Our clients often ask us about doing a “post-possession agreement,” which is an agreement that the seller will remain in the property after the closing for a determined period of time, where there may be rent paid to the buyer or part of the sales proceeds remain in escrow to cover any property damage incurred during the post-possession period. Even though the buyer has title to the property, the seller has possession. Often, this arises because the seller wants to stay for the summer season, or the seller has a hard time finding a new property because the inventory now is so low.
For both sides, a post-possession agreement is a bad idea. For the buyer, it’s obvious. If the seller remains in the property for a period post-closing, there’s a risk of property damage. If the post-possession period is 60 days, for example, there is a risk that the seller will stay beyond the 60 days. In that scenario, the buyer will have to file an eviction notice and go through the process at the Justice Court, which can take months. Further, homeowners’ insurance is increasingly difficult to obtain and having a post-possession agreement creates questions for the insurance company. And while we can attempt to contract around these issues, there just isn’t a way to make a post-possession agreement risk-free for the buyer.
For the seller, a post-possession agreement also carries risk. Typically, there are funds put in escrow from the sale until the end of the post-possession period. The seller gets that money when they vacate the property and the buyer agrees that there is no damage. Well, in that situation, the buyer could find damage, whether caused by the seller or natural wear-and-tear, and claim that they are entitled to the escrow funds. From the buyer’s perspective, there isn’t a lot of downside to making such a claim once the seller has vacated.
The only clean way to do a closing is to have the buyer provide the money and the seller provide the keys and vacate on the closing date. These post-possession issues are not easy to resolve and could take an easy closing and make it a litigated nightmare.
PLEASE NOTE that this article is not intended to create an attorney-client relationship and the information within does not substitute for a consultation with an attorney.
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