Updates: Details

An issue which has arisen several times in the last few weeks on matters being attended to by our office, each time causing substantial acrimony and unhappiness, is the issue of occupation dates in an Agreement of Sale.

One approach by Sellers, Buyers and Estate Agents when negotiating occupation dates on agreements is to make occupation on registration of transfer. This has the advantage, mainly for the Seller, of ensuring that when the Purchaser obtains vacant occupation of the property purchased, he is already the registered owner of the property which he has, by then, paid for in full. Should the Purchaser then discover aspects of the property's condition that he was unaware of previously, he will have to follow proper legal recourse to enforce any rights he may have against the Seller. There is also an advantage in this approach for the Purchaser, in that should he be contemplating any alterations or improvements to the property purchased in order to adapt the property to his needs, he will not even be tempted to spend his money on improving a property not yet his. It is a case of taking delivery against payment – a very normal contract practice.

However a significant disadvantage with linking occupation of a property sold to registration of transfer of that property is that it creates a great deal of uncertainty for all parties in this regard. This uncertainty, when combined with the psychological stress and trauma imposed on people by their having to move home can prove disastrous for a transaction and impossible to deal with successfully. It is also impossible to ensure any degree of certainty due to the fact that the transfer process has far too many players involved for any one party to have control thereof – the conveyancers attending to the transfer where occupation is on registration of transfer will attempt to manage the situation by giving parties estimates of when they believe it may be possible to expect registration of transfer to occur, but these estimates are no more than that, and as often as not, do not prove to be sufficiently correct or accurate for the parties purposes .

Another approach is to have the parties agree to an actual occupation date that may end up being prior to, or after registration of transfer and an occupational rental being payable by the Purchaser to the Seller or vice versa. This provides the parties with a high degree of certainty as far as the date of occupation is concerned but also creates the possibility of a situation where a Purchaser moves into a property which is not yet his and proceeds to discover all sorts of "problems" with the property that he believes, sometimes rightly and sometimes wrongly, that the Seller is responsible for repairing or rectifying. The Purchaser then often does not wish transfer to take place until these "problems" have been attended to leaving the Seller in a very unpleasant position of no longer having control of his property for which he has not yet been paid, for and having to consider spending money on the problem "just to make it go away" and not because of any compelling legal obligation on his part. The Purchaser, if he needs to make alterations to the property to adapt it to his needs, is also often tempted to make those alterations prior to transfer; he will then be spending his funds on someone else's property and, if the transfer does not proceed for any reason, may well have a problem recovering his expenditure from the Seller if in fact the sale agreement does not provide for the forfeiture of improvements made before registration.

We have, on occasion, seen a third approach taken to setting an occupation date in an agreement; the date is set for a date after registration of transfer e.g. "the 15^th day of the month following registration of transfer" . This approach combines advantages of both the previous approaches and eliminates some of the disadvantages as well. The biggest problem with this approach often being the difficulty of persuading some Sellers of the wisdom of their agreeing to pay occupational rental for "their" property, however most are able to see the benefit to them of doing so, if this is properly explained to them .

The most important aspect of the whole issue of occupation dates in an Agreement of Sale is that the parties should be genuinely engaged by the estate agent when deciding on an occupation date on the basis of properly assessing their respective requirements in this regard, and bearing in mind that no one approach is going to be the right one for all circumstances on a transaction.

Any of the three approaches involves trade-offs and it is extremely unlikely that everyone will be happy with what has been agreed once the consequences thereof become clear but at least it will be a decision taken after consideration of the various issues.

Written by: Richard Grant