Why the occupational rent clause is important

Why the occupational rent clause is important

A well composed sale agreement is meant to ensure that everything goes smoothly. However, things can still go wrong.

It's easy to get caught up in the excitement when you buy or sell a home, but this doesn't mean that you should throw caution to the wind by making unreasonable, often unrealistic demands and cry foul when things don't go the way you planned.

While you may have every intention of moving into a property on a specific date because you know transfer will definitely have taken place by then, the Deeds Office may have very different ideas. Indeed, there are often delays with transfers (for a multitude of reasons) and no one is actually able predict for certain when a transfer will be granted.

This was recently highlighted in a letter received by a very disgruntled homeowner. According to the seller, the buyer was adamant that he would move in on a certain date, which was recorded in the sales agreement. The seller made moving arrangements to accommodate the buyer, but a week before the specified date the buyer, realising that the transfer wasn't going to go through in time, asked the seller to stay in the property until the home was officially sold. In addition, the buyer refused to pay occupational rent if he was forced to move in before transfer had taken place.

This left the seller in a very awkward position. Firstly, he was unable to change his moving plans, his household goods were basically packed up, and he'd already signed a lease on another property. The seller’s biggest concern however was leaving the home standing empty, a tempting target for criminals.

Legally speaking, the buyer doesn't have a leg to stand on because the date of occupation and the amount to be paid in occupational rent were set out in the sales contract. However, this won't help the seller in this particular instance because as with anything legal it not only costs a great deal of money to sort out such disagreements, it also takes a considerable length of time.

Selling a property can be stressful and the idea of a solid sales contract is to ensure that everyone is on the same page in order for things to go as smoothly as possible. Clauses to minimise the fallout should something go wrong protect both parties, but this can backfire if the stipulations impact one party over another. We recently discussed occupational rent and the importance of setting the correct figure. Buyers incur additional expenses when buying a home and are unlikely to be willing to pay an inflated amount while waiting for transfer to take place. Sellers on the other hand may be in a better position financially, but this doesn't mean they will be willing to pay over the odds to live in a property they once owned.

In an ideal world, we'd all be able to look into our crystal balls and know when transfer will go through and plan accordingly. Unfortunately this is never going to happen and having a clear understanding as to what will happen if transfer is delayed is absolutely vital for all parties concerned.

The seller is generally responsible for insuring the home until transfer has taken place and leaving a property vulnerable to criminal activity because it is vacant could result in huge claims. In other words, the owner has a vested interest in staying in the property until transfer has been effected. The buyer should share these concerns and arrange to move in as soon as the home becomes vacant - even if this means he will have to pay occupational rent – mainly because the inconvenience of living without a geyser, a stove and other items typically targeted by burglars is not a pleasant option, even in the short term.

The bottom line is, make sure you agree with everything before you sign a sales contract. Take a long hard look at the amount being suggested for occupational rent and query the figure if you believe it's too high. Lastly, stick to the agreement and if a specific date for occupation has been agreed to, make very sure you are in a position to move in or out on that date.

Article from privateproperty