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

Real Estate (2nd edition)

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.

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).

Hong Kong Small Flag Hong Kong

If the property transaction is effected by a share transfer and not an asset transfer, there is no change of registered owner holding the property and the benefit of any occupational leases and income remains the same.

If the property is sold as an asset transfer subject to a lease, the sale and purchase agreement normally will specify that the purchaser will assume all the rights, obligations and liabilities under the subsisting lease. A novation agreement should also be entered into to replace the purchaser as the new lessor who shall continue to receive the rental income after completion of the purchase of the property.

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.

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 buyer could demonstrate that it had no knowledge of the existence of the lease at the moment of the acquisition and pretends the termination of the lease based on such lack of knowledge.

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.

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.

Switzerland Small Flag Switzerland

Any lease agreement on the whole or part of the real estate, such as a lease of the entire building or office or parking spaces, is 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, but the new owner is entitled to terminate the lease agreement for the next legal term, should the new owner be able to demonstrate an urgent need of such building for the conduct of its own commercial activities. In such case, an indemnity may be due to the tenant by the previous owner.

There are no specific formalities for such transfers. 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. Any rent will be due to the buyer as from the day of the registration of the deed of sale with the land registry, if no other date has been agreed between the parties in the deed of sale.

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. In the typical case, however, the seller and purchaser will execute a separate instrument assigning all of the leases that affect the property.

Peru Small Flag Peru

Yes, the transfer of real estate ownership entails the transfer of the collection rights on the proceeds of the leases or other interests over them. However, it is suggested to immediately communicate the acquisition to the tenants so that the rents are paid directly to the new owner.

In addition, the tenant is suggested to file with the Public Registries any lease and usufruct interests, among others, so that these rights are enforceable and, therefore, compulsorily recognized and observed by the new property owner.

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.

Italy Small Flag Italy

Upon transfer of a real estate property leased through a lease agreement (contratto di locazione), the purchaser automatically (and by operation of law) succeeds into the lease agreement in lieu of the seller, and the lease profits (i.e., rents) pertain to the purchaser as from the closing date.

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.

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.

Japan Small Flag Japan

Upon the transfer of the ownership interest in land, the contractual status of lease as to the land, including the right to rental income, is automatically transferred 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.

Updated: December 12, 2018