Real estate transactions in New Jersey do not always line up perfectly with a buyer’s or seller’s moving plans. Sometimes a seller needs to remain in the home after closing. Other times, a buyer hopes to move in early before the final walkthrough or closing date. In these situations, a Use and Occupancy Agreement (U&O) becomes a crucial tool. While it isn’t a lease, it functions similarly by giving temporary rights to the property during a narrow window of time. New Jersey buyers and sellers should understand how these agreements work, why they are used, and how to structure them to avoid misunderstandings.
Why a Use and Occupancy Agreement May Be Needed
A U&O agreement is often used when closing dates shift due to lender delays, title issues, moving schedules, or construction timelines. Examples include:
- The seller needs two extra weeks to complete the purchase of their next home.
- The buyer must move in early to start a new job.
- A title issue delays closing but both parties want to avoid losing the deal.
- Weather or unforeseen circumstances make moving impractical on the original date.
A U&O provides flexibility while keeping the transaction on track.
What a U&O Agreement Covers
Even though temporary, a U&O must be carefully drafted. A well-written agreement should address:
- Exact dates of occupancy
- Daily or monthly fee for use (often comparable to market rent)
- Responsibility for utilities, maintenance, and insurance
- Security deposit, if any
- Penalties for staying past the agreed date
- Liability for damages that occur during the occupancy
- Access rights, such as inspections or repairs required before closing
Because a U&O is not a traditional landlord-tenant arrangement, the agreement must clearly state that no tenancy is created, preventing unintended tenant protections under New Jersey law.
Risks for Buyers and Sellers
U&O agreements are useful, but each side should understand the risks. For sellers allowing a buyer to move in early:
- The buyer may cause property damage before closing.
- Delays in closing can leave the seller with limited recourse.
- Insurance policies may need temporary adjustments.
For buyers allowing a seller to remain after closing:
- The seller may refuse to vacate on time, causing costly hold-ups.
- The buyer becomes responsible for the home even though they aren’t living in it yet.
- Any damage during the seller’s stay becomes harder to attribute.
Clear, enforceable terms help minimize these issues.
Legal and Insurance Considerations
Insurance is often overlooked in U&O agreements. Both parties must notify their insurance carriers to confirm coverage during the temporary occupancy period. Some carriers require a rider or short-term policy for protection.
The agreement should also specify who is responsible for injuries that occur on the property, who pays for repairs, and how to handle emergencies.
Use and Occupancy Agreements provide essential flexibility in New Jersey real estate transactions, but only when drafted carefully and tailored to the parties’ needs. If you are buying or selling a home and facing timing challenges, The Law Offices of Agnes Rybar LLC can help you negotiate and prepare a clear, enforceable U&O that protects your rights. Contact us today to ensure your closing stays on track and your interests remain safeguarded.
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