Temporary Possession Or Use Of Property Before Or After Sale

In an ideal world, possession of property would occur at closing of the purchase. However, as you well know, we do not live in an ideal world and sometimes change of possession occurs before or after closing. Failure to properly document these short term tenancies will substantially increase the risks of all parties, including the brokers and agents.

TREC has promulgated lease forms for short term tenancies of less than 90 days for use when a seller does not vacate at closing or the buyer is allowed to occupy the property prior to closing. These forms are adequate for short term tenancies which occur in the context of a sale of the property.

Any time there is to be a landlord-tenant relationship between a buyer and seller – even if the tenancy is for just one day – there should be a written lease which documents the tenancy. Tenancies of less than 90 days, documented in writing as part of the contract to sell property, are exempt from the residential security devices statutes (These statutes require certain types of security devices to be installed on rental property). Failure to use a written agreement to document a tenancy related to the sale of property or establishing a tenancy of 90 or more days, will subject the owner of the leased property to liability if the property does not have all of the required security devices. Use of a proper lease will relieve the landlord of this liability for tenancies of less than 90 days.

The Texas Property Code also requires the installation of smoke detection devices for residential rental property, even if the tenancy is for less than 90 days. The TREC lease forms waive the landlord’s duty to inspect and repair the smoke detectors, but there is still a requirement that smoke detectors be installed in the property.

At times, a buyer may not need to actually occupy the property prior to closing but may ask to be allowed to store personal property in the property. This arrangement can also present liability issues for the seller. Generally, sellers are well advised not to permit a buyer to store personal property on the premises prior to closing unless there is a written agreement between the parties regarding storage arrangements.

Allowing the buyer to store personal property before closing can create several liability issues for a property owner. First, there is the issue of liability for loss due to theft, fire, water, etc. A property owner should make certain that the Buyer has insurance coverage on the stored property for the full value of the property. The storage agreement between the parties should provide that the property owner has no responsibility for loss resulting from damage to the stored property.

A seller who allows personal property to be stored prior to closing also has to be concerned with removal of the personal property if the contract to purchase the property falls off. The storage agreement should address this issue by requiring the immediate removal of the stored goods upon termination of the contract to purchase and should further provide that if the personal property is not promptly removed, the property shall be deemed to be abandoned.

Even with a storage agreement addressing the issues listed above, a seller should resist allowing personal property to be stored to the extent possible. No matter what the storage agreement provides, if the transaction does not close and the buyer fails to promptly remove the stored property, the seller is going to incur expense and will almost invariably be subjected to some risk in attempting to get the stored property removed.

If there is one lesson to be learned, it is that you should not allow possession of the property, before or after closing, by a party other than the owner without a lease agreement and you should not allow the property to be used for storage purposes without a storage agreement in place. If you do not have a storage agreement and need one, see our Contract Forms section.