Advice and Opinion

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When a property is sold when it has a tenant in occupation, the questions often raised are: “What happens to the tenant if the landlords sells the property?”, and what rights the tenant will have with regards to cancelling the lease or enforcing it, says Michael Bauer, managing director of IHPC estate agents.

While all landlords are well within their rights to sell their properties at any time, the tenant’s rights to his lease remain in place before any rights of the buyer and the tenant can remain in the property until his lease expires.

Some concerns might be raised if the property is sold and the lease passed from one landlord to another, said Bauer.

The conditions of the existing lease do not fall away, and if it has not been cancelled both the tenant and the new landlord are bound by these until such time that the lease is renegotiated or expires, he said.

What needs to be done, however, is that the deposit held by the previous landlord must be transferred to the new owner, and the same rule would apply as with the previous landlord, that he must hold the deposit in an interest bearing account in favour of the tenant, to be refunded to the tenant with interest when he moves out, said Bauer.

On the other hand, he said, if the tenant decides he would no longer like to live on the property if there is a new landlord, the conditions of the lease could also prevent him from leaving the new landlord in the lurch and cancelling the lease. If the tenant does decide to cancel his lease he may incur a penalty and although the Consumer Protection Act allows him to cancel (if the landlord is a supplier according to the CPA and lets property as an ordinary course of business) giving 20 business days’ notice, there is still a “reasonable” penalty that the landlord can charge the tenant, said Bauer.

“If for any reason, whether on the landlord or tenant’s part, the lease is to be cancelled once the property is taken over by the new owner, it must be by mutual consent and the first course of action is to have open communication between the two parties so that an agreement can be reached without either party put at risk financially. Usually the penalty that would be charged to the tenant would be the cost of finding a new tenant and one month’s rent, which is how long it might take the landlord to find a new tenant – which is reasonable. In the case of the landlord being the one who would like to cancel the lease, the tenant should be given enough time to find new premises, which should perhaps also be one month,” said Bauer.