Selling a property while a tenant is still occupying it is a common scenario and, when managed correctly, it does not need to be complicated. However, poor communication and a lack of planning can create tension with tenants, delay the sale process and potentially affect the final selling price.
For landlords considering selling a tenanted property, careful preparation and transparency are key.
Understand Your Legal Obligations
One of the most important principles to understand is that a fixed-term lease does not end simply because the property has been sold. In South Africa, the lease agreement transfers to the new owner together with the rights and obligations attached to it. This should be clearly disclosed to prospective buyers from the outset.
Where a lease is month-to-month, written notice may be given in accordance with the lease terms, typically one calendar month. However, where a fixed-term lease is in place, the tenant generally retains the right to remain in occupation until the lease expires.
Communicate with Your Tenant Early
Open and respectful communication with tenants can make a significant difference to the success of the sale process.
Before marketing begins, landlords should inform tenants of the intention to sell, explain what the process will involve and reassure them that their rights remain protected. Tenants who feel informed and respected are often more cooperative when it comes to keeping the property presentable and accommodating viewings.
Unexpected viewings or poor communication can create unnecessary friction and may make the selling process more difficult.
Manage Viewings Considerately
The Rental Housing Act requires reasonable notice before a landlord or representative enters the property. Forty-eight hours’ written notice is generally considered standard practice.
Viewings should be arranged with consideration for the tenant’s schedule wherever possible. If a show day is planned, discussing arrangements in advance and obtaining the tenant’s cooperation can contribute to a smoother experience for everyone involved.
Ensure Full Disclosure to Buyers
Prospective buyers should receive full disclosure regarding any existing lease agreement before making an offer.
Providing details of the tenancy, including lease terms and expiry dates, allows buyers to make informed decisions and reduces the risk of disputes later in the process.
For investment buyers, an existing tenant and documented rental income can be attractive. Buyers intending to occupy the property themselves will usually need clarity on when occupation can realistically take place.
Consider Vacant Occupation Carefully
If a buyer requires vacant occupation on transfer, this must be addressed in the Offer to Purchase through an appropriate condition.
Landlords should ensure that any arrangements relating to vacant occupation comply with the legal process and realistic timelines. Commitments should only be made where there is certainty that vacant occupation can be achieved lawfully and within the agreed timeframe.
With clear communication, proper disclosure and an understanding of legal obligations, selling a tenanted property can be a smooth and successful process for landlords, tenants and buyers alike.