Can a buyer see the lease agreement before buying a property?

Buying a Property With a Lease Agreement: What’s in the Box?

Your Rights as a Buyer.

 

Imagine purchasing a beautifully wrapped box at an auction. The seller assures you it’s a valuable item, but there’s a catch: you can’t open it until after you’ve paid. You take the risk, hand over your money, and finally unbox it—only to discover a complex set of rules taped to the inside lid. These rules dictate how the box can be used, who can access it, and even how much revenue it must generate for a stranger. This is what it feels like to buy a property with an undisclosed or unfavourable lease agreement. You’re stuck with terms you never agreed to, all because you couldn’t “open the box” before signing.

 

Here’s what you need to know about your rights as a buyer when a lease is part of the deal—and how to avoid inheriting a legal nightmare.

The “Box” Analogy: Why Lease Agreements Matter

In property transactions, the lease agreement is the “hidden rulebook” inside the box. If the seller or agent refuses to let you review it upfront, you’re essentially buying blind. For example:

• The lease might tie you to a tenant paying below-market rent for years.

• It could include clauses that make eviction nearly impossible. (Eviction laws)

• It may shift maintenance costs unfairly onto you, the new owner.

 

 

Under South African law, you have the right to open the box before you buy.

Here’s why:

1. The Law Says You Can’t Be Kept in the Dark

Your right to disclosure:

• Material Facts Matter: Lease agreements are legally classified as material facts. Sellers and agents must disclose them under the common law duty of disclosure and statutes like the Consumer Protection Act (CPA). Hiding a lease is like hiding termite damage—it’s deceptive and illegal.

 

• CPA Protection: The CPA (Section 41) requires full transparency in transactions involving consumers. If a tenant exists, the lease terms directly affect your decision to buy. Withholding it violates your right to informed consent (Section 9).

Consequences for sellers who hide the “box”

• Misrepresentation Claims: If the lease contains unfavourable terms (e.g., rent control, indefinite renewals), you can sue for damages or cancel the sale.

• Regulatory Action: Agents risk penalties from the Property Practitioners Regulatory Authority (PPRA) for nondisclosure.

 

2. The Offer to Purchase (OTP) is Your Lifeline

Most Offers to Purchase (OTPs) include a clause like: “This sale is subject to the terms of the existing lease agreement.”

But what if the lease isn’t attached?

• Invalid OTP: The Alienation of Land Act requires material documents (like leases) to be annexed to the OTP. If it’s missing, the contract may be voidable.

• Conditional Approval: You can insist on making the OTP conditional upon reviewing and approving the lease. Never sign until you’ve seen it!

 

3. What If You “Open the Box” and Hate What’s Inside?

If the lease reveals deal-breaking terms, you have options:

1.  Walk Away: If the lease wasn’t disclosed upfront, the CPA allows you to cancel within 90 days for nondisclosure.

2. Renegotiate: Demand rent adjustments, lease termination clauses, or a price reduction to offset risks.

3. Shift Liability: Require the seller to resolve problematic terms (e.g., evicting a nonpaying tenant) before transfer.

How to Protect Yourself

• Demand the Lease Upfront: Treat it like a title deed. No lease, no signature.

• Get a Property Attorney: Have them scrutinise the lease for red flags (e.g., automatic renewals, subletting rights).

• Verify Everything:

           •   Confirm tenant deposits were correctly handled.

           •   Check prepaid meter certifications and unit numbers against municipal records.

The Bottom Line

Buying a property with a lease is not a gamble you should take. The law entitles you to open the “box,” inspect its contents, and decide whether the rules inside work for you. If a seller or agent refuses, walk away—they’re handing you a ticking time bomb, not a bargain.

 

Remember: When it comes to leases, what you don’t know can (and will) cost you. Report the agent to the PPRA immediately if you don’t receive a lease agreement. 

Legal references:

1. Legal Duty of Disclosure

As the seller’s agent, you are bound by the common law and statutory duty to disclose all material facts affecting this transaction. Lease agreements are unequivocally material to a purchaser’s decision-making process under.

Section 6(4) of the Housing Consumers Protection Measures Act and established precedent (Odendaal v Ferraris). Your refusal to provide these documents constitutes a breach of this duty, exposing both the seller and your agency to claims for damages or rescission.

 

2. Consumer Protection Act (CPA) Violations

Here are the verified references from the Consumer Protection Act (CPA) No. 68 of 2008 supporting the claims:

 

Section 41: Disclosure and Transparency

• • CPA Section 41(1) mandates suppliers to “disclose full details of any charge, penalty, or other financial obligation” in transactions. This aligns with the requirement for “full transparency” as mentioned above.
  • Source: CPA 68 of 2008, Section 41.

 

Section 9: Right to Information

• • CPA Section 9(1) states consumers have the right to receive information “in plain and understandable language,” including the material terms of agreements. Withholding a lease agreement violates this right.
  • Source: CPA 68 of 2008, Section 9 (see Part A: Fundamental Rights).

 

Section 40: Prohibition of Misrepresentation

• • CPA Section 40(1) prohibits suppliers from making false, misleading, or deceptive representations. Withholding critical terms (e.g., lease agreements) could constitute misrepresentation.
  • Section 40(3) explicitly prohibits unconscionable conduct, defined as exploiting vulnerabilities or failing to disclose material facts. Non-disclosure of lease terms may fall under this.
  • Source: CPA 68 of 2008, Section 40 (pp. 32–34).

 

Enforcement by the National Consumer Commission (NCC)

• • The NCC is empowered by CPA Section 99 to investigate complaints and take enforcement action against unconscionable conduct or non-compliance.
  • Source: CPA 68 of 2008, Chapter 6: Enforcement.

 

Non-disclosure of material terms (e.g., a lease) violates Sections 9, 40, and 41 and could trigger NCC enforcement under Section 99. Always ensure written agreements are provided to consumers to comply with the CPA.

 

3. Offer to Purchase (OTP) Compliance

The OTP explicitly references the existence of a lease “subject to the terms thereof” (Clause [X]). Failure to annex the lease agreement prior to signature invalidates the OTP’s validity under Section 2(1) of the Alienation of Land Act and breaches the contractual requirement for good faith.

Without immediate disclosure, our client reserves the right to withdraw from the transaction and pursue cost recovery.

 

Consequences of Non-Compliance

Failure to comply will compel our client to:

• Report the matter to the Property Practitioners Regulatory Authority (PPRA) for investigation;

• Pursue remedies under the CPA, including cancellation and damages;

• Seek cost orders against the seller and your agency for breach of contract.