Nuances of the Post-Closing Occupancy Agreement
The process of selling an old home and moving into a new one is rarely clean-cut. Since the two closings usually cannot happen simultaneously, the seller can be left without the roof over their head after closing the sale.
The solution would be for the seller and buyer to sign a post-closing occupancy agreement, which would allow the seller to remain on the property for a specified period after closing.
If you want to know more about this legal document, including the terms and conditions, possible ramifications, and other crucial elements, DoNotPay has the answers. Find out what other contracts our app can draw up in your stead!
A post-closing occupancy agreement enables the seller to continue living in their home after closing the sale, as long as they pay the buyer rent. There are many reasons the seller and buyer may decide to sign this agreement, the most common being:
- Seller is buying a new home and needs the revenue from the sale to complete the purchase. To avoid moving out of their home a few days before closing, the seller may ask to remain in their old house until the purchase is completed
- Buyer wants to close the sale before the seller is ready to avoid losing a good interest rate from the buyer’s lender
- Seller is renovating their new home and needs to stay in the old one until the renovations are done
- Buyer is afraid of losing the chance to buy a home in the desired area and agrees to the seller’s post-occupancy demand
Both parties should agree on the terms before signing the contract to avoid any misunderstandings at the time of closing.
A post-closing occupancy agreement must clearly outline the following:
- Buyer and seller’s name and other personal information
- Occupancy and settlement date
- Daily occupancy rate
- Security deposit amount
- Liabilities for the seller and the buyer, such as:
- Plans in the event of a disaster, for example, a fire or a flood
- Utility bill payment
- Maintenance of appliances and fixtures
- Consequences for breaching the agreement (for example, the landlord refusing to leave the premises after the agreed occupancy period):
- Paying a double or a triple rate of the original amount for every additional day
- Forfeiting the security deposit
- Paying additional fees
- Signatures of:
- Buyer and seller
- Real-estate agent holding the deposit for the seller
If hiring a lawyer to draw up your post-closing occupancy agreement turns out to be too expensive, you can try writing the agreement yourself or downloading a contract template. Bear in mind that creating this legal document without legal supervision is risky. The acceptable compromise would be to have an attorney review the agreement after you finish writing or customizing it. That way, the charges won’t be as high, and you still have the assurance that all necessary items are covered.
The post-closing occupancy agreements can be tricky and should only be used as a last resort. Typically, legal assistance is required to ensure all parties are protected. A poorly drafted and reviewed post-closing occupancy agreement can cause serious legal repercussions for both the seller and the buyer.
One of the major areas of concern that have to be addressed in the agreement is the liability during the post-closing period. Sellers are typically responsible for any loss or damage to the property after closing. They should carry their liability insurance coverage until leaving the property to avoid severe penalties.
Another issue may arise if the seller refuses to leave the property after the post-closing move-out period. In this case, the buyer would have to sue to evict the seller from the property.
The best way to handle these potential problems is to request that the title company withhold the security deposit from the seller. Assuming that everything goes well and there is no damage to the property during the rent-back period, the title company releases the security deposit back to the seller.
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