By: Garret T. Barnes, Esquire, Barnes Walker, Goethe, Perron, Shea, & Robinson, PLLC
While it is best practice to avoid pre-closing and post-closing situations altogether, reality dictates otherwise, and if it is to be done, then it must be done correctly.
FR/BAR CONTRACT ADDENDUMS
Addendums “T” and “U” of the FR/BAR contract contemplate pre-closing and post-closing occupancies and these addendums are not agreements for pre-closing and post-closing occupancy, but rather require the buyer or seller to deliver a mutually acceptable written lease within 10 days. The addendums also spell out who is to pay for the lease, the repair and maintenance obligations, the rent amount and terms, etc., all of which must be incorporated into the lease, but this is not the occupancy agreement.
The addendums further state that if the parties fail to enter into an agreeable written lease within the time frame, then either party may terminate the contract. The parties can also elect not to execute the addendums and go directly to the occupancy agreement; however, in this process, the contract is not contingent upon an agreeable occupancy agreement.
It is extremely important to have a written lease (which can be called an occupancy agreement) between the parties to bring it within the control of the Florida Residential Landlord Tenant Act, Chapter 83, Florida Statutes, as well as the eviction statutes. The benefit for landlords under the Residential Landlord-Tenant Act is that it keeps it under the statutory eviction process. This eviction process is quick and well settled, and relatively inexpensive. Alternatively, if the occupancy agreement is established in the contract (under contracts law), then the Residential Landlord-Tenant Act is not available and the process will be much slower, more expensive, and more cumbersome.
IMPORTANCE OF A PROPER LEASE
We highly recommend that REALTORS® do not create pre-imposed occupancy rights via addendum in the contract, or in the special clauses, without referencing that a written lease will be needed. It is the same process whether we have two days or two months, as a lease must be done to protect both parties. A lease will set forth the rent, term, insurance, maintenance requirement, escrow, holdover, damages, access, association approval, repairs, utilities, taxes, rules and regulations, security deposits, etc. We do sometimes receive complaints that we are overdoing it, when preparing a lease when it is just a few days; however, it is imperative that it be so. This protects not only the landlord and tenant but also the REALTOR®. There is an approved FR/BAR Residential Lease available, but please check with your broker.
Regarding these agreements, the parties have to consider the risk of the closing not happening and then having to evict the buyer or the seller, and then, upon eviction, determine if there is any damage done or other harm or injury. One can simply imagine a scenario that the buyer or seller may be able to tie the property up for a lengthy time.
It is very important that a proper procedure is followed when dealing with these “dangerous” occupancy agreements and that a proper lease is prepared for the protection of all parties. Additionally, it is crucial to know early in the closing process if the parties will be agreeing on the terms of the occupancy agreement, therefore, not waiting until the end.
Be sure to register for our upcoming class, Post Occupancy: What is it and Should a Buyer Allow It? This course will help you understand what the risks are and what you should do to avoid them.
This article is meant for educational purposes only. It is not intended to serve as legal advice and should not be used as a substitute for consultation with an attorney.