It may seem attractive for property investors to acquire a property where a lease agreement is already in place. After all, investors may see it as a marketable feature of the property — as buyers will not need to find a new tenant, and therefore will avoid an initial vacancy period when taking transfer of the property.

How does this happen? Well, South Africa's law has a provision that states that 'lease goes before sale', better known as 'huur gaat voor koop'.

This means that when a leased premise is sold before the lease of a current tenant has expired, the tenant may in terms of the 'huur gaat voor koop' rule remain in occupation of the premises until the lease expires.

Investors: Beware

This may, at face value, make the investment all the more attractive. But property investors need to beware: it opens you up to a number of risks that would have been negated had you not inherited a tenant with an existing lease agreement.

So what are the problems? In one recent example, a tenant whose lease agreement had been inherited in exactly this manner requested to extend the lease agreement for a further period equal to the initial lease under the same terms.

The property investor was naturally inclined to simply sign the agreement, only to be told that the agreement in place was one which had been purchased at a local stationary store. Such agreements are notorious in professional circles for being out of date and often in contravention of rental legislation and provincial guidelines.

In breach of law

The property investor, in the old agreement, had taken on a long list of unnecessary obligations while he was also in breach of the law on a number of points.

He had also taken on some risks that could have presented significant financial risk considering the age of the property, the nature of the tenant and the duration for which the tenant had resided at the property.

For one, there had been no written inspection on commencement date for this tenant. This put the investor in a situation in which he could not lay claim for any damages caused directly by the tenant at the end of the lease period.

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