State laws vary and real estate law is dependent on contractual agreements. This is why there’s no real legal precedent for when a seller should have to move; although, it’s recommended they leave before escrow. Many sellers appreciate an extended stay due to extenuating circumstances. For example, they may be relying on the money from the sale to pay for their moving costs. Or, they may require six more months in the property while their new home is renovated, in which case they would pay rent to the buyer.
It’s important that all parties understand who is responsible for what when a seller continues to occupy a purchased property. This is a time during which ownership has transferred, but residency has not. Insurance, rent, utilities, and other factors will need to be discussed and amended into the sale agreement.
Insurance and Seller Occupied
Mortgage company’s demand that a buyer retain insurance for the property before the sale closes. If the seller is remaining in the property after closing, what happens if there’s an accident? Is the buyer then responsible for personal injury or damages?
It all depends on your contract.
If the seller is residing in the property beyond the closing date, an addendum should be added to your contract that states they’re liable for personal injury and property damage. If this addendum is not added, the seller may have a personal injury claim against the buyer. They would then need to obtain a personal injury attorney, and the buyer would need an attorney as well if he chooses to fight the claim.
In both cases, it’s important to look for an attorney who offers a free case review and who has stellar reviews. For example, the law offices of Siegfried & Jensen have a Yelp page, which is a good place to start looking for an attorney because it features client reviews and ratings.
Rent, Utilities and Other Costs
While the seller occupies a property, they should be responsible for utilities and other costs unless it’s included in a rental agreement. Yes, the seller should have to pay the buyer rent, unless an alternate deal is worked out. The rental agreement is what’s called a lease back and it’s a fairly standard rental agreement.
Before creating a lease back, both parties should consult their attorneys and involve the real estate agent. The real estate agent should be knowledgeable about fees, including trash pickup and utility costs. The seller may not be willing to disclose every detail in the hopes that they could avoid extra costs. The attorneys will draw up a legally binding contract that states exactly when the sellers should evacuate the property.
Penalties and Legal Actions
So, you’ve divvied up costs and the seller has resided for a while, but now it’s time to leave. What happens if the seller won’t leave the property? The move out date is non-negotiable, but for whatever reason they’ve decided to dig in their heels.
It’s likely your amended contract includes penalties for breaking the agreement. The seller may end up owing the buyer a hefty sum for ignoring the agreement. Unfortunately, the seller may be unwilling to move and unwilling to pay their penalties, in which case the buyer is urged to proceed with legal action. Legal actions and penalties should be included in the contract for the best possible results.
Overall, it all comes down to your agreement. If you don’t have a rock solid contractual agreement, then you could end up unsatisfied. It’s important that buyer and seller work diligently to create a contract that makes sense to both of them and follow its directions to avoid penalty. It’s not a bad thing for sellers to occupy properties after closing is completed, but it is complicated. A contract ensures all parties are protected.
