Getting the keys before settlement – no big deal, right or Wrong?

It was once common for the keys to be handed over days or even weeks before the settlement of a property took place. And for that reason, many buyers expect to have early access to a property to start moving in.

It can be tricky to coordinate the move from one property to another, but it’s important to understand that early access to the property is rarely allowed today except under the Licence Agreement.

A buyer will typically seek early possession where they require sufficient time to move their possession or to allow them somewhere to live until the settlement has been completed.

The seller is not under any obligation to allow early possession unless a special condition had previously been included in the Contract. Buyers may still elect to request early possession or even to negotiate for early possession to be granted. A seller may be reluctant to grant early possession as the associated risks involved can be seen as too great to the seller. Alternatively, the seller may not vacate the property themselves until the day of settlement.

Each situation will differ completely as every conveyance is individual and unique. All buyers and sellers will have different needs and goals as to what they are expecting to achieve out of the situation.

We highly recommend that legal advice is sought before requesting early possession or before agreeing to the grant of early possession. If you have engaged a Solicitor or Conveyancer they will be able to handle the request formally, thus ensuring that all parties are aware of their rights and obligations.

Possession under a licence agreement will outline the following conditions for early possession:

1. The buyer must maintain the property in an ‘as is’ condition at the date of possession. Fair wear and tear is accepted as reasonable;
2. Entry to the property is under a licence and does not create a Landlord and Tenant relationship;
3. The property must be insured to the seller’s satisfaction; and
4. The buyer indemnifies the seller against any damages or expenses incurred by the seller as a result of the buyer’s possession before settlement.

Downfalls of Early Possession for the Seller

1. The legal title does not pass to the buyer until formal settlement has been completed;
2. The seller will not receive settlement monies until the formal settlement;
3. If settlement does not occur, or if a dispute arises with the buyer, it may be timely and costly to remove the buyers from the property. You may even be required to resort to legal action to remove the buyers from the property; and
4. The sale might be delayed for several reasons, in extreme cases, it may be that settlement would not occur.

Downfalls of Early Possession for the Buyer

1. 1. If you are granted early possession you will not be entitled to make alterations to the property;
2. The house must be maintained in the same condition it was at possession;
3. Should the property be damaged you will still be obliged to proceed with the settlement;
4. If it becomes part of the agreement you may be responsible for rates from the date of possession; and
5. You may also be charged a fee by the seller for the time spent on the property before settlement.

Considerations for Early Possession

1. The specific details of the agreement;
2. The costs to each party;
3. Utilities should be moved into the buyer’s name;
4. Buyers should agree to maintain the property in an ‘as is’ condition;
5. The seller still owns the home so they should maintain their insurance; and
6. The parties should be aware and completely comprehend their obligations and responsibilities before agreeing to anything.

 

If you or someone you know is considering possessing a property before settlement, do not hesitate to contact our office to speak with one of our friendly team members today on 1300 224 828.