UNDERSTANDING THE OCCUPATION CLAUSE IN A SALE AGREEMENT

UNDERSTANDING THE OCCUPATION CLAUSE IN A SALE AGREEMENT

Occupation refers to the right to physically occupy the property. This usually takes place when the keys are handed over and the Purchaser is actually entitled to move in. There are only 2 types of occupation that can be recorded in a Sale Agreement:

  1. “vacant occupation”: this means that from that particular date the Purchaser can move into the property or place a tenant.
  1. “occupation subject to existing tenancies” this means that the existing lease will be ceded to the purchaser and that the current tenant will continue to rent from the new owner. Remember that the rights of a tenant in terms of a lease agreement trump those of a purchaser who has acquired the property. This is as a consequence of the principle of “huur gaat voor koop” which is well established in South African property law.

The question often arises whether the date of occupation should be a particular date in the sale agreement (to create certainty) or rather on registration of transfer (which is a target date, and cannot be guaranteed).
Occupation on transfer avoids the purchaser taking occupation and potentially delaying the transfer because of complaints regarding the condition of the Property. Occupation on transfer sees the purchaser take occupation only when ownership is passed but unfortunately this is not always possible, and each case needs to be dealt with in accordance with its specific circumstances and the parties’ requirements.

We suggest that occupational rent should be based on a market related rental for the particular property.

From the above brief synopsis the reader will note that occupation clauses can be tricky and can give rise to disputes if not formulated correctly. The parties are advised to seek advice from one of our attorneys when in doubt.

FRANK HOLLAND

 

  • On September 23, 2022
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