Duration of the lease. Often, the seller tries to stay in the property until they can complete the purchase of another property and then move. Assuming this is the case, the seller will want to specify a rental period that is approximately equal to the estimated time until the new home closes, with an automatic right to renew for consecutive fixed periods. The buyer will likely prefer a non-renewable lease term for a relatively short period of time, provided the buyer plans to move in when the seller leaves and wants to be able to plan ahead. Buyer shall request that the Contract stipulate that renewals require Buyer`s written consent, that no termination is required, and that Buyer has the right not to extend the termination date unless there is Buyer`s written consent, and buyer is not obligated to send notice. However, if the buyer bought the property as an investment, the buyer has much more flexibility in the duration of the lease and can be happy to have a tenant immediately after completion. While pre-ownership agreements may involve some risks for the seller, these risks can be mitigated or eliminated through a thoughtful and thorough pre-closing occupancy agreement. Below is a list of the most common pitfalls of pre-closing occupancy contracts: While post-possession agreements carry some risks for the buyer, these risks can be minimized with the right insurance policies and with a thoughtful and comprehensive occupancy agreement after closing. The buyer can also request a “fiduciary retention” to protect his interests. For example, the buyer may require the escrow company to withhold $50,000 of the purchase price of the escrow account, which will not be returned to the seller until: (1) the seller peacefully surrenders ownership of the premises on the agreed date;  The seller transfers the property in the same condition as it was in at the time of the final inspection;  The seller pays all rental fees agreed in the final contract after occupancy; and  any other reasonable conditions agreed to by the parties. The escrow holdback strategy provides the buyer with sufficient protection to essentially offset the risks associated with post-possession agreements.
1 This is the second part of our two-part series on pre- and post-ownership agreements and is a follow-up to our previous article entitled The Dodd Frank Act and Pre-Possession Agreements. Nevertheless, as provided for in the Commission`s new rule, a post-ownership agreement involves certain risks that must be taken into account. As with the pre-ownership scenario, the agreement must be in writing and may be a standard residential lease in accordance with the provisions of the Arizona Residential Landlord Tenant Act (“ARLTA”), S.R.A. §§ 33-1301 et seq., which applies widely to all residential leases. Below is a summary of many of the risks and issues that need to be addressed in the agreement. Due to longer and less predictable closing periods, buyers and sellers face occupancy issues and request agreements before or after the property until their pending transaction can be completed. Pre-possession agreements are clumsily named and better understood as “pre-closure occupation agreements.” This is a written agreement in which the seller agrees to lease the property to the buyer before the transaction is actually completed. The term is usually short – from a day to a month. In the penultimate issue, I published an article about pre-ownership occupancy contracts, which are agreements between a seller and a buyer of real estate that allow the buyer to prove ownership before closing. I noted that one of the rules of the Commissioner of the Department of Real Estate explicitly requires that real estate permit holders not allow a non-owner to occupy a property without obtaining the owner`s express permission or direction, and also advises their client to seek advice on the risks involved.
See A.A.C. R4-28-1101(J– K). Occupancy contracts after possession are not covered in this article, but also taken into account under rule R4-28-1101. Due to longer and less predictable closing periods, buyers and sellers face occupancy issues and request agreements before or after the property until their pending transaction can be completed. (This column previously dealt with pre-ownership agreements – the situation in which the buyer asks the seller to allow the buyer to take possession of the escrow account before closing. We don`t focus our attention on post-ownership agreements – where the seller asks the buyer for permission to stay in the house for a short period of time after the escrow account is closed.) The post-possession occupation agreement is essentially the flip side of a pre-possession occupation agreement. .