A sale deed is complete when the purchaser hands over the money and the seller hands over the keys. A post-closing agreement is an agreement signed after entering into a sale deed. This allows the seller to live in the house after the settlement is signed. Now we will briefly see about Post Closing Occupancy Agreement.
In many situations, the seller may need more time to move out of the house and this is when the seller and the purchaser sign a post-closing agreement. In this kind of agreement, it is decided that the property would be in the possession of the seller even after the sale is finalized. The seller rents back the house from the purchaser.
Situations in which can you enter into a post-closing agreement
A post-closing agreement is entered between the seller and the purchaser of the property, to let the seller stay at the property even after the date of sale. For this, the seller has to pay rent to the purchaser. The most common reasons for two parties to enter into this are:
- The seller is purchasing a new house and to complete the sale transaction of that house, he requires funds that he is raising by selling this house. To avoid moving out for just a few days until the closing of the new house, the seller may want to stay in the old house until the purchase of that house is completed.
- At the time of finalizing the sale agreement, the purchaser would be getting a good interest rate that he would not want to lose, hence he would enter into a sale agreement before the seller is ready.
- The seller would have notified the purchaser that their new house is being renovated due to which they cannot move out and would have to occupy the old house until the renovations are completed.
- Purchaser agrees to the seller’s post-occupancy demand because he is terrified of not finding another property as per his wishes.
Terms and Conditions
A post-closing agreement must clearly state the purchaser’s and seller’s names and other personal information. It should mention the period of occupancy, the settlement date, and the daily occupancy rate. The amount of security deposit that the seller deposited for this agreement. The liabilities of the purchaser and seller should be stated clearly like who would be accountable for the utility bills, the plan of action if a disaster occurs, and who would look after the maintenance of appliances and fixtures.
The agreement should have a clause that stipulates the consequences of breach of the agreement. For example, if the seller would have to pay a double or triple the daily occupancy rate for every additional day, forfeiture of the security deposit, or pay additional fees. The agreement should end with the signatures of the purchaser and the seller and the real-estate agent who holds the security deposit.
Can a post-closing agreement be made without a lawyer?
If consulting a lawyer to write your post-closing occupancy agreement proves to be expensive, you can write the agreement yourself or use a contract template. Keep in mind that drafting this legal document without legal guidance is dangerous. To safeguard your interest as well as save money, you can have an attorney evaluate the contract after you have finished drafting or altering it. As a result, the fees will be lower, and you can rest assured that all necessary goods will be covered.
Areas of concern in a post-closing agreement
- The post-closing agreements are tricky and should be made only as a last option. They should be drafted keeping in mind that all the parties to the agreement are protected and with legal guidance. If not made with care, then these agreements can have serious repercussions for both parties.
- The liability in the post-closing occupancy period generally falls onto the sellers. The agreement should have a clause to specify who would be responsible for the liabilities in case of any damages or loss.
- Like every contract there is a risk of non-fulfillment of the contract and here it is if the seller refuses to leave the property even after the occupancy period is over. The contract should state what would happen in such a scenario.
- Probably the most unnoticed clause of the agreement is that the agreement is a license and not a lease. A license is just permission to do something on the property, in this case, it’s a license to stay on the property. Whereas, a lease is a transfer of the right of the immovable property.
Conclusion
A post-closing agreement can work in the favor of both parties to the contract if drafted correctly. However, there is always a risk factor attached to it. The purchaser and seller should consider all areas of concern before finalizing the contract.
FAQ
- Some important points of the agreement.
The important points of the agreement are escrow, carrying costs, monetary damages, insurance, the release of escrow, and access.
- Are rent-back agreements and the post-closing occupancy agreements the same?
Yes, the post-closing occupancy agreement and rent-back agreements are the same.
- What is the period beyond which you should hire an attorney for drafting the agreement?
A 60-day period is an ideal one, beyond which you should consider hiring an attorney.
