What landlords should know about selling tenanted property

Seeff breaks down the essential legal and strategic considerations for landlords selling tenanted property

Burdened by economic instability, property investors and landlords today are at a crossroads. Many are considering the sale of their rental properties, whether to streamline their portfolio or consolidate their assets for better manageability, while others aim to mitigate looming financial risks.

In some cases, property investors face an urgent need for cash and may turn to their rental investments as a quick solution. This “solution” is not straightforward, however, when the rental property is occupied by a tenant. 

Key Considerations When Selling Tenanted Property

Experts from Seeff highlight the importance of a robust rental agreement that specifically addresses the sale of the property, given that the leaseholds precedence over any sale within South African law.

Landlords should consider the following when selling tenanted property:

• Review Lease Agreements. Examine the lease for clauses that govern the sale process. The absence of such a clause defers to legal requirements.
  
  
• Tenant's Occupancy Rights. Note that tenants have the legal right to remain in the property until the lease expires, even after the property is sold.
  
  
• Right of First Refusal. If the lease grants the tenant this right, the landlord must first offer the property to the tenant before accepting other offers.
  
  
• Tenants' Exit Option. Under the Consumer Protection Act (CPA), tenants can opt to leave by giving twenty business days’ notice, but they might be liable for compensation, usually one to two months’ rent.
  
  
• Landlord's Obligations. Lease termination isn’t permissible by the landlord; the lease must be honoured until its conclusion.
  
  
• New Owner's Responsibilities. Upon the property’s sale, the new owner inherits the lease with no authority to end it prematurely, raise the rent, or modify the terms.

Seeff recommends that property owners delay selling until the lease has concluded and the property is unoccupied. This strategy minimises the complexities tied to selling a tenanted property, giving you peace of mind when you do decide to sell.

However, it’s also worth noting that buyers may find value in acquiring a property with an incumbent tenant, particularly when the tenant has a track record of maintaining the property and punctually paying rent. This could be an attractive bonus for the buyer.

Sell your home with Seeff, and let us help you prosper through property.