This is another of my favorites from my Arizona Republic column. The topic here is pre- and post-possession, either moving into a new home before the closing or staying in your old home after it has closed:
Pre- and post-possession create a de facto tenancy. It may be just a friendly agreement between buyer and seller, but when you occupy a home you do not own, you are a tenant. You should ratify the occupancy with a lease. But there is still potential for big trouble.
Suppose the house burns down. Who is liable? The owner, even though he is not occupying the home? Or the occupant, who is not the owner and probably just lost all of his personal property?
This used to be common in the sale of a home, but the legal difficulties arising from pre- and post-possession can be huge:
If the owner did not disclose the tenancy, the insurance company probably will not pay on the house. If the occupant had homeowner’s insurance, not a tenant’s policy, his underwriter also might refuse to pay for the lost personal property. There may be two aggrieved lenders, and both might call their notes due, even though the house is now destroyed.
But the worst is yet to come. Everyone involved gets to spend years in court fighting over who owes what to whom. The owner will be out the value of the house. The occupant will have lost all of his portable wealth, including the memories attached to those things. Everyone will emerge from this lengthy process bruised, begrudging and much, much poorer.
My ultimate answer: “Take possession at the close of escrow, just as the purchase contract advises. Whatever convenience you might enjoy from pre- or post-possession, the risks are just too great.”
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jf.sellsius says:
As a buyer, try to avoid seller post-possession at all costs. And Sellers don’t realize that their current insurance policy will probably not cover a claim because of the tenancy issue.
If you do a post possession, you better have a large escrow & a high per diem occupancy (holdover) charge which includes the buyer’s carrying costs (mortgage interest, taxes, rental).
September 26, 2006 — 11:13 am