In a normal real estate transaction, after closing, the seller moves out, and the buyer takes possession of the house. However, there are times when the situation dictates that the seller may need to stay in the house after closing, or the buyer may need to move in before the closing. In these situations, it’s good to use a Use and Occupy Agreement.

USE AND OCCUPANCY DEFINED

A Use and Occupancy Agreement is a document between the buyer and seller that allows one party to occupy or use the property for a certain time period. The seller still retains ownership of the home during the agreement period, before the closing. The buyer is the new owner, while the seller stays in the home for the agreed upon period, after the closing. 

This is not considered a lease. It’s simply an agreement allowing the buyer, or the seller to occupy the property for a limited period of time. Neither will be considered a tenant, meaning they aren’t granted any tenant’s rights. The sole purpose of the agreement is to allow the party to use and occupy the property.

WHEN IS IT USED?

The need for a Use and Occupy Agreement arises for different reasons. 

For the buyer, if the original settlement date is delayed, the buyer may have already moved out of their residence, and needs a place to live. If the seller has moved out, they may agree to let the buyer move in early. 

For the seller, it may be that they need more time to move out. Maybe they need more time to pack up their belongings, or their new house is not ready to move into. When the seller stays in the property, it’s also known as a rent-back.

HOW TO MAKE A USE AND OCCUPANCY AGREEMENT WORK

Put The Agreement In Writing

You’ll want the agreement in writing, signed by the seller and buyer. This way there is no confusion with the terms.

Set The Rate

Whichever side is allowing the other to occupy the property, is allowed to charge a “rent” fee. It may be a daily fee, or lump sum. 

Be Specific

Set up a clear length for the duration of stay, including what should happen when the agreement expires, or needs to be extended. Although the buyer is allowed to use the property, they don’t own it yet. This means they’re not allowed to make any changes or renovations to it during the agreement period. List all specifications in the agreement and make sure that both parties are bound to it by affixing their signature.

Do A Final Walk Through

The walk-through should be done Before, and After the agreement. This is to document the house’s condition before the agreement, and it’s condition after the party moves out.

Possible Concerns To Consider

In the rare case that the party occupying the property does not leave, the other party may have to evict them. If the purchase does not close, the buyer may stay because they have nowhere else to go. The same could happen if the seller’s new purchase deal falls through, and they have nowhere else to live

There could be a dispute over damage not noticed during the walk-thru. Be thorough during the “before” walk-thru. 

Work With Professionals

The agreement should be as specific as possible. The length of occupancy, the daily amount being charged and any other conditions that the buyer and seller want included. It’s always in your best interest to work with a real estate professional to draft these types of agreements. A professional will make sure you address all the terms, and different scenarios. 

Our team of experts at SellUsHomes are skilled in all types of real estate transactions. Our goal is making sure you have a quick and hassle-free sale. We purchase homes in As-Is condition in Detroit and Southeast Michigan. To learn more, contact us at (734) 224-5947 or reach out to us via email at info@sellushomes.com.

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