In the normal course of events, the new owner of a property takes possession after the sale has closed. Once the sale has closed, the vendor’s solicitor advises the estate agent to release the keys. However, sometimes things don’t go as smoothly as planned and it would be beneficial to both parties for the new owners to take possession in advance of closing.
For example, the purchaser may have given notice to their landlord of their intention to leave the rental property in which they live in expectation of closing the sale on a certain date. If that date, for whatever reason, becomes unachievable and the landlord is insisting that the agreed termination date is adhered to, this puts the purchaser in a difficult position. The vendor can take the approach that this isn’t their problem and possession will be handed over on closing. However, if the vendor is happy with the offer and is minded to assist the purchaser, there are options open to facilitate the purchaser to take possession before the sale closes.
In other instances, it can be the vendor who is looking to remain in the property even after the sale has closed; for example if there is a delay in closing the sale on the property that they are buying. In this situation, the purchaser will usually insist that the closing of the two properties happen back to back (at the same time), but there are rare occasions where the purchaser may be willing to facilitate the vendor in closing the purchase and allowing the vendor to stay in the property for a defined period thereafter.
A situation that we encountered was when the sale had closed but a mixup had occurred with the removal company such that it was envisaged that they would fully clear the property on closing day but subsequently advised that this would no longer be possible. The vendor refused to vacate the property even after it had closed and essentially was trespassing at that point. The purchaser could have, in theory, escalated matters even to the point of calling An Garda Siochana but ultimately decided to give the previous owner a few days to get the property cleared. This obviously was far from ideal and exposed the previous owner to the prospect of having to reimburse the purchaser for costs such as storage, arranging alternative accommodation and even compensation for distress caused; thankfully it didn’t come to that but it could have, had the purchaser pursued it vigorously.
What is a Caretaker Agreement?
A caretaker’s agreement, as the name suggests, is when the purchaser or the vendor lives in the property despite them not being the owner or having any tenancy rights. This would occur for a purchaser where they move in before the closing or for a vendor where they continue to occupy the property after it has closed.
The caretaker does not accrue any tenant rights and so, for example, the owner of the property can terminate the agreement typically with very minimal notice to the caretaker. The caretaker agrees to maintain the property in good order for the duration of their stay. The attraction from the owner’s point of view is that, in theory, they can remove the caretaker with minimal notice and the caretaker does not enjoy the same rights as a tenant would. There is no need to register this agreement with the RTB and the caretaker has no recourse to the RTB in the event of a dispute.
Again, solicitors are very wary of such agreements, even when goodwill exists on both sides, as should the onward purchase envisaged to allow the agreement to come to a natural and amicable end, be frustrated or delayed, this can put strain on all sides. While the caretaker will be legally obliged to leave the property on demand from the owner, should they not, the owner will need to enforce this and incur legal costs to do so.
The owner of the property, be that the new purchaser or the vendor, can rent the property to the person in possession of the property for a period in advance of the closing date. A tenancy agreement can be put in place with rent paid to the owner for the duration of the tenancy. The obvious difficulty here, and the reason that most solicitors don’t recommend such arrangements, is that should the event required to bring the tenancy to a natural end e.g. the closing of an onward purchase, not proceed, the tenant can get stuck in the property so to speak. If they are there for a period of six months or more, they will start to accrue “Part Four” tenancy rights and removing them thereafter could prove quite challenging. These rights accrue even if the tenancy agreement is a fixed term one.
Sometimes license agreements are used as a means of circumventing this but the courts have shown that they will look at the substance of what is actually happening in reality and not just what is written on the agreement. So while a homeowner may feel that a license agreement offers greater flexibility, and it does, one cannot rule out the courts ruling that what actually existed was a tenancy, with all of the associated rights and responsibilities that go with that. License agreements are typically used for short stays in hotels / guest houses, student accommodation and are characterised by the licensee not having exclusive access to the property and the licensor’s authority to move the licensee within the premises e.g. move from one hotel room to another. Based on this, even if a license agreement was signed, the courts may well interpret the arrangement as being a landlord / tenant and not a licensor / licensee arrangement.
It is a risk for sure to agree to rent a property to someone when the original intention was to sell it. Both sides’ solicitors will explain the risks and benefits and the respective parties will decide if this is something they wish to pursue.
From time to time, we will get a request from a purchaser in relation to delivering some contents to the property that they are purchasing in advance of the closing date. Such requests are typically not entertained as the effect of placing contents in a property that you do not yet own is to put them out of your control. While a sale may be due to close in a matter of days, last minute hurdles do arise, and if they do, the contents are then beyond the reach of the owner. While it may be tempting to ask the vendor to facilitate the delivery of some contents in advance of the sale closing, this is generally ill advised and to be avoided.
Back to Back Closing
While the above options do exist, by far the most common means of getting sales over the line without the need for caretaker or tenancy agreements are back to back closings. As the name suggests, both properties (or sometimes more than two) close on the same day. It’s not uncommon for a vendor of one property who is in turn purchasing another property to have a removal company scheduled for early on the morning of closing day. Coordinating this can be something of a high wire balancing act in that once the sale of their own property closes (while removal personnel are still on site), they are technically trespassing there so they need to move quickly to vacate. Obviously should either sale hit any last minute snags, then things can get complicated. Thankfully however, solicitors are very familiar with and experienced in back to back closings; they happen regularly, and they generally do get over the line in the end. So while back to back closings can be nerve wracking, they are the preferred means of selling one property while buying another one at the same time.