"Huur Gaat Voor Koop" In South African Law
Category Advice
The maxim huur gaat voor koop was established within Roman-Dutch Law and has since carried through into South African legislation. The principle honours any contract that a tenant has with their landlord, in a circumstance where the property owned is being sold.
The maxim explained
In basic terms, the maxim dictates that a lease agreement takes precedence over a later sale of the property, and the new owner does not have the right to cancel the agreement for the reason of its new ownership. In the same breath, the tenant cannot legally cancel the contract - without the expected penalties - for no other justified reason.
Are there any exceptions to the maxim?
Keep in mind that there are limitations to this principle. As much as it aims to protect the relationship between the landlord and tenant, it does not stand against the rights of the bank in the case of mortgage execution. Where a mortgage bond preceded the lease agreement, the rights of the bank will trump those of the tenant. It is the bank's ethical duty to try and sell the property subject to the lease they are aware of, but if there isn't a sufficient offer for the property attached to the lease, the bank is within its right to auction the property free of its previous contracts.
In the case that the owner of the property is unable to pay their debts, the administrator of the insolvent estate may choose to cancel the lease agreement.
The huur gaat voor koop maxim is also restricted to lease agreements under 10 years in duration. Long-term leases (10 years and over) are only protected by the registration of the agreement at the Deeds Office, against the title deed of the property.
What is best practice going forward?
If you are a landlord planning to sell, our advice would be to provide your estate agent with the relevant tenant agreements, so they are able to pass them on to serious buyers before an offer to purchase is entered into. Your agent will then ensure the buyer signs an acknowledgement that they have received the lease copy.
For guidance on closing the deal with your purchaser while keeping a happy tenant, reach out to us so we can assist!
Author: "Huur Gaat Voor Koop" In South African Law
