Does a seller have to pay rent to stay in the property past closing?

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08/31/2015 | Author: Editorial Staff

A seller received an offer on his home, but he needs to stay in the property for two weeks after the buyer’s proposed closing date. Both parties are OK with a temporary-lease situation, but the buyer’s agent says the Seller’s Temporary Residential Lease (TREC 15-5, TAR 1910) must have a daily rental amount in Paragraph 4 to be effective.

The seller says his agreement to sell the property with an early closing date should be sufficient consideration for the temporary rental and doesn’t want to pay a daily rental fee. Can the parties enter into an effective temporary lease without a daily rental amount in Paragraph 4?

Yes. Parties can negotiate a contract where no additional rental fee for the term of the temporary lease is required.

The other terms of this agreement to sell the property, which includes the temporary lease as part of the main contract, could provide sufficient consideration for the lease to be effective and enforceable without specifying additional monetary consideration for the temporary-lease term.

The same answer would apply to those using the Buyer’s Temporary Residential Lease (TREC 16-5, TAR 1911).

Get more legal questions and answers in the Legal FAQs section of TexasRealEstate.com.

Categories: Legal
Tags: legal faq, temporary lease, buyers, sellers


Comments

Jean on 08/21/2016

When Buyer leases to Seller when are monies collected? At Closing when lease back begins? Does Buyer get the deposit or is it held in escrow? What is typical for holdover rate?

amend the temporary lease on 06/30/2016

If my seller, now tenant, want to stay a couple of days over the date specified in the seller’s temporary lease, how would I amend the temporary lease?

Karen Shrock-Jones on 09/08/2015

Doing a temp lease should not be a problem for either party with $0 rent. They’ve gone through weeks together on this transaction, they should know each other well enough to trust each other. The promulgated form like so many provides an opportunity to educate.

Bruce Owens on 09/03/2015

Why not change the closing date?  Problem solved.  I know leasebacks are sometimes a necessity, but it’s best to find an alternative if at all possible.  Leasebacks are often a hassle at the very least.

David Hageman on 09/03/2015

THERESA AKIN, I could not disagree more. Writing things in special provisions that promulgated forms are designed for a real “no-no” with TREC. The temporary leaseback needs to address the details of possession and other items as paragraph 12 appears to. Insurance coverages cannot be addressed in a contract since each insurance company’s coverage is specific to that company. You cannot make assumptions that a buyer’s coverage covers: “buyer/new owner’s insurance will cover the structure and whatever else but the seller (aka temp tenant) should have renter’s to cover the personal contents.” because that may not be true. I have learned the hard way that each insurance company’s coverage can be different. Our advice should strictly be for the buyer and seller to contact their insurance company and make certain they are covered for the temporary lease period.

THERESA AKIN on 09/03/2015

If it was all part of the contract negotiations then that is how it should be handled. Of course other circumstances occur. One thing for sure the buyer needs to let his insurance agent know which would be part of his loan if there is one and the seller needs to get renter’s insurance coverage. The buyer/new owner’s insurance will cover the structure and whatever else but the seller (aka temp tenant) should have renter’s to cover the personal contents. You could put in Special Provisions how a possession after closing will be handled which I believe would be with a Temp Lease and depend on rental market I had a client who needed possession prior to closing and we drew up an amendment and the temp lease so everyone was covered. Buyer and seller both made sure appropriate insurances were also inplace.

Becky Hild on 09/03/2015

I use the negotiations to determine whether we do rent or not. A damage deposit is always a good idea. There have been states that give sellers 2 weeks possession after closing. If my clients are older,especially, I try to get them a little time after closing, just incase something goes wrong or gets delayed..

David Hageman on 09/03/2015

John Sallaway, while much of what you say makes sense you also appear to venture off into an assumption of how we should think about this. I would prefer we have a contract and a temporary lease that specifically states these things. As I said when I said I was wrong, paragraph 12 does take care of the key issue and clarifies the only reason a new owner can enter the home is for inspections. They cannot just say “we need to come measure for drapes, etc.” and demand to be let in on a whim.  I know from experience that insurance companies struggle with this and some policies specifically state they must be notified if the home is leased. If the home were to burn down it is possible that the new owners insurance would not cover the claim. I do know this because I have seen it in writing from an insurance agent who I thought was nuts and because I had a water leak claim that happened during one of these and Allstate denied the $50K claim.  My only point is that I believe there are too many holes in the temporary lease process.

John Sallaway on 09/03/2015

David H don’t be confused with the difference between ownership and possession. Ownership clearly transfers at closing and funding and for agreed upon consideration the old Seller becomes the Tenant of the new Owner because the Seller is now living in the Buyers home.  As for the passing of keys, no rational person would buy a home and not have a key to their asset. Think of it as though the Buyer is an investor and the Seller intends rent the home back. Investors have keys to all of their assets.

As for who is responsible for the home during the leaseback, the contract is explicitly clear. The home has to be turned over to the Buyer in the condition it was in at the time of closing. This is partially in place to keep a Seller from hiding repairs during a contract and claiming that the breakdown occurred during the leaseback. Either way, the grey area comes in how to enforce responsibility unless there is a sizeable security deposit. Let us all know how managing that deposit and your Buyer/New Owner works out.

Lee on 09/03/2015

David Hageman’s comment make sense - delayed possession would solve a lots of liability issues.  Would like to see the opinion from TAR’s legal advisor on this.

Tinsley Alexander on 09/03/2015

Oops, sorry DIANA ALDERMAN.  Meant to respond to David Hageman

David Hageman on 09/03/2015

You are right and I am wrong… 12. INSPECTIONS: Landlord may enter at reasonable times to inspect the Property. Tenant shall provide Landlord door keys and access codes to allow access to the Property during the term of Lease.

Tinsley Alexander on 09/03/2015

DIANA ALDERMAN- If I’m not mistaken, paragraph 12 of the sellers temp. lease covers the new owner to enter the property.

David Hageman on 09/03/2015

According to the contract, I believe that possession does not take place until the temporary lease is over. Therefore I am not convinced the relationship becomes that of a tenant/landlord but is still a seller/buyer. The paragraph seems clear to me that possession either takes place at closing and funding or at the end of a temporary lease. I have had agents refuse to give the buyer a key at closing and according to one real estate attorney I spoke with they do not have to. He said keys equal possession. His answer of who is responsible for the home was “this is a gray area that has never been cleared up.” Too many holes in RE law!

Siu Chow on 08/21/2014

If leasing back is one of the terms agreed upon in the contract, I would leave paragraph 4 of the TAR 1911 blank. As the seller has changed the status to tenant after closing, it is better for the new owner to ask to fill out TAR 1911 and also ask for a deposit. An accident is an event which is not predicted. Even during 2 or 3 days leased back, unpredictable things may happen. It is better to be safe than sorry.

DIANA ALDERMAN on 08/21/2014

I personally use a Temporary Residential on at least 2 out every 5 transactions (at least for two days following closing).  There is one major problem with the Sellers Temp. Lease.  If the lease is two weeks or even 30 days, the current promulgated lease does not include verbage allowing the actual owner (former buyer) to give notice to the Seller (now the Tenant) that he would like to enter the property prior to the expiration of the Seller’s Temp. Lease.  Primary reason for entering in most cases:  Allowing a contractor to measure for flooring or finalizing a remodel bid which the new owner would like to begin as soon as the new owner has possession.  This must be written into special provisions.  If not, it can and often does become a difficult situation.  Possession vs a quick trip with sufficient notice are entirely two different things.

Doedi Meyer on 08/19/2014

While I agree that rent is not necessary, depending on the situation, I do ask for a deposit. For the seller when the buyer is leasing temporarily before closing, or for the buyer when the seller is leasing temporarily after closing.

This helps ease everyone’s minds about possible damages during the lease period.


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