Key Practice Areas
Issues in Giving a Buyer Early Occupation
Tuesday, May 30, 2017
There may be a number of reasons why a seller is asked by a buyer for permission for the buyer to take occupation of a property before settlement has taken place. Whatever the reason, the seller must give careful consideration before agreeing to give the buyer early occupation.
There are a number of potential problems with giving a buyer obtaining early occupation.
These may include:
- the buyer damages the property,
- appliances break and there are questions as to who is responsible for their repair,
- the property is damaged or destroyed e.g. by fire and questions arise as to whose liability it is and whether insurance is in place to cover it,
- the buyer fails to settle, and
- the buyer fails to vacate the property when requested.
The process for evicting the buyer of a residential property can be time consuming and expensive. A seller must think long and hard whether the risk is worth taking.
If a seller does accept the risk then the Standard Conditions in an REIQ Contract for House and Residential Land provide (amongst other things):
- The buyer must maintain the property in substantially its condition at the date of possession, fair wear and tear excepted.
- Entry into possession is under a licence personal to the buyer revocable at any time and does not:
- Create a relationship of landlord and tenant, or
- Waive the buyer’s rights under the contract
- The buyer must insure the property to the seller’s satisfaction.
- The buyer indemnifies the seller against any expense or damages incurred by the seller as a result of the buyer’s possession of the property.
These Standard Conditions only go so far. Consideration should be given to expanding these conditions to include specifically stating such things as:
- The buyer accepts the property in its condition at the date of possession.
- The buyer is responsible for all repairs and maintenance to the property.
- The buyer must pay for all services from the date of possession (electricity, gas, water consumption etc).
- Adjustments for rates, body corporate fees etc. should be made from the date of possession not the settlement date.
- No pets are permitted.
This is not an exhaustive list and there may be other issues that a seller wants to include.
As shown above, the giving of early occupation is not a straightforward issue and many complications can and do arise. Sellers need to be aware of the potential risks and proceed accordingly.