Occupancy Agreements

Real estate deals cannot be defined by one criterion, while it may be nice to suggest that all real estate deals come about with as much precision as seen in the movements of a well crafted watch, they are rarely so as each deal has its own logic and complications. Distinctive complications and complexities, always accompanied by one of the most perplexing issues, coordinated closings, inevitably follow every single real estate deal.

Perfect deals such as selling one house and turning around to buy another without complications are certainly possible and do happen to many people. Nevertheless, while such types of coordinated settlements may be quite common in the market, every single deal cannot be expected to work out that smoothly at every instance.

An informal arrangement of some type may be the best solution to a host of such occupancy issues, it is good to move from "Yeah, sure, the place is empty so it's okay to stay for a few weeks," towards arrangements that are more structured and defined. Such arrangements and addenda may complicate things and can be lengthy affairs, aside from being seen as awkward and stuffy, they do have the advantage of eliminating or moderating the effect of a potential or actual host of problems much before they can bear effect and increase complications. Some of the primary issues that must be addressed by any well crafted occupancy agreement are given below.


On the issue of alterations of the property being traded, even though, most buyers will have the desire to make changes to the place from the moment they move into the property, they do not actually own the property until the coming of the closing date. In any case, all alterations done to a property must be carried out in two ways. The owner's permission is the first step as no alternations can be carried out without the owner's knowledge. This first step has an important corollary, if the deal falls through or isn't carried out, all the alterations become the property of the owner and the potential buyer will have no further claims to the property.


There should be a possibility of assigning occupancy in order to protect the interests of the owner's of property, and the occupants must also have the approval of the owner before they can sublet the property to a third party.


The buyer must be able to inspect the property before the closing date; the buyer usually walks though the property to ascertain that the house has not sustained any damages during the time between the signing of the contract and the making of the settlement. The approach to the situation differs in cases where the buyer lives on the property before the actual closing date. To discover and raise complaints about any substantial damage in a property, it is vital that the walk-through be conducted before actual occupancy and not settlement of the property in question. The buyer has the responsibility of maintaining the property once the walk-through has been performed and the owner is not responsible for any damages seen in the property at a later date.

The seller must be treated as a regular tenant, in all post-occupancy arrangements. When the property being traded is inspected before the actual occupation and after, any damage found has to be repaired and paid for by the owner.


There also must be some sort of agreement between both parties in the amount of deposit money that can be held by the owner at one time. It is also essential to specify the conditions under which, some or all of the deposit be considered lost. While, it is considered ideal to have the largest possible deposit of money, this may depend on the buyers and sellers. All parties must also know that individual jurisdictions in different areas will actually limit the size of a deposit that can be made in such deals.


What do buyers and sellers do if some major problem crops up? Many sellers and buyers might assume that a deal will soon be completed; however, this can be complicated by non-availability of financing or the coming of some other unforeseen major problem. There exists a possibility of a situation where the buyer has moved into the property before the closing date but in which the property will never go into settlement between parties. Forming a pre-occupancy agreement that states that the buyer's residency on the property will be ended on a particular date, in the absence of a seller's agreement to an extension will help preclude such complications from arising in the first place.

Heirs and assigns

All such occupancy agreement must explicitly state that, the agreement is also binding on all the heirs, those assigned by the buyer or seller, the executors, the administrators, and the successors if any to the property. This is an important provision in the agreement as in the event of the death of the buyer or seller, in the event that he or she assigns the sales agreement, or meets with an accident, the deal can still proceed.

Hold harmless

The hold harmless clause is a vital inclusion in any deal. This clause states that in the event of any accident occurring inside the property during the period of occupancy, the owner cannot be liable for the damages and is not responsible for repairs.


The resident is also obliged under the terms of the occupancy agreement to have fire, theft, and hazard insurance for the property he or she resides in. While this is true, it is also essential for the seller to keep maintaining insurance on the property until the actual transfer of the title in the public records, as a precaution against any problems in the policy taken out by the occupant.

Legal claim

Claim when the buyers move into a home before the closing date, or when the sellers stay on following settlement on the property, the question of occupancy constituting a legal claim against the property comes up. Therefore, this problem of a legal claim created by occupancy must be eliminated before it has the chance to develop and complicate the deal for buyer and seller and as a precaution against unethical people. The party involved in deal has to make a decision whether to establish a landlord and tenant type relationship depending on the legal peculiarities of the jurisdiction of the area in which the property is located.

Occupancy charge

While similar to rent, in many areas, parties may instead need to collect an "occupancy charge" and not "rent" on the property. The logic operating here is that an occupant may gain special rights and privileges in some two hundred communities that have rent control regulations, if the amount charged is defined as "rent" by the owner of the property. It may be wise for the owner of the property in question to charge an "occupancy fee" and never to employ terms like "rent," "lease," or "rental," in order to avoid all rent control regulations apparent in a certain area.


In addition, the owner of the property will be expected to pay property taxes, throughout the period of occupancy.


It is common to speak of occupancy on a yearly basis or on a monthly basis. But in practice, when speaking of occupancy agreements, the arrangement will be followed as being run on a daily basis. The reason behind this due to the following reason, it may become essential to give notice in advance at the end of the occupancy period, at times, this may run to the equivalent of a full month or may be for whatever length of time that the occupancy period has been defined in the agreement. The owner by this provision of making the occupancy period on a day to day basis makes it possible to vacate the occupant by giving a single day's notice, when choosing to do so.


When living in a property, occupants are expected to take care of the expense for all utilities, this means that the assorted meters might have to be read before and following the occupancy period to ensure that a proper accounting is done and nothing complicates the matter at a later date.

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