Generally speaking, homes should be bought and sold empty. But that’s not always possible for a variety of reasons, and it’s not unusual for post-closing occupancy by a Seller to be necessary. There’s a right way to do that, involving a written agreement setting forth exactly who has to do what, and when.
People who are buying and selling don’t tend to think in terms of disasters (that’s the lawyer’s job, we are paid to be pessimists). The “Post-Closing Occupancy by Seller Addendum,” to the FARBAR Contract is not always comprehensive enough to cover the disasters.
John and Mary were buying a house. The Sellers were having a new house built for them, and, as usual, things were running behind schedule. The builder swore repeatedly that the new house would be ready within four weeks. John and Mary, the buyers, weren’t in a big hurry to move, and their mortgage commitment was close to expiring, so they agreed to close now, and let the Sellers stay in the house for four weeks after closing. The parties executed the FARBAR Post Closing Occupancy Addendum and the closing took place with the Sellers receiving full payment for the house.
Four weeks later, the new house still wasn’t ready, and the Sellers flatly refused to move out. The Sellers refused to talk to the Buyers or to let them inside the house and referred all inquiries to their attorney.
Investigation made it clear that the situation had turned into a total disaster. The builder had managed to reverse the Sellers new house plans. The foundation had been put in and the house nearly completed before the building inspector caught the error, and determined that the house violated the building setback lines. The inspector refused to issue the final approval and construction came to an abrupt halt.
The FARBAR Addendum stated that the Seller would remain in possession of the house for four weeks after closing at a monthly rent in the amount of $1,500, but failed to state what would happen in the event the Seller was unable to move out at the end of that four weeks!
The Buyers filed an eviction notice to force the Sellers to vacate the property. Litigation is time consuming, and expensive. It can take at least two months to force a tenant out of a rental property, even if they don’t contest the action, and the Sellers contested by filing motions and spurious claims to delay matters. Things dragged on for another six months, before the builder finally fixed the mess, and completed the house so that the Sellers could move into it.
Lesson Learned: Letting Seller stay in the house you just bought, without first seeking the advice of an attorney can be a very costly mistake. At American Real Title, we don’t rely on form contracts to address unique situations, because that is too often insufficient. As a trained real estate attorney, I have the knowledge and experience to draft a document that covers all of the “what if’s.” You may be trying to be a “nice guy,” and accommodate the Seller, but as the old saying goes, the road to Hell is paved with good intentions. Make sure you have a title company with a lawyer on staff when you have a unique situation such as this one.