Does Section 4(5)(c) of the Rental Housing Act contradict the principle of huur gaat voor koop?
The legal principle of huur gaat voor koop was established within Roman Dutch Law and has, since the adoption of Roman Dutch Law as the foundation of the South African legal system, been one of the cornerstone principles governing property law in South Africa. This principle has been solidified within the South African legal system in numerous court judgments and is implemented in our South African legal system today in exactly the same way it always was. But does more recent legislation take away from this established principle?
The principle of huur gaat voor koop dictates that regardless of whether a lease agreement in respect of a property which is sold is a written, verbal or even a tacit agreement, the lease agreement will supersede the sale of the property. In other words, the new owner of the property will not be entitled to cancel the lease agreement based solely upon their new ownership of the property but will be bound by the material terms of the lease agreement which is in place. The reason for this is that the right of occupation is the only right, in the collection of rights which form the right of ownership, that is transferred separately upon the purchase of a property. The tenant will retain the right of occupation since this right has already passed to him, for the full term of the existing lease agreement. This means that even in a situation where the landlord sells the property, the tenant’s right of occupation remains unaffected. The only effect is that from the moment of transfer the tenant will pay rent and fulfil all other obligations in terms of the lease agreement to the purchaser instead of the previous owner.
Huur gaat voor koop is a principle that is applied ex lege, meaning by way of law, and for this reason, the purchaser will ‘step into the shoes of the landlord’ upon transfer without any further formalities, such as a cession and assignment agreement. The principle of huur gaat voor koop provides the tenant with the necessary security in a situation where the landlord intends to sell the property. There can, however, be factors that complicate the situation. An example is where a landlord is forced to take occupation of their leased property, for instance when the landlord is financially compelled to sell their primary residence. In a situation such as this, where we are dealing with a residential property, the provisions of the Rental Housing Act dictates that the landlord would be entitled to cancel the lease agreement on two distinct conditions; namely that the lease agreement specifically provides for the cancellation of the lease agreement in these circumstances, and secondly that the reason for cancellation does not constitute an unfair practice.
“Rental Housing Act 50 of 1999, section 4(5)(c)
The landlord’s rights against the tenant include his or her right to-
(c) terminate the lease in respect of rental housing property on grounds that do
not constitute an unfair practice and are specified in the lease;”
The example described above would not constitute an unfair practice. In this regard an unfair practice would be a situation such as a landlord making the decision to cancel the lease agreement based upon the knowledge that he would be able to get an increased rental income by renting to a different tenant. In practice, one can only exercise this action provided by this section, when the lease agreement specifically contains explicit provision to do so. This provides the landlord with the means for cancellation in specific circumstances, but also requires stipulation of a specific time period in which the landlord must give notice, in order to lawfully effect this cancellation. The Act does not prescribe a specific notice period; therefore, this must be agreed upon between the parties within the lease agreement.
In a case where there is a provision in the lease agreement allowing the landlord to cancel the lease agreement should he wish to sell the property, the principle of huur gaat voor koop will not apply because the lease agreement will be cancelled and irrelevant by the time the property transfers to the purchaser. Upon cancellation, the tenant will be requested to vacate, if they do not vacate, they will be in illegal occupation of the property. The reason this is allowed, is because the principle of huur gaat voor koop is a common law principle and parties to an agreement may contract out of common law and change the common law position provided that such agreement is in line with legislation.
Courts are empowered to interpret and amend the position in common law, in most cases there may even be permission granted to contract out of common law. As much as this particular provision in the Rental Housing Act may be contradictory to the principles of huur gaat voor koop, it is perfectly sound in law to have a legislated provision to override a common law principle.
However, this provision is only enforceable when the lease agreement specifically makes provision for this – and the grounds upon which the landlord is allowed to implement the provision – as well as clearly stipulating the notice period the landlord has to provide the tenant with, prior to cancellation. Even though the Rental Housing Act does not give any indication on what constitutes a reasonable time period, one month’s notice on a fixed-term agreement could be considered insufficient notice for a tenant to find alternative accommodation. The question of what is reasonable will depend on various factors specific to the lease agreement, for instance the area where the property is situated. It is advisable to allow a time period of approximately two months. However, this is not stipulated by law in any way.
Seeming discrepancies in law do not imply the inability to enforce a principle itself, but rather that a deeper understanding of the law is necessary when considering lease agreements.
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