The effect of a sale on a management mandate agreement

Is the purchaser of a property with a tenant in the premises duty-bound to perform in terms of the former landlord’s obligations towards the lease agreement, or in terms of a mandate in the case of a management mandate agreement?

The lease agreement remains in place.

The starting point would be the lease agreement. The principal of huur gaat voor koop is a well-established legal principal that made its way to the South African legal system all the way from Dutch Law. This principal simply dictates that in the event of sale of an immovable property where there is a tenant in occupation, the provisions of the lease agreement will carry through transfer of the property, and the lease agreement will remain of full force and effect.

As a result, the purchaser will simply step into the shoes of the landlord on transfer. This happens by way of law, there is no need for an addendum, cession, new lease agreement or any other legal process to have the lease agreement transferred to the purchaser, this is something that happens automatically. In a case of a verbal agreement the same principal applies, however in the case of a verbal agreement it will be a month-to-month agreement which can then be terminated by either party on one month’s written notice.

What about the mandate agreement?

Since the lease agreement transfers to the purchaser on transfer of the property, what is the position with the mandate agreement that might be attached to the lease agreement, especially if this mandate agreement is a management mandate agreement?

The mandate agreement is a separate agreement that is legally irrelevant to the lease agreement, for all intents and purposes. The mandate agreement is an agreement exclusively between the landlord and the agent. However, the fact that the landlord is replaced by the purchaser in terms of the principal of huur gaat voor koop does not have the same effect on the mandate agreement.

The mandate agreement is the agreement governing the obligations of the owner of the property as the landlord in terms of the lease agreement, with the agent. The principal of huur gaat voor koop is only relevant to the relationship between the landlord and the tenant, in relation to the lease agreement. Even if the lease agreement makes reference or even incorporates the mandate agreement the principal of huur gaat voor koop is not wide enough to have the mandate agreement carried through transfer.

“The agent with the management mandate will have to obtain instructions from the new owner
of the property, with regards to the mandate agreement…”

The owner of the property is always at liberty to choose whether he or she will personally attend to the management of the lease agreement or whether he or she wants to appoint an agent to do so on his or her behalf. Should the purchaser wish to do his or her own management of the tenant or appoint another agent, he or she is completely entitled to do so and there are no legal limitations to this election.

Practically the implication of this would be that on transfer of the property the agent with the management mandate will have to obtain instructions from the new owner of the property, with regards to the mandate agreement. This could mean that the agent will conclude a new management mandate with the new owner. As mentioned above, on transfer the mandate agreement will be cancelled automatically. In such an event, in the case of a management mandate where the agent held a deposit, the agent will be obligated to immediately release the deposit to the purchaser, as the new owner of the property. The agent will no longer have any right to hold such deposit and further will have no obligations with regards to management of the tenant or any other obligations in terms of the mandate agreement.

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