consumer Protection Act allows for a tenant to continue renting on a month to month contract if the Landlord does not expressly cancel the Agreement in time.
2. EFFECTS OF THE UNFORESEEN EVENT OF A TENANT NOT VACATING THE PREMISES
If the tenant refuses to move despite the Lease Agreement having been cancelled formal eviction processes will have to be implemented. If it is however not a condition of sale that the property be transferred without the Tenants, this will become the burden of the new owner i.e. The Purchaser. If this is however a condition of sale the Seller will be liable to ensure that the property is not occupied and will have to enforce a legal eviction process. The Seller will incur additional legal costs and the transfer will be delayed by 3 months.
3. HOW TO ENSURE THAT A TENANT NOT WANTING TO VACATE DOES NOT AFFECT YOUR SALE
It is imperative that the agent finds out when the lease expires. It is better to obtain a copy of the lease agreement that also indicates the terms of the Lease. Ensure that the Purchaser is aware that the there is a Lease over the property and determine what the conditions of sale is in respect of the continuance of the Lease or not. If it is a condition of sale then notify the attorney attending to the transfer in order to ensure that property notification of cancellation of the Lease is given to the tenants alternatively eviction processes are initiated. If facts are not disclosed to the Purchaser this may be deemed as a material breach and the new owner will have a claim against the Agent for damages suffered.
The effects of unforeseen events to a transfer mostly results in delays, additional leg work and additional costs and expenses. The best way to avoid these delays is to ensure that you have all the information from the Seller and familiarize yourself with the current status of the property and Offer to Purchase. As soon as you become aware of the “out of the ordinary” situations such as tenants or building plans it is imperative to inform the transferring attorney as soon as possible to minimize the delay.