Author: Ewan O’Reilly
Lease agreements vs Sale agreements:
If you are the owner of immovable property and you have decided to sell your property but there are currently tenants renting from you, the following question comes to mind:
Will the existing lease agreement between yourself and the tenants take preference over your new sale agreement with the purchaser?
Yes, the lease agreement will take preference over the sale agreement. The maxim “huur gaat voor koop” applies to our law. Thus, a pre-existing lease agreement will need to be honoured despite a new sale agreement being introduced. However, its application is limited in certain instances, one of them being the duration of the lease. The maxim only applies to lease agreements of less than ten years.
Cancelling the lease agreement:
Should the existing lease agreement have a specified start and end date (fixed term) and the tenants wish to terminate the lease, they will need to give 20 business days’ notice to the landlord. The landlord may also terminate the lease agreement but cannot do so merely because the landlord wishes to sell the property and the prospective new owner /purchaser wishes to take vacant occupation whilst the lease duration has not elapsed.
According to the Consumer Protection Act, the landlord (residential) may only give 20 days’ notice to vacate following a material breach of lease. Furthermore, if the breach is remedied by the tenant/s within the 20-day notice period the contact will remain in force and the grounds for cancellation fall away.
Practically this would mean that the purchaser of the property will have to acknowledge and honour the lease agreement should the tenants wish to continue residing on the property for the duration of the lease. The same conditions of the lease will remain unless bilaterally cancelled by the purchaser/new owner and the tenant/s.
An exception to the “huur gaat voor koop” maxim
An exception to the maxim does exist and will apply in a situation where the Bank needs to sell the property in order to settle its claim. The tenant’s lease agreement and the associated rights will not necessarily exceed a Banks’ rights originating from a mortgage bond over the property.
The bank must attempt to sell the property whilst honouring the existing lease agreement, however, should the bank not be able to realise the amount needed to settle their claim, they will not be obliged to honour the lease agreement and may elect to sell the property devoid of a lease agreement as if there were no lease agreement to begin with.
When purchasing a property where tenants are leasing the “huur gaat voor koop” will generally apply to a short-term lease. It is important for a prospective owner to obtain all relevant information of the existing lease to ensure that there are no disputes further down the line.