When you sell or buy a new home, important real estate dates do not always match up with your moving timeline. Many homeowners find that the date they need to vacate their current residence is off by a few days from the closing date on their next home. If the seller is lucky, the buyers will have a place to stay during the gap, and the sellers can remain in the residence after closing. This scenario is called post-settlement occupancy, and both sellers and buyers need to understand how it works and what is needed for a smooth post-settlement experience.
What is a Post-Settlement Occupancy Agreement?
If you think you will need to remain in the residence after closing, you need to discuss this with your real estate agent early so that it can be negotiated in the buyer’s offer and sales contract.
It is critical that both the buyer and seller agree to and sign a post-settlement occupancy agreement. Homeowner’s insurance does not always cover claims that occur during a seller occupancy, so the agreement protects the buyer against events that could occur during the seller’s occupancy. This legally binding document outlines the responsibilities of both the seller and the buyer.
During the occupancy, the seller pays a security deposit and daily rate of occupancy to the buyer — both of which were agreed to beforehand and included in the post-settlement occupancy agreement.
While the post-occupancy agreement is similar to a lease, it is important that you understand the difference between the two. A lease affords certain rights to the occupants, who are referred to legally as “tenants.” Conversely, a post-settlement occupancy agreement does not make the occupants “tenants,” meaning the occupants are only afforded the right to stay on the property.
What is Included in the Agreement?
Your real estate agent should have access to the standard jurisdictional form for post-settlement occupancy agreement, which will help you through the post-settlement occupancy process.
The standard form post-settlement occupancy agreement includes:
The agreement in writing;
The date of occupancy and settlement;
A set daily occupancy rate, plus a security deposit amount which is paid at closing;
Liabilities for the seller and buyer outlined clearly (more on that below); and
Signatures of all buyers and sellers, as well as the signature of the escrow agent (typically the title company) who is holding the security deposit pending the final walkthrough.
In most cases, a final walk-through of the home is conducted before the seller’s occupancy begins. This allows both parties to see the condition of the home, and it protects the buyer from any damage that the seller may cause during post-settlement occupancy. It is important to pay close attention to the claims period timeframes outlined in the post-settlement occupancy agreement. Failure to make a written claim to the seller and escrow agent within the prescribed timeframes is often a waiver of claim.
The post-settlement occupancy agreement covers liability insurance coverage, plans in the event of calamities like fire or flooding, the handling of utility bills, and the maintenance of appliances and fixtures. Additionally, the post-settlement occupancy agreement makes clear the consequences of agreement violations.
For example, if the seller stays in the residence longer than the agreed upon date, many agreements stipulate that the occupant then pays a daily rate that is double or triple the original amount for the additional days. In the case of a violation, the seller can also require that the occupants vacate the premises, forfeit the security deposit, and/or pay any resulting fees.
How to Create Your Own Post-Settlement Occupancy Agreement
To get started, talk to your real estate agent about drafting an agreement, Then, you all will work with the buyer’s agent to negotiate the agreement and coordinate a date to have all parties sign.