Pre and Post-Closing Possession Agreements
August 10, 2018 |
If you represent a buyer that requires immediate housing and wants possession prior to closing, consider a pre-closing possession agreement. The agreement is similar to a lease, whereby the parties agree to certain terms and conditions of the buyer moving in before the buyer actually purchases the property. As with any agreement, it is important the agreement be reduced to writing and signed by the parties. This aids in avoiding misunderstandings later as to what the parties agreed to concerning possession.
A pre-closing possession agreement should disclose the date of possession and the expected date of closing. The buyer should expect to pay some consideration for the benefit of moving in early. The agreement should prohibit any alteration of the property prior to closing, which protects the seller in the event the closing does not occur. The agreement should require the buyer to surrender possession if closing does not occur and require buyer’s payment of all fees/costs (including attorney’s fees) should the buyer fail to vacate when required.
These agreements do present risks for the seller. All of these risks are associated with the buyer’s ultimate inability or refusal to purchase the property. The buyer may move in the property and start making changes (painting, removing fixtures, replacing appliances) which could make the property less desirable to other buyers. The buyer may move in and either identify more repairs needed or second guess buying the property altogether. Last, a seller is tasked with regaining possession should the buyer fail to close. This process could involve hiring an attorney and the time and expense of filing a lawsuit to recover possession.
If you represent a seller that is interested in retaining possession after closing, consider utilizing a post-closing possession agreement. These agreements help to protect both the buyer and seller by reducing the terms of possession to writing. With a written agreement, chances are there will not be disputes or misunderstandings as to what is expected of the parties.
The post-closing possession agreement will have a date certain by which the seller will deliver possession of the property to the buyer. The agreement will require the seller to deliver the property in the same condition as it was on the date of closing, with all fixtures and appliances in good condition and repair. The seller should commit to maintaining all current casualty and liability insurance on the property to cover any personal injury, death or property damage occurring while the seller is still in possession. Typically, the seller agrees to pay any utilities and other expenses and any costs (including attorney’s fees) should the seller fail to surrender possession at the agreed upon time.
Your personal attorney can draft a form pre and post-possession agreements for use in your practice. These agreements may help to remedy possession issues that accompany the various needs of both buyers and sellers.