Closing day on your property has come. You will sit at the table, sign loads of documents, hand over keys, and complete the sale of your property to someone else. This, of course, entails you leaving the property so the buyers can move in, but what happens if you can not leave on the day of closing?
When do You Need an Occupancy Agreement?
This scenario is not uncommon. Say, for example, you are selling your home in anticipation of moving into a new one. The new home has an unforeseen delay in closing, postponing your move-in date. Now you are selling your home, and moving out of it, yet you have nowhere to go.
In these situations, the buyer and seller can negotiate an occupancy agreement. Assuming all parties agree, this agreement allows a seller to remain in the home after closing for a short period of time (or whatever time agreed to by the parties). The seller will remain in the property as a tenant, leasing the property from the new owners (the buyers).
What an Occupancy Agreement Entails
This kind of transaction requires the execution of a Use & Occupancy Agreement, usually at closing, that is similar to a lease that would be signed in a traditional landlord tenant situation.
The agreement will normally require the payment of a fee/rent, require that the property be maintained by the seller/tenant, and require that the property be left in broom clean condition at the time the occupancy terminates. It should also address whether there is a security deposit, describe the right of the owner to enter onto and secure the property, and detail who is responsible for damage beyond anyone’s control (i.e., due to weather).
When occupancy terminates, the owner (the buyer), just like a landlord, will have the right to conduct a walk-through to make sure the property is in the same condition as it was at the time of closing.
Benefits of Occupancy Agreements
From a buyer’s perspective occupancy agreements can have pros and cons. The pros may be money; if you are not in a huge rush to move in, you may be able to make some extra cash during the time the seller is renting. You also may be able to negotiate a better purchase price, if you indicate a willingness to allow the seller to remain in the home post closing.
The negative is that you now have a tenant, and if that tenant does not pay rent, or leave when the agreement expires, you may be left having to resort to legal action to evict the (former) seller. You also now find yourself acting like a landlord, even though you may have no idea how to do that, or what the legal responsibilities of a landlord even are.
Buyers who are allowing sellers to remain in the property and rent should also make sure that their loan agreements from lenders do not prohibit this. Many lenders may see this as violating riders that are often put on loan documents prohibiting the renting of property.
Questions about closing on your property? Contact real estate attorney Agnes Rybar LLC, to make sure you have representation in any New Jersey real estate transaction.