The technical term is post-settlement occupancy, or PSO.
In all those syllables is a basic situation: Sellers remain in the property after the buyers complete the purchase. Ownership has changed, but occupancy has not. Yet. (It is the opposite of another kind of PSO–pre-settlement occupancy, about which I wrote a couple of weeks ago.)
You easily can imagine some of the reasons that sellers might make the request, e.g.:
- The closing for their new home has been unavoidably postponed because a developer is still waiting for a certificate of occupancy, there are title issues or a lender is slow to provide final approval of a mortgage;
- There are matters of convenience;
- A birth occurs unexpectedly early;
- Illness or a death occurs;
- A family emergency arises on distant shores.
You no doubt imagined by now why a PSO isn’t such a great idea. You might, for instance, have valid concerns about changes in the condition or contents of the property once the sellers move out – if they move out when they promise, in writing, of course.
Naturally, you’d want your attorney to develop an agreement between you and the sellers.
Although you’ll want to document the property thoroughly with video and text, bear in mind that you’ll be depriving yourself of the ability to determine any hitherto unknown defects that can be discovered in your walk-through inspection of a vacant apartment or townhouse just prior to closing.
What’s under the rug?
If summer turns to winter, does the air conditioning work correctly?
Are their holes in the walls behind artwork?
Is the countertop stained under that microwave oven?
Of course, there are protections that your attorney will build into the agreement between you and the sellers. They’ll be assessed a heavy penalty in the event of overstaying their welcome. There will be a hefty security deposit for any damage. They will pay handsomely for what you’ll think of as rent, though it won’t be such.
What won’t be easily resolved, however, is how to handle any disputes. You might object to the cracked floorboards that you discover under the carpet, and the sellers might counter that you did, after all, buy the place “as is.”
While it’s always nice to be accommodating, it is critically important to enter any post-settlement occupancy with eyes wide open to the substantial risks involved.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022