In our last blog, we discussed the topic of post-settlement occupancy agreements. If a seller needs to stay in the home after settlement, terms are agreed upon by the buyer and seller as to how long the seller can stay and how much the seller must pay to the buyer to occupy that space.
Today, the topics of discussion include the following:
- What happens when the seller leaves early?
- What happens when the seller won’t go?
- Who is responsible for the property while the seller is there?
- Security deposits
Checking out early
What happens when the agreement is for 30 days, but the seller leaves in 20 days instead? The answer is – it depends. The paragraph dealing with the Occupancy Deadline has two options. The parties can either agree that any unused portion of the Occupancy Charge will be refunded to the seller or that the new amount will not be refunded. The Occupancy Charge is paid in full at the time of settlement, so the buyer is responsible for reimbursing the unused portion of the Occupancy Charge directly to the seller. Regardless of whether the Occupancy Charge will be refunded, the seller is responsible for giving the buyer at least three days written notice before vacating early.
Staying late
A portion of the agreement covers what happens should the seller stay past the deadline. The agreement allows the parties to agree that either the seller will pay double the Daily Occupancy Charge or the parties can select a daily charge. The charge should be enough to strongly discourage the seller from staying past the agreed deadline. Often we will see customary charges as large as $200-$300 per day. In addition to the increased Daily Occupancy Charge, the seller could also be liable for the buyer’s expenses incurred due to the seller overstaying their welcome.
Ultimately, the biggest problem with the seller staying longer is that the buyer would be responsible for evicting the seller if the situation escalates…much like a rental.
Property responsibilities
In the agreement, the seller is held responsible for the general maintenance and repair of the property. If there is a leak in the plumbing or the air conditioning stops working, it is the seller’s responsibility to repair those issues. The home needs to be returned to the buyer in the condition it was on the settlement date.
However, if there is a bigger issue like a fire in the home or the basement flooding, that is considered a Risk of Loss. Should these happen while the seller is in the house, the buyer’s homeowner’s insurance would cover occurrences considered ‘Acts of God.’
In addition, the homeowner’s insurance would not cover the seller’s damaged items due to this. Hence, the seller must maintain an insurance policy covering things like their television and couch if damaged. (The seller should contact their insurance company to ensure they acquire the proper coverage that remains effective when they stay in the home.)
Security deposit
A security deposit will be discussed in the agreement. The title company will typically hold the security deposit agreed upon between the buyer and seller. Typically, the higher the cost of the home, the higher the security deposit, and the longer the occupancy period, the higher the security deposit. The security deposit is in place so that post settlement, the seller doesn’t damage the property. For example, the security deposit covers the repair cost if the movers put a hole in a wall with a couch.
If there is a discrepancy regarding the security deposit, the buyer and seller must agree before the security deposit is released.
A few miscellaneous things important to note are:
- The seller will keep the utilities in their name for the duration.
- The buyer gets a set of keys at settlement, but that doesn’t mean they can let themselves into the house anytime they see fit. The agreement states that the buyer should have reasonable access upon giving notice to the seller.
- The buyer must do a walkthrough within three days of the seller vacating the premises. If there are issues, the buyer must notify the title company.
Please contact us if you have any questions or concerns regarding the seller’s post-settlement occupancy agreement addendum.