What Happens To Tenants When Property Is Sold?

Introduction:

Many tenants in such circumstances, are not sure if their tenancy agreement will be terminated by the purchaser or new owner. Many tenants also fear that the new owner may increase their rent. Also, some tenants pray that the new owner doesn’t just pursue away all existing tenants on the property.

New Property Owner & Exiting Tenants:

“What Happens To Tenants When a Property Is Sold?”, the judgments of the appellate courts in Nigeria will be considered.

The Court of Appeal has held that nothing happens to tenants when a property is sold. Tenants rights and powers are never affected by sell and purchase of their property. The contents of a tenancy agreement binds the landlord and any new purchaser and as such sell of property does not affect a tenant and his tenancy agreement.

Here are the actual words of the Court of Appeal; “… the covenants therein (in a tenancy agreement) are binding not only on the landlord and tenant but also (any) person whom the property subsequently passes thereto. Undoubtedly, the terms ‘Landlord’ and ‘Tenant’ as couched in the tenancy agreement in question include ‘the successors-in-title and assigns’ of both the landlord and tenant, respectively.” SAULAWA, J.C.A in the case of Chaka v. Messrs. Aerobell (Nig.) Ltd. (2012) 12 N.WL.R. (Pt. 1314) p. 296 @ 320 CA.

This simply means that the moment a landlord sells his property, the new owner of the property takes over the property with the assets and liabilities in it, including the tenants in it. So, the tenancy agreements between a tenant and his landlord, will automatically be deemed to have been inherited by the new purchaser/owner of the property. Hence, the new owner of a property is bound by the existing tenancy agreements and relationships between tenants on the property and the former owner of the property. The new owner does not need to sign the existing tenancy agreement or be mentioned in it for the new owner to be bound. Rather, the new owner replaces the landlord in the tenancy agreement without any party, the moment the property is sold to the new owner.

Conclusion:

A tenancy agreement like most commercial contracts binds the parties to the agreement and any other person that may take over the place of any of the parties. So, a tenancy agreement binds a landlord and a tenant as well as all other persons that may takeover, inherit, purchase or step into the shoes of the landlord or tenant. So, a new purchaser of a property is bound by the tenancy agreement between tenants on the purchased property and the former landlord/seller. Such a new purchaser cannot terminate tenancy agreements, pursue away tenants or increase rent unless in line with the existing tenancy agreement between existing tenants and the former landlord.

Prospective purchasers of property are advised to always understand the agreement between sellers/landlords and their tenants, ahead of purchasing a property, because they most inherit and continue with such agreements. However, upon the expiration of an existing tenancy agreement, the new purchaser/landlord can then make a fresh tenancy agreement with the existing tenants.