Once in a while, you encounter a situation where a buyer has to move in to the property they intend on purchasing before settlement has occurred. Usually, this happens because their lease is over before the settlement date and settlement itself has been delayed for one reason or other. Whatever the case may be, having a pre-settlement occupancy agreement becomes the only option for the purchaser so as to avoid becoming homeless (literally).
The thing to be aware of with these agreements is that it not only accommodates the early move-in, but it also gives the seller a lot of leverage in that should settlement not occur on the specified date, then all monies are forfeited and the purchaser is literally kicked out of the property within a matter of days. So it’s a case of Buyer Beware. There are explicit clauses within this agreement which are in contrast to most statutory laws regarding tenant rights. Also, a buyer accepts the property in the condition it was in at time of signing the agreement. This means that if AFTER you’ve signed the agreement the HVAC stops working, the seller is no longer responsible for repairs or replacement. Additionally, the buyer does not have the right to alter the property without seller’s prior consent.
There are also indemnification clauses that protect the seller in the event the property is destroyed or damaged for any reason whatsoever. That is why it is crucial to purchase insurance that has an effective policy as of the date of the pre-settlement occupancy agreement.
As a buyer, you have to go in it with the understanding that, unless modified, pre-settlement occupancy agreements are written to protect, first and foremost, the seller’s interest. This is not a buyer-friendly agreement and there are caveats that need to be taken into consideration prior to signing.
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