When sellers ask to rent back a home from a buyer for a certain period after the closing date, both parties should sign a use and occupancy agreement. This agreement would outline the terms of the arrangement and provide certain protections to the buyer. Since the buyer officially owns the home as of the closing date, it is critical to have MA use & occupancy agreements in place. An attorney can draft this for you to include the following things to protect your interests.
Time Frame
MA use & occupancy agreements should specify a particular date range during which the seller is permitted to remain in the home after closing. Buyers should never agree to open-ended dates. During that timeframe, sellers should retain utilities in their own name and continue to be responsible for those charges.
Compensation & Penalty
There is normally a daily rate that sellers pay to buyers for the right to remain in the home. The daily rate would cover buyers’ mortgage, tax, and insurance expenses, at the very least. Some utilities, such as water and sewer, are normally transferred to a buyer’s name at closing. Therefore, the daily rate may be increased to account for that buyer’s cost and the added inconvenience of not being able to take physical possession upon closing. Additionally, if a seller does not vacate by the pre-set date, there is often a much higher daily rate that would apply.
Release of Liability
Since the buyer technically owns the home but the seller remains an occupant, most attorneys will include some type of clause covering liability. The clause would cover damages to the property and/or the seller’s personal belongings be stored within that property. The goal here is to protect the buyer from certain liabilities.
Non-Tenancy Clause
It is important to note in use & occupancy agreements that a landlord-tenant relationship is not created. Tenants have certain rights in the state of Massachusetts, especially when it comes to eviction procedures. This clause helps to protect buyers from that complication in cases where sellers fail to leave within the designated timeframe.
Damages to the Property
Lastly, MA use & occupancy agreements should protect buyers from damages that may occur while sellers occupy the home or during their move-out. A certain sum of money is normally held in escrow by the closing attorney to cover potential damages to the home. Once the seller moves out, he/she would receive those escrowed funds once the buyer confirms that no damages occurred. Buyers should perform a walk-thru both immediately before closing and after the seller’s physical move.
Summary
In most cases, buyers and sellers try and avoid complicated situations such as use & occupancy agreements or storage agreements. There is always risk and inconvenience involved. However, in cases where both parties are agreeable, having a formal agreement in place will ensure that buyers are protected and sellers are motivated to move out on-time. Always consult with an attorney to discuss the risks involved with such agreements and have your attorney draft the specific language.
