The first question should be, how long should the seller stay in the property? This is essential because it determines the type of occupancy contract that will be used. Less than 30 days make it a temporary accommodation agreement that is excluded by the Arizona Residential Landlord Tenant ACT (ARLTA). This short-term agreement can also be called the incumbent seller in some states. If the lease lasts 30 days or more, it is a residential lease that falls under the ARLTA. Areas to consider include: Here are the common pitfalls common to post-possession agreements (many of these risks are also common with pre-ownership agreements): The State of Arizona has a standard lease. I recommend using it for any seller situation after ownership. It is a document that clearly states the rights and obligations of the buyer and seller in the transaction. The state lease states that a home buyer who grants ownership of the mail to the former owner cannot take into account all aspects of the business. It is important that buyers and sellers agree on all these items. Otherwise, a buyer might find the landscaping overgrown when moving in. The pool may lack maintenance after a few weeks. The previous owner could expect the new owner to be responsible for the landscaping and pool. Write it down so that there are no misunderstandings.
With planning, most buyers and sellers can avoid this situation. However, we all know that even with impeccable planning, unexpected situations occur. Sometimes a buyer or seller needs to have a specific closing date. All parties must agree on closing dates under the original contract. If situations change, the deadline for submissions may be changed by mutual agreement. Although most property contracts work once they are finalized, if they go wrong, they can go very wrong for the simple reason that not all hypothetical and potential scenarios have been thought of. For this reason, buyers and sellers are encouraged to seek professional advice in the fields of insurance, law, taxation and accounting. Arizona`s fraud law requires that any agreement to sell or participate in real estate be in writing. R.S.R. §44-101(6).
However, an important exception to the rule is a lease of less than one year. So technically, an oral agreement after possession is legal. However, under no circumstances should a buyer (or his agent) accept an oral agreement after possession. While post-possession agreements create some risks for the buyer, these risks can be minimized with the right insurance policies and with a thoughtful and comprehensive occupancy agreement after closing. The buyer can also request a “fiduciary retention” to protect his interests. For example, the buyer may require the escrow company to withhold $50,000 of the purchase price of the escrow account, which will not be returned to the seller until: (1) the seller peacefully surrenders ownership of the premises on the agreed date; [2] The seller transfers the property in the same condition as it was in at the time of the final inspection; [3] The seller pays all rental fees agreed in the final contract after occupancy; and [4] any other reasonable conditions agreed to by the parties. The escrow holdback strategy provides the buyer with sufficient protection to essentially offset the risks associated with post-possession agreements. Due to longer and less predictable closing periods, buyers and sellers face occupancy issues and request agreements before or after the property until their pending transaction can be completed. (This column previously dealt with pre-ownership agreements – the situation in which the buyer asks the seller to allow the buyer to take possession of the escrow account before closing. We don`t focus our attention on post-ownership agreements – where the seller asks the buyer for permission to stay in the house for a short period of time after the escrow account is closed.) As we mentioned in our recent article on pre-ownership agreements, important provisions of the Dodd Frank Act (“Dodd Frank”) came into force in 2015.
Dodd Frank aims to reform the U.S. regulatory system, particularly with respect to mortgages. To this end, Dodd Frank has made significant changes to the residential mortgage closing process. For example, the document “Truth in Lending and Good Faith” has been replaced by the new Loan Area (“LE”) and the SETTLEMENT STATEMENT HUD-1 by the Closing Disclosure (“CD”). The mortgage industry has spent billions of dollars adapting to these changes. For example, Quicken Loans reportedly hired 350 employees for 18 months just to implement the Dodd Frank changes. The buyer and seller of the home should have documents for each post-possession contract. While no one expects there to be a problem, both parties need to make sure they are covered by the ownership documentation. If the seller does not leave the house as agreed, the buyer needs to know what legal action he can take. If the Buyer holds deposits, the Seller must ensure that they will be refunded in accordance with the Contract. Post-possession agreements are unique and interesting legal issues.
They also pose a significant risk to the buyer. In fact, the Commissioner`s Rule R4-28-1101(k) warns: “A seller or broker must recommend that a client seek advice from insurance, legal, tax and accounting professionals regarding the risks associated with the previous or post-ownership of a property.” Duration of the lease. Often, the seller tries to stay in the property until they can complete the purchase of another property and then move. Assuming this is the case, the seller will want to specify a rental period that is approximately equal to the estimated time until the new home closes, with an automatic right to renew for consecutive fixed periods. The buyer will likely prefer a non-renewable lease term for a relatively short period of time, provided the buyer plans to move in when the seller leaves and wants to be able to plan ahead. Buyer shall request that the Contract stipulate that renewals require Buyer`s written consent, that no termination is required, and that Buyer has the right not to extend the termination date unless there is Buyer`s written consent, and buyer is not obligated to send notice. However, if the buyer bought the property as an investment, the buyer has much more flexibility in the duration of the lease and can be happy to have a tenant immediately after completion. Some real estate agents do not allow post-ownership documents as part of the real estate transaction. This means that all agreements are made by both the buyer and seller without the help of their brokers. However, in Arizona, owning mail is legal and my brokerage company allows it with real estate documentation. In the penultimate issue, I published an article about pre-ownership occupancy contracts, which are agreements between a seller and a buyer of real estate that allow the buyer to prove ownership before closing. I noted that one of the rules of the Commissioner of the Department of Real Estate explicitly requires that real estate permit holders not allow a non-owner to occupy a property without obtaining the owner`s express permission or direction, and also advises their client to seek advice on the risks involved.
See A.A.C. R4-28-1101(J– K). Occupancy contracts after possession are not covered in this article, but also taken into account under rule R4-28-1101. A seller may want to reorganize the ownership of the house they are selling for a variety of reasons. They may have a delay in closing their new home. In addition, they may notice an unexpected delay in moving companies. If the home seller has to stay in the house for a longer period of time, a better option is to ask the buyer and seller to sign a lease. In addition, the Possession After option is usually used for a short period of time, such as a few days or weeks, and not longer periods. In addition, the agreement should include a deposit and rent payment for the specific period after possession. Risk of loss or damage. As in the pre-ownership scenario, the landlord (now the buyer) should try to transfer the risk of loss or damage to the tenant (the seller).
Of course, and again as in the scenario before possession, insurance is key. .
