Many tenants wonder, what is occupational rent? When you purchase a property, you can usually only move into the property once the transfer is registered in the Deeds Office. That said, the Seeff Property Group explains that it is, however, possible to move in earlier.
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Reasons for wanting to move into the property earlier are varied. It might for example be that the particular property that you are purchasing is vacant, and the seller is therefore amenable to agreeing to an early occupation before registration of transfer.
It may also be that the seller is keen to move earlier, and there is then an opportunity for the buyer to move in, especially in instances where the buyer does not first have to sell another property.
Early occupation is, however, not a right, and the seller is under no obligation to let the buyer move in early. It is usually recommended that occupation takes place only once the registration of transfer is effected, as there are risks involved in letting the buyer move in early.
Include terms and conditions
In the event where a seller agrees to early occupation, it is vital that specific terms and conditions that deal with the occupation including transfer of risk, costs and so on are specifically included in the agreement of sale. These should preferably be vetted by a conveyancer.
In the event that the buyer then takes early occupation of the property, the buyer will be required to pay occupational rent to the seller until such time as the registration of transfer of the property to the buyer.
Responsibility for costs
The buyer will also be responsible for costs in connection with the occupation of the property such as water and electricity, and any other stipulated costs. The amount of occupational rent to be paid is usually set out in the Offer to Purchase so that there is an upfront understanding of what the applicable rent will be in the event of early occupation.
Seeff advises that buyers should also be aware that they will occupy the property as tenants, and not as owners. They will therefore not be entitled to make any changes to the property unless it is agreed to by the seller.
If the property is vacant at the time when the buyer puts in their Offer to Purchase and they are thinking about moving in earlier, it is recommended that they negotiate that upfront, says Seeff.
Should the property transfer be registered earlier than the occupation date, then the rent paid by the buyer must be refunded, unless otherwise agreed.
