Are you selling a home – like a condo, co-op, or townhome – and looking to purchase a new home? What happens in those instances where you sell the old home before you can move into your new home? Or what if you sell your old property and purchase a new home but need to make renovations before you move into it? These circumstances can prove frustrating for everyone involved, but they happen all the time.
Getting two real estate transactions in New York to line up just right so you can move out of the old one and into the new one on the same day can be next to impossible.
But there is something akin to a solution – that said, it favors the seller more than the buyer – and that's a post-closing possession agreement. Here's an overview of what this agreement is and why you will want a New York-based residential and commercial closing attorney to review it – if not draft it – for you.
What is a Post-Closing Possession Agreement in NYC?
A post-closing possession agreement is a contract that allows the seller of a property to remain on it temporarily after the closing has already occurred. Properties include things like condos, co-ops, and townhomes.
As above-mentioned, this type of agreement is desired when:
- the seller is buying a new property; and/or
- the seller is renovating the new property (typically a new home).
In the first scenario, the seller needs assurance that he or she has a place to live while waiting to move into the new home, especially in cases where the closing for the new home may be delayed for one purpose or another. The same is true in the second scenario, i.e., the seller needs a place to live while the new home is renovated.
A well-drafted agreement will include at a minimum the following components:
- specific length of post-possession occupancy;
- the rights of the occupancy;
- the rental rate to occupy the property (e.g., daily, weekly, monthly, one-time rate);
- escrow amount;
- holdover fee and/or procedures;
- agent to manage the property and leasing;
- lender approval – the new homeowners' mortgage lender must approve of the agreement;
- co-op board approval (if the property is a co-op); and
- liability insurance and indemnification.
Who Benefits from a Post-Closing Possession Agreement in New York?
Benefits are derived on a case-by-case basis. The seller benefits because he or she has a familiar place to live, but t comes at a price. The buyer benefits so much as he or she profits from the agreement, but the buyer is inconvenienced by having to wait before taking possession of the property. So, it really depends on your perspective with regard to who benefits (or who doesn't).
What are the Risks of Entering into a New York Post-Closing Possession Agreement?
There are definite risks to entering a post-closing possession agreement. These include:
- damage to the property
- seller stays on the property after the expiration of the agreed-upon date;
- legal and monetary liability to third parties (e.g., seller's guests).
These are serious risks for the buyer. Buyers are particularly vulnerable to risk when the post-closing possession agreement isn't drafted, negotiated, and reviewed by an experienced real estate attorney in New York. Make sure you are covered and the agreement is sound and risk-proof, contact Melvin Monachan at (516) 714-5763today.