Post Closing and Pre Closing Occupancy can be a great way to negotiate timing for clients and can sometimes save a transaction. However, it is important to note that this practice can be riddled with liability issues and should be embarked on with a lot of diligence. It is a best practice to always call Laura Hazlett or me when writing up a transaction with a pre or post closing occupancy to make sure all of the bases are covered.
If a buyer is taking possession of the property before closing, be sure to have the Pre Closing Occupancy by Buyer Rider completed. The lease must state that the Paragraph 11 and Paragraph 12 no longer applicable and the Buyer accepts property in existing condition….. A lease must be prepared within 10 days of effective date. Even if the Buyer is going to be in the home for 1 week prior to closing, a lease is still required. This lease should be prepared by an attorney so that these considerations are included and the seller is protected. CR-5 – Pre-Closing Occupancy by Buyer Rider T (Rev 09_15)
If a seller is remaining in the property after closing, a Post closing Occupancy by Seller Rider must be completed. This rider states that the lease shall provide that Seller’s maintenance obligation under Paragraph 11 shall continue after closing until possession is delivered to the buyer, HOWEVER Seller’s repair, replacement and treatment and remedy in paragraph 12 shall not be extend beyond closing. A lease must be exectued within 10 days prior to closing and accepted by all parties. A lease governing the occupancy must be executed even if the Seller is going to be in the home for a short period of time. Once again this lease should be prepared by an attorney so that these special conditions are included and all parties are protected. CR-5 – Post-Closing Occupancy by Seller Rider U (Rev 09_15)
For either occupancy, the Rider must be included and noted in the contract as such. It is not acceptable to write in any occupancy terms on the sales contract. In both Riders, there is an area where the cost of lease preparation is identified. Be sure to use the Property Management attorney lease for preparation and for cost information refer to this previous post: Rental Policies and documents required
Paperwork is the only way we can protect our clients and ourselves. Verbal agreements, and assumptions in these occupancy situations are far to precarious. Get it in writing and get it done by a professional to protect all of us.
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