Although many don’t realise it, an offer to purchase is transformed into a sales agreement the second a seller signs the deal. The excitement linked to buying a home often causes buyers to overlook really important aspects of the sale and many assume that they will be able to amend the sales contract at a later stage. The bad news is that although this is possible, both the buyer and seller have to be in full agreement and countersign any changes to the document before it becomes legally binding.
The date of occupation and the amount that is being charged for occupational rent often becomes one of the most contentious issues when a property is sold. Property is taking far longer to go through the transfer process and many sellers have to move out before the property has been registered in the new owner’s name. In theory, this is not a problem and buyers have been taking early occupation for years.
An agent will usually calculate an amount of occupational rent that is fair to both parties. Various factors are taken into consideration, including the amount payable on a bond, or if there is no bond, a fair market-related rental price. If the figure is included in the sales agreement, there can be no dispute. However, when this vital part of the contract is left blank, problems can - and often do - present themselves.
Many assume that as they have no plans to move before the property has been transferred into the new owner’s name, this clause is a non-issue. Unfortunately, while that might well be the case at the time, circumstances do change. Trying to agree on a figure after the fact could lead to disputes and to protect both parties, the amount of occupational rent should always be included.
The other aspect that can cause immense headaches is the date of occupation. Again, this clause protects both the buyer and the seller. Arriving at your new home with the furniture removal van in tow, only to find that the previous owner is still in occupation and isn’t yet in a position to move out is going to cause tempers to flare. The fact that he verbally agreed to move out on a certain date, before transfer has taken place, holds little water legally if the date has not been included into the sales agreement.
Strangely enough, many sellers do not understand the importance of working out the exact amount that will be charged for occupational rent. In the excitement of the moment, it is easy to underestimate how much rent should be charged before the property is transferred, particularly if both parties do not expect this to become an issue.
Life has a nasty way of throwing the odd curve ball and although many buyers and sellers are reasonable, there is always going to be one who digs his heels in and refuses to give an inch.
Do yourself and the buyer a favour - cover you bases and set an amount that is fair to all, even if you are absolutely positive that the new buyer won’t be moving in until transfer has taken place. Always cross the Ts and dot the Is when it comes to property, leaving no room for error or confusion. It could well save a great deal of money and heartache.