Huur gaat voor koop – what does this mean?
Roughly translated, huur gaat voor koop means: an existing lease trumps a subsequent sale.
What are the legal consequences of this principle?
(a) When a property which is subject to a lease is transferred, the purchaser steps into the shoes of the seller as the landlord in terms of the lease.
(b) The new owner and the tenant are bound by the terms of the lease as if the new owner had signed the lease agreement as the landlord.
(c) This takes effect automatically by operation of law and no new agreement between the parties is required.
(d) The tenant’s right to undisturbed occupation of the property for the duration of the lease, is protected for up to 9 years and 11 months from date of commencement of the lease.
(e) On termination of the lease, the new owner will be liable to refund any deposits made by the tenant, regardless of whether the deposit was paid to the new or previous owner.
(f) A mortgage bond supersedes the lease only if the bond was registered before the lease agreement was concluded. If not, the rights of the tenant will prevail over the rights of the bondholder.
What are the limitations of this principle?
Huur gaat voor koop only protects rights that are material to the landlord-tenant relationship and does not include inter alia the following examples:
(a) An option in favour of the tenant to purchase the property (unless the tenant can show that the purchaser was made aware of the option prior to purchasing the property).
(b) Any claim the tenant may have regarding improvements to of the property as the purchaser is not the party who benefited from these improvements (unless the tenant can show that the purchase price was reduced in anticipation of a claim by the tenant for these improvements).
What are the exceptions to this principle?
(a) Sale in execution: whilst the sheriff will try to sell the property subject to the existing lease/s, if insufficient offers are received the property can be sold “without leases”. This is at the sheriff’s discretion.
(b) If the owner is declared insolvent the individual appointed as administrator of the insolvent estate may elect whether to cancel the lease or not.
(c) The huur gaat voor koop principle does not apply to long term leases (over 10 years in duration). The rights of tenants of long term leases can only be protected by registration of the lease agreement against the title deed of the property in the Deeds Office.
Our tips for dealing with huur gaat voor koop
(a) If you are purchasing a property subject to a lease agreement:
- make arrangements for any deposit/s paid by the tenant/s to be transferred to you prior to registration of the transfer; and
- obtain a copy of the lease agreement/s and familiarise yourself with its terms and conditions.
(b) If you are a tenant and are uncertain as to whether your lease agreement is still valid, obtain legal advice.
(c) If you are a prospective tenant, seek legal advice to ensure all terms material to you are recorded properly to protect your interests.