A use-and-occupancy agreement has pros and pitfalls
The NFL draft is in full swing, and so is the spring real estate market.
I often say that real estate resales are sometimes comprised of many quarterbacks calling the plays, confusing everyone on the team with tangles of information. In each deal, there are buyers and sellers and real estate agents and loan officers and attorneys . . . The game is so complicated and time-sensitive that sometimes it makes you want to drop back and punt. On top of it all, what if someone drops the ball, and you find yourself between properties with no place to live? Take heart.
A common tool used to overcome these types of situations is a use-and-occupancy agreement, a short-term right of possession for either the buyer or seller in a real estate transaction. Note: This agreement is not a lease. Don’t want the new owners to pop in unannounced or call in the contractors while you’re still living there? Better work that out beforehand.
Suppose I were buying 123 Anystreet Way in Boston, with a closing date of May 10, but the sellers are not moving into their new place until June 1? Technically, when they hand the deed to me and it is recorded, the sellers need to have all of their things out of my new property. I could allow them to stay with a use-and-occupancy agreement. If you do:
1. Hire a professional to draft the agreement.
2. Come up with a daily fee (agreed to and signed by both parties).
3. Create an escrow account. What if the people staying in your new home decide they don’t want to leave on the designated date? Establish that per diem, and at closing, hold back funds at 1½ times that amount.