After finding out that his landlord wants to sell the property he has been renting for several months, a reader wants to know how he can give effect to a right he has to purchase the premises.
He says that as he liked the premises so much when initially concluding the rental agreement he added a clause whereby he is entitled to purchase the property if the landlord decides to sell during the currency of the lease.
The landlord has recently advised him that he intends to sell the property.
A third-party purchaser has apparently already been identified, says the reader, and negotiations on the purchase price are either underway or have already been finalised.
See the reader’s question here.
He is concerned that the landlord appears not to want to honour his purchase right as the negotiations have progressed so far and only now has the landlord advised him of the proposed sale.
The reader is aware of the principle of huur gaat voor koop which typically provides for the lease to remain uninterrupted regardless of any change in the owner or landlord.
He is not concerned about continued use of the rented premises, but rather the fact that the landlord appears to be ignoring his right to purchase.
What the reader is referring to is typically described as a pre-emptive right.
Such a right often operates in favour of a tenant and usually provides for the landlord to approach him if he wishes to sell the property.
This is the case whether the landlord is selling on his own initiative or as a result of an offer from a third party.
Depending on the wording of the pre-emptive right, the landlord may be required to advise the tenant of any interest to sell the property.
Alternatively, after finalising negotiations in an agreement of sale, the landlord must present it to the tenant so he can validly exercise his pre-emptive right.
So as not to negotiate in bad faith or to place the potential [third-party] purchaser under any misconception, it is normal practice to include a suspensive condition in the agreement of sale.
This sets out the fact that the operation and effect of the agreement of sale is on hold until the conditions of that suspensive condition have been met.
In this instance, the suspensive condition would record that a third party (the reader) has a right of pre-emption in respect of the property and that the offer must be made to him prior to giving effect to the terms of the sale.
Of course, in the event of the tenant validly exercising his right of pre-emption, the agreement of sale will lapse and be of no further effect. The sale will then take place between landlord and tenant.
It is thus not problematic that the landlord has not previously approached the reader in respect of the pre-emptive right.
Until some finality is reached in respect of the proposed terms and conditions of sale, there is no possibility of our reader exercising his pre-emptive right.
In the Supreme Court of Appeal matter of Tiekiedraai Eiendomme v Shell South Africa Marketing the court had to determine whether an earlier offer made by a seller of land that was subject to a pre-emptive right constituted a proper offer in terms of that right.
After considering the earlier offer made to Shell (the pre-emptive right holder) compared to the agreement of sale concluded between the seller (Hall & Sons) and the purchaser (Tiekiedraai), the court ruled that Shell had to be afforded the opportunity to conclude an agreement with Hall & Sons.
This had to carry identical conditions as any agreement between Hall & Sons and Tiekiedraai in order for the seller to fulfil its obligations to Shell in terms of its right of pre-emption.
However, the absence of a final agreement between Tiekiedraai and Hall & Sons on all of the terms and conditions on which they were prepared to contract meant Hall & Sons could not fulfil its obligations to Shell in this regard.
It is clear that it is the terms of the final agreement between seller and purchaser that are relevant and it is these terms that should be put to the holder of the pre-emptive right for acceptance or refusal.
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