Lease of Immovable Property: Change of the Owner

Lease of immovable property is a contract through which the lessor allows the lessee to use and profit from the leased immovable property such as land and/or building in return for compensation (rental fee). In case where the ownership over the leased property is transferred to person who is not party to the contract, there might be a concern whether or not such change has negative impact to the rights of lessee under the lease contract. This short article aims to discuss on this matter.

In order to protect the lessee’s rights, parties tend to include a clause in the their contracts specifically stipulate that the lessor has the right to sell the leased property to any person provided that it causes such new owner to respect the lease rights of the lessee. There are also cases where lessor’s right to sell or dispose the leased property is subject to prior approval of the lessee. Furthermore, the parties may agree that the lessee has the preemptive right to buy the leased property before any person who offers the same price.

In addition to such contractual approach, the Civil Code, in particular Article 598, provides that a lease of an immovable property may be held again a subsequent acquirer of any real property right over the immovable by virtue of the fact that the lessee has occupied and continuously used and profited from the leased immovable. A lessee actually occupying a leased property may exercise the same rights as the owner to demand return of a dispossessed object, for the removal of disturbance, for the prevention of disturbance, and/or against any infringement of the lease rights. Accordingly, the change of ownership over the leased immovable will not affect the rights of lease of the lessee provided that the lessee has occupied and fulfilled its contractual obligations under the lease contract.  The new owner becomes the lessor in place of the former owner as the party to the lease contract.

In practice, there is an arrangement among the new owner, former owner and the lessee to ascertain their rights and obligations under the lease contract due to the change of ownership over the leased immovable property. Such arrangement can be made under the supplementary contract or correspondence letters.

Published by Kanharith Nop

Kanharith Nop obtained a Degree of Doctor of Laws (Comparative Law) from Nagoya University, Japan in March 2013. His research interests and areas of practices include corporate law, employment and labor laws, contract laws and laws on securities of obligations.

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