On the sale of freehold interests in land does the benefit of any occupational leases and income automatically transfer

Real Estate (3rd edition)

Austria Small Flag Austria

Leases that are registered in the land register automatically transfer to the buyer in any case. Usually only long-term leases that are not subject to the Austrian Tenancy Act ("MRG") are registered with the land register, but any lease (if signed in the required form) can be registered.

In Austria, lease agreements subject to the MRG are automatically transferred with the transfer of the ownership rights in the property. The buyer automatically enters into the lease agreement with the transfer and therefore the tenant is obligated, after he has been informed about the change of landlord, to pay the rent to the buyer. This provision is mandatory and therefore cannot be waived by the parties.

In case the MRG is not applicable and only the provisions of the Austrian Civil Code ("ABGB") apply, both landlord and tenant may terminate the lease agreement if the lease is not registered in the land register. This right to terminate the lease agreement can be explicitly waived by the parties of the lease agreement. Otherwise the lease transfers automatically.

Brazil Small Flag Brazil

Unless otherwise agreed under the transfer instrument, the new owner of the property shall be entitled to any incomes or rents related to the properties from the transfer date on. For said purpose, the relevant debtors must be notified of the change of ownership and informed of the new payment instructions.

Please refer to Section 15 with regards to lessor’s right of first refusal and to maintaining the lease in force further to the sale of freehold interests.

Cayman Islands Small Flag Cayman Islands

11.1 Yes – no formalities are required beyond the registration of the transfer of land. However, a lessee is afforded protection from a claim for non-payment of rent to the transferee to the extent the lessee has not received notice of the transfer.

11.2 Commonly transferors and transferees will enter into a formal assignment of leases where there are additional commercial terms between them.

Cyprus Small Flag Cyprus

When the immovable property being sold is occupied by a tenant, the Vendor has the obligation to inform both the tenant and the purchaser about this fact. If the tenancy is a tenancy protected by the tenancy tribunal law or if the tenancy period has not expired at the time the property is transferred to the purchaser, the purchaser will be obliged to respect the tenant’s rights under such tenancy.

Denmark Small Flag Denmark

Yes, in case of sale of freehold interests in land (i.e. transfer of ownership of real estate) all benefits under occupational leases are automatically transferred to the buyer.

France Small Flag France

Upon acquisition of the property, all occupational leases granted on the property are, as of right, transferred to the purchaser. The purchaser will, thus, automatically become the new landlord under the leases.

Germany Small Flag Germany

Yes – no formalities are required; leases transfer automatically at the time of registration of transfer of ownership in the land register. However, as transfer of title only occurs some weeks or months following closing (see Q9 above), leases are typically assigned at closing (as part of the SPA provisions for closing).

Greece Small Flag Greece

The benefit of any occupational leases and income automatically transfer on the sale of interests in land, unless otherwise agreed on the lease agreement.

Hungary Small Flag Hungary

Yes, no formalities are required beyond the registration of the ownership change, but the tenants needs to be informed on the ownership change.

India Small Flag India

Yes, unless the terms of transfer expressly provide to the contrary. Usually, notices calling upon lessees / tenants to attorn to the purchaser are served, post completion of the transaction.

Ireland Small Flag Ireland

Yes.

Japan Small Flag Japan

As a general rule, upon the transfer of the ownership interest in land, the contractual status of the lessor as to the land, including the right to rental income, is automatically transferred to an assignee of the land if the lease is registered, or if the lessee owns premises registered under their name on the land. Obligations to return lease deposits to the lessee after the end of lease contracts are also automatically transferred upon the transfer of the ownership interest in land. This doctrine has been established by judicial precedents, and has now also been stipulated in the Amended Civil Code.

However, under the Amended Civil Code, the contractual status of lessor may remain with an assignor if both parties agree that the contractual status of the lessor is not transferred to an assignee, and that an assignee leases the land back to an assignor. If the contractual status of lessor is automatically transferred to a new landlord as a result of ownership change, then it can be interpreted that consent to the change of lessor (from the new landlord to the old landlord) be required to be obtained from a lessee in the case that the old landlord keeps leasing the land to a lessee by renting such land from the new landlord. This may cause unnecessary administrative workload, and complicate contractual relationships with a lessee, and thus the Amended Civil Code allows that the contractual status of lessor may remain with an assignor as above.

Kenya Small Flag Kenya

On the sale of freehold land, the occupational leases and income would automatically transfer to the new owner of the land. However, where the lessee is not given notice of the sale of the property by the lessor, the lessee will not be liable for continuing to pay rent to the outgoing lessor until notice of the sale is given to the lessee.

Mexico Small Flag Mexico

Under Mexican civil law, lease rights run with the real property conveyance. In this case, tenant has a right of first refusal in case landlord decides to transfer the real estate over which the lease was created (unless such right is waived), and landlord must give tenant prior notice of the intention to sell in order to allow tenant to decide whether or not the right of first refusal is exercised.

As a general rule, the lease will transfer and subsist in the same terms of the original lease agreement, but now tenant shall pay the rent to the new owner, including unpaid rents. The new owner must notify tenant of the title transfer in order to have the right to demand and collect rent payments.

Monaco Small Flag Monaco

Any lease agreement of real estate is, as of right, transferred to the buyer in case of the sale of such real estate. The lease agreement will continue with the new owner under the same terms and conditions. There are no specific formalities as any real estate lease agreement will be mentioned in the deed of sale and the parties will acknowledge that such lease agreement is transferred to the buyer with the sale of the real estate who becomes the new landlord.

Romania Small Flag Romania

Yes, the property’s purchaser may benefit from the lease agreement concluded by the former land owner with a third-party tenant, unless the lease agreement provides a change of ownership clause which may be invoked by the tenant upon the sale of the property.

The purchaser must also honour all leases registered in the land book or, in the case of agricultural land, in the land registries kept by the local City councils.

Russia Small Flag Russia

In Russia, by virtue of law, occupational leases and future rental income automatically transfer upon the sale of freehold interests in real estate.

However, this effect may be undesirable for the new buyer, as in some cases the buyer does not wish to have tenants in the purchased property. Still, under Russian law the buyer mandatorily becomes bound by any lease agreements that exist with respect to the real estate object, and may not generally terminate them until their expiration (unless the agreement contains a change of control clause or other special grounds for termination). In such cases due diligence has to be conducted to identify leasehold rights prior to the purchase of real estate. Long-term leases (over 1 year) are subject to registration in the public register, which significantly reduces the respective risks for the buyer. However, short-term leases (less than 1 year) at times cannot be identified in advance, but the purchaser will still be unable to forcibly eject the tenants from the purchased property until the expiry of lease.

Slovenia Small Flag Slovenia

The transfer of ownership of real estate does not however affect the pre-existing leases with all the associated rights, while each (new) acquirer of the ownership right enters into the legal status of the previous one, as this is the case both in commercial lease and in ordinary (residential) lease.

Spain Small Flag Spain

In general terms, occupational leases (and related income) are transferred with the sale of the commercial real estate, unless it is agreed otherwise in the lease agreement or if the purchaser can demonstrate that it had no knowledge of the existence of the lease at the time of acquisition and intends to terminate the lease based on such lack of knowledge (and provided the lease agreement is not registered in the Land Registry).

Sweden Small Flag Sweden

In principle, occupational leases, including the right to receive rental payments, automatically transfer to the new owner when a property or site leasehold is transferred.

Thailand Small Flag Thailand

Yes. If there is a sale of real estate, the CCC specifically provides that a lease of real asset does not interfere with a transfer of such real estate ownership – the transferee therefore takes ownership subject to the occupational leases, without binding to specific provisions (if any) of such occupational leases. In practice, it is therefore advisable to arrange an addendum to the lease agreement acknowledging the change of the lessor, and agree additional terms (if any).

Turkey Small Flag Turkey

In case of a change of ownership taking place after the conclusion of the lease agreement for any reason, the new owner becomes automatically a party to the lease agreement under Code of Obligations. ("Sale does not void rent” rule) However, the new owner of the real estate may terminate the lease agreement for necessity of owner’s spouse, first degree relatives, legally dependents and himself/herself. In such case, the new owner should send a termination notice within 1 month after the transfer and the new owner can terminate the agreement by filing a lawsuit after 6 months.

  • Rule of "Sale does not void rent” does not apply to the expropriation process.
  • Another issue about the rule of "Sale does not void rent” is if sale is realized after the lease agreement has been established but the tenant has not actually occupied the leased property, then subjective impossibility will arise and the former owner will be obliged to pay compensation to the tenant but the tenant will not be able to use the property due to the owner change.

United Kingdom Small Flag United Kingdom

Yes – no formalities are required beyond the registration of the sale itself (see Q9 above for more details).

United States Small Flag United States

Yes. Nevertheless, in a typical transaction, the seller and purchaser will execute a separate instrument assigning all of the leases that affect the property.

Indonesia Small Flag Indonesia

The Indonesian Civil Code provides that a lease arrangement will not automatically terminate due to a sale of the underlying property, unless provided otherwise in the lease agreement. As such, the lessee has the right to continue as a tenant even if the owner of the property has changed. However, the Civil Code is silent as to whether the benefit of leases and income would automatically transfer to the new owner when the sale happens. On one reading, the fact that the new owner is obliged under the law to honour the rights of the lessee until the lease expires would imply that the new owner should be entitled to receive any remaining benefits from the lease. To remove uncertainty, the treatment of any existing leases including their remaining benefits should be specifically covered by the sale and purchase agreement between the seller and the buyer.

Morocco Small Flag Morocco

In Morocco, by virtue of law, occupational leases and future rental income automatically transfer upon the sale of freehold interests in real estate. The lease agreements will therefore continue with the new owner under the same terms and conditions. There are no specific formalities for such transfers, however, it is suggested to immediately communicate the acquisition to the tenants so that the rents are paid directly to the new owner.

Updated: December 17, 2019