What is a Use & Occupancy Agreement?

Dated: May 7 2023

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As the real estate market continues to evolve, so do the processes and agreements that are used during a purchase or sale. In order to create competitive offers and alleviate the pain points in a transaction, expert realtors must be able navigate these hurdles by helping their clients create contracts with mutually beneficial agreements that help keep things moving towards their end goal.

Timing is Everything

One such pain point is the timing of the move for both buyers and sellers. Oftentimes a seller may need some additional time to occupy the property after the closing date or a buyer may need to move in early. To alleviate these stressors, we create Use & Occupancy Agreements (U&O), which enables buyers to move into a property before the sale is completed or sellers to remain after the sale closes.

These agreements can be beneficial for buyers who need to move in quickly, but the closing date is postponed, or sellers who require more time to vacate the property. This agreement typically includes the move-in and move-out dates, the rental amount, maintenance and utility responsibilities, a security deposit and other essential details.

To create an effective use and occupancy agreement, both parties must agree on the terms, and it is recommended to have the agreement reviewed by a real estate attorney to ensure that it is legally binding and protects both parties' interests. The agreement should be put in writing to avoid any misunderstandings and provide clarity on the agreed-upon terms.

Here are four tips to keep in mind when creating a use and occupancy agreement:

  • Clearly Define Expectations: Both the buyer and seller should be clear about their expectations, including move-in and move-out dates, rental amount, and responsibilities.
  • Set Deadlines: To avoid any potential complications, set clear deadlines for when the sale should be finalized, and the occupancy agreement should end.
  • Include Provisions for Disputes: To handle any potential disputes, include provisions in the agreement for how conflicts will be resolved, such as through mediation or arbitration.
  • Protect Both Parties: Ensure that the agreement is fair to both the buyer and seller and includes provisions for any potential issues that may arise.

As a buyer trying to stand out among dozens of other offers, a free use and occupancy agreement is a fantastic thing to offer a seller that is still searching for their next home or wants extra time to move out. As an Accredited Buyer Representative, it’s always my goal to find the key pain points of the seller so I can leverage them to help my buyers win their dream home.

What’s the difference between a Use & Occupancy Agreement and a Lease Back Agreement (or Leaseback)?

The term leaseback is often misused by inexperienced agents to define a U&O but they are very different legally. A leaseback creates a tenancy and that should be avoided at all costs by savvy buyers looking to give the seller more time in the property. In Massachusetts, tenant’s rights are very strong and if a tenancy is established with a leaseback agreement in lieu of a use & occupancy, the buyer and now new owner of the property will be presented with a legal headache should the previous owner, now tenant, refuse to lease the property. With a U&O, the seller must leave on the date stated or they can be removed by police force. If a tenancy is created, the new owner would have to go through the entire eviction process before being able to force the previous owner to leave - sometimes months later and after thousands of dollars in legal fees.

A use and occupancy agreement can be a valuable tool for buyers and sellers during a property transaction. By understanding what this agreement entails and following the tips mentioned above, both parties can ensure a smooth and seamless transition of ownership. Never try to create these agreements on your own, consult your expert real estate agent and a trusted attorney before considering the use of a use and occupancy agreement.

Connect with me today if you’re just getting started with your next move - I offer free appointments at your convenience.

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Alex Navarro

Book a free consultation call with Alex Alex’s unique style of client-driven service, flexibility and amiable approach to new challenges allows him to help his clients reach their unique re....

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