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What Is an Occupancy Agreement?

An occupancy agreement allows a new home owner to move in after a house is sold but before the close of escrow.
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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 29 September 2014
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An occupancy agreement is a contract between the buyer and seller of a home to allow the buyer to move in before the close of escrow or to permit the seller to remain in the home after escrow closes. Most commonly, it is used when buyers want to move in early. The occupancy agreement covers a number of concerns, including liability and what will happen if escrow falls through and the buyer does not purchase the home. Typically, it is drafted by attorneys and reviewed carefully by both sides.

Buyers may be concerned about delays to escrow that might leave them homeless if they have already given notice or sold their own homes. They can ask if it is possible to move in before the scheduled close of escrow, usually paying rent to the buyer until they take possession of the title to the home. Some concerns include liability issues, as homeowner's insurance may not cover buyers acting as tenants, as well as concerns about who is liable if a problem with the home develops during the occupancy period.

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Sellers sometimes request permission to stay on, paying rent to the buyer. This can happen when people do not find a home to relocate to or for other reasons. In this case, the buyer agrees to allow this as part of the terms of sale, and an occupancy agreement is drawn up to address the needs and concerns of all parties involved. Sellers who need to occupy a home past the close of the sale may have trouble finding buyers and should discuss this with their realtors carefully.

The occupancy agreement also provides a discussion of what will happen if the deal does not close successfully. The buyer may need to vacate, or there may be a measure allowing the buyer to remain as a tenant until the seller finds a new buyer and enters escrow. Available options vary, and usually people can reach an amenable arrangement during negotiations over the occupancy agreement.

As with all legal documents, occupancy agreements should be carefully reviewed to make sure all the expected clauses are included and to identify any problems. If people do not like the terms, they should request a revision before signing the occupancy agreement. Signature indicates acceptance, making it harder to change.

People may also generally use the term “occupancy agreement” to refer to any kind of rental form or lease, from student housing to a commercial lease. This type of occupancy agreement serves as a contract between the lessee, or tenant, and the lessor, or owner, of a rental property. Generally, it will include information like the agreed amount of rent that is to be paid, as well as late fees or other penalties if the terms of the lease are violated.

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