The Most Misunderstood Form in the Library?

ORLANDO, Fla. – Here’s a common scenario we hear about on the Florida Realtors Legal Hotline: A seller and buyer enter a Florida Realtors/Florida Bar contract. Both parties remain eager to close. But the seller encounters an unexpected issue that would make it difficult or impossible to move out by the closing date. However, the seller just needs to stay in the house for a short period of time after closing.

Assuming the buyer is fine delaying their move-in date, how should they document it?

Some people think that Rider U, Post-Closing Occupancy by Seller, is the required next step. It does, after all, have “Post-Closing Occupancy” in the title. However, the main thing this rider does is give both sides an option to cancel the contract. If that’s not what they want, then it’s probably not a good tool for this situation.

Before we go into detail, here’s a one-sentence summary of the clause: The buyer and seller will attempt to negotiate a lease or occupancy agreement, but if they can’t agree to terms by the deadline, then either side can terminate the contract. Now, onto the details.

Deadline

It sets a deadline for the parties to deliver a “mutually acceptable written lease, post-closing occupancy agreement or similar agreement.” The default deadline is 10 days before the closing date, although the parties are welcome to negotiate a different deadline.

Lease or occupancy agreement or other similar agreement

Under this rider, the buyer and seller could negotiate a lease, which would trigger all the rights and obligations in Florida’s Residential Landlord/Tenant Act. The Form Simplicity library contains lease forms if the buyer or seller wants to use them, but they will need to look elsewhere if they want to negotiate a “post-closing occupancy agreement or other similar agreement.”

Who pays

The rider has check boxes to designate whether the seller, buyer, or both pay for costs incurred to prepare an agreement. However, the rider doesn’t obligate anyone to hire a lawyer or otherwise pay for an agreement, so putting something together on their own ($0) also remains an option.

Who prepares?

When it comes to preparation of the agreement, the rider provides that the contract is contingent on the buyer and seller “delivering to each other” an agreement by the deadline. The phrase “delivering to each other” doesn’t clarify which side should prepare the agreement, so hopefully the parties can communicate and figure it out.

Termination right

Either side can terminate if they can’t agree to terms by the deadline. This key part of the rider provides, “If the parties fail to deliver a mutually acceptable Post-Closing Agreement within the time period stated above, then either party by written notice to the other may terminate this Contract …” If either side terminates, then the buyer is entitled to get a return of the deposit.

Note that neither party is obligated to agree to specific terms other than the length of occupancy and “monthly rental” described in the rider. Hopefully, the parties can get on the same page as to what they want in that agreement; otherwise, this remains an extremely broad right for either side to terminate the contract.

With this overview in mind, it makes the most sense to use this rider if the parties aren’t under contract yet. This rider allows them to execute the purchase and sale contract now and prepare the lease or occupancy agreement later, with a termination right if things go south with the lease or occupancy negotiation.

Returning to our scenario above –the buyer and seller are already under contract and onboard with putting together a brief occupancy agreement – what document makes the most sense?

In most cases, parties prefer to go straight to negotiating the lease or occupancy agreement. The agreement could take many forms, so it’s ultimately up to the parties how formal or casual to make it. Of course, a clear, written agreement with thoughtful rules in place is far preferable to a vague, oral agreement. Note that if the seller is unable to secure this agreement, the contract would still obligate them to move out by closing.

There’s also a CR-6 Pre-Closing Occupancy rider that mirrors almost all the language in the CR-6 Post-Closing Occupancy rider we just reviewed, so the principles discussed here apply to it as well.

As a final disclaimer, this article discussed the Florida Realtors/Florida Bar rider and is narrowly focused on making sure that members know how that rider works. It’s certainly possible to add a short-term occupancy agreement to the purchase and sale contract. I’ve seen a few different form contract amendments outside of our Florida Realtors forms library that do just that, and parties are always welcome to prepare their own amendments.

Joel Maxson is Associate General Counsel for Florida Realtors
Note: Information deemed accurate on date of publication

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