Home Front by Peter Crowley: Best to trust a pro for post-sale occupancy agreements
While we are certainly witnessing a shift in the residential real estate market (discussed in a previous article), the inventory of available homes for sale still remains historically low. As a result, post-occupancy agreements are far more frequently used by buyers and sellers than in a balanced market.
A pre-occupancy agreement, while less frequently used, involves the prospective buyer occupying the home prior to the actual closing, whereas a post-occupancy agreement involves the seller remaining in the home for a period of time after the actual closing of the home. Both types of agreements carry similar risks and considerations, but since the post-occupancy agreement is more prevalent in the current market, I will focus on some of the issues surrounding this agreement.
The typical scenario involving a post-occupancy agreement involves a seller who is waiting to close on their replacement home (possibly a new construction home that isn’t quite finished or they have yet to identify their replacement home) and wishes to remain in the home for a period of time after the closing. The length of time is usually quite short – sometimes days, weeks, or a few months, and this is where the first problem arises. Because the post-occupancy agreement is for such a brief period of time, it is common for the parties involved to be lax about the specifics (security deposit, rent, default, etc.) That is why an experienced Realtor will utilize the appropriate addendum to the sales contract which usually will specify a period of time (10 days is normal) for the parties to sign an actual lease or formal post-occupancy agreement prepared by a Florida real estate attorney.
Oftentimes the buyer and seller feel an actual lease is overkill for such a simple and brief agreement between the parties. The problem arises, however, when the agreed upon period of time expires and the seller refuses to vacate the property.
The simple answer would be to just evict the seller, but without a proper agreement providing all of the rights for both landlords and tenants under the Florida Residential Landlord and Tenant Act, Chapter 83, Part II, Florida Statutes, the process to remove an uncooperative seller is lengthy, complicated and expensive.
By utilizing the expertise of a Florida real estate attorney familiar with Florida leases, all of the specifics (rent amount, term, security deposit, default, etc.) can be clearly spelled out in an agreement mutually agreed to by both parties. The protections provided by the Florida Residential Landlord-Tenant Act allows for a much simpler and cost effective eviction process should a problem arise.
Another problem that can arise with post-occupancy agreements is the potential for problems when a lender is involved in the transaction. Most lenders will require a buyer to sign an affidavit at closing stating that the buyer will occupy the property within 60 days of closing. If the contemplated post-occupancy term is longer than 60 days, this could create a problem for the buyer’s financing. Some insurance companies may also have an issue with post-occupancy agreements as well so it is important to check with your insurance agent before entering into a post-occupancy agreement.
Sometimes unforeseen circumstances arise that require an extension of the post-occupancy agreements, possibly for as long as six months. Again, a properly drafted lease agreement will anticipate this possibility and spell out the notice requirements for such an extension and further obligations of the seller/tenant for maintenance, repairs, etc.
A post-occupancy agreement may seem simple at first glance – what could go wrong in one or two weeks? Experienced Realtors and real estate attorneys understand the pitfalls of these seemingly simple agreements.
There is absolutely nothing wrong with utilizing a post-occupancy agreement but be sure to consult with a real estate attorney for a properly drafted agreement between the parties. The in-house legal counsel at Re/Max Alliance Group has gotten very versed on the ins and outs of pre and post-occupancy agreements and provides a valuable service to our customers should the need arise.
Peter Crowley is president of Re/Max Alliance Group.
This article originally appeared on Sarasota Herald-Tribune: Peter Crowley: For post-occupancy agreements, consult with an expert
