This Ethiopian Cassation Division decision (የሰ/መ/ቁ. 62858) clarifies the rights of a tenant when a property they are leasing is sold due to the landlord's debt.

Case Details:

• Cassation Case No.: 62858
• Date: Ginbot 16, 2003 E.C. (Ethiopian Calendar) - Likely late May or early June 2011 Gregorian Calendar
• Parties: Piz Finder International Ethiopia (Applicant) vs. Commercial Bank of Ethiopia and the Ethiopian Olympic Committee (Respondents)
• Court: Cassation Division of the Federal Supreme Court of Ethiopia
• Subject: Rights of a tenant when leased property is sold due to foreclosure.

Key Facts:

• The Applicant leased a property from a landlord.
• The landlord had taken a loan from the Commercial Bank of Ethiopia (1st Respondent), using the property as collateral.
• The landlord defaulted on the loan.
• The bank foreclosed on the property and sold it to the Ethiopian Olympic Committee (2nd Respondent).
• The new owner (2nd Respondent) notified the Applicant to vacate the property.
• The Applicant argued that the notice to vacate constituted unlawful disturbance ("hukut") because their lease agreement was still valid.

Cassation Division Decision:

• The Cassation Division upheld the lower court's decision, which had dismissed the Applicant's claim of unlawful disturbance.
• The Cassation Division ruled that the sale of the property due to foreclosure did not constitute unlawful disturbance of the tenant's rights.
• The Court clarified the interplay between lease agreements and foreclosure sales. It stated that while a registered lease agreement exceeding five years can be used as a defense against the new owner under certain conditions (referencing articles 2899 and 2931 of the Civil Code), this does not mean the tenant has an absolute right to remain on the property until the end of the lease.
• The Court emphasized that the bank, in exercising its right to sell the property due to the landlord's default, was acting legally under Proclamation 97/90. The new owner, having legally purchased the property, has the right to possess it.
• The Cassation Division clarified that the relevant articles of the Civil Code (1184, 1204, 2899, 2931, 2932/1, and 2933) address the relationship between the seller and buyer regarding existing lease agreements, but they do not prevent a lawful sale due to foreclosure. The new owner is bound by the remaining term of a registered lease exceeding five years under certain conditions, but the sale itself is valid. For unregistered leases, the buyer is bound for up to five years from the date of the sale's registration.
• The Court distinguished between lawful actions taken under legal authority (foreclosure and subsequent possession by the new owner) and unlawful disturbance ("hukut"), which involves forceful or illegal actions. The bank's and the new owner's actions in this case were deemed lawful and did not constitute unlawful disturbance.

Key Legal Rule (Interpretation of Law):

Foreclosure Sale and Tenant Rights: A lawful foreclosure sale terminates the original lease agreement with exceptions for registered leases exceeding five years. The tenant's right to possession is subject to the bank's right to foreclose and the new owner's right to possess the property. While certain articles of the Civil Code protect tenants' rights vis-à-vis the buyer under specific circumstances, these provisions do not prevent the sale of the property due to foreclosure. The act of the bank selling the property and the new owner requesting possession does not constitute unlawful disturbance ("hukut") as long as these actions are carried out legally. The tenant may have a claim against the former landlord for breach of contract, but they cannot prevent the lawful sale or the new owner from taking possession

This Ethiopian Cassation Division decision (የሰ/መ/ቁ. 70824) addresses the issue of which collateralized property should be sold first when a borrower defaults on a loan secured by multiple properties.