Pre and Post Possession Agreements
Possession agreements are typically required when the date of occupancy does not coincide with the date of closing. Negotiating terms of possession is much easier when the terms are discussed at the time of the original contract. Too often, when terms are discussed last minute, undue pressure is created for Sellers, Buyers and their attorneys.
Here are some typical examples when possession agreements might be utilized:
1. A home is vacant home and the Buyer would like to occupy the home prior to closing. This can reduce some of the Seller’s costs, mainly yard maintenance and utilities. It also can generate income for the Seller in the form of rent. (Pre-possession)
2. A Seller is building a new home, but the new home is not completed and ready for occupancy. In this case, the Seller may choose to close on their existing home and remain in it until their new home is completed, delaying the Buyer’s move-in period. (Post- possession)
3. Another common scenario occurs when several Buyers and Sellers are transitioning from one house to another. It may not be feasible for everyone to move-in and move-out on the same day because moving companies cannot always accommodate everyone’s exact moving date. In this situation, Buyers and Sellers must work together to accommodate each another. When this situation arises, let each Seller have the opportunity to do a final cleaning, then perform your final walk-through inspection before making your final move.
Possession agreements should be drafted by attorneys to protect all parties involved in the transaction. To do so, Buyers and Sellers need to properly anticipate closing and occupancy dates far enough in advance. Many attorneys do not like pre-possession agreements because they are concerned about a number of issues:
- The Buyer may fail to close on the property.
- Once moved-in, the Buyer may find fault with the property.
- The Buyer could possibly damage the property.
Possession agreements will usually include these terms and clauses:
- An occupancy and closing clause.
- A specified rental amount.
- A security deposit clause.
- Property insurance requirements.
- Utility, maintenance and escrow requirements.
- Property condition - “as is” clause.
- Failure to pay and/or an escalated rent clause.
- Forfeiture of deposit clause.
- No alteration clause.
- Damage and negligence clause.
- Indemnity and liability clause.
Prior to taking possession, all parties should perform a final walk-through inspection to make sure everything is in order. It may even be a good idea to videotape the condition of your property prior to giving or taking possession. Review some sample possession agreements below: