It is common for seller to be in occupation of the property, in which case, the question of taking possession of the property by the buyer before completion does not arise. Unless there is a prior agreement to this effect, the seller is entitled to retain possession of the property.
Sometimes, buyers may express an interest in taking occupation of the property. This should be approached with trepidation by the seller, because he loses his incentive to complete the transaction. And if the seller is unable to complete the transaction, the seller may find it very difficult to regain possession. When the property is mortgaged by the seller, the lender’s permission should be sought before allowing the buyer into occupation.
Under circumstances where the seller allows the buyer to take possession of the pro
perty, the seller should ensure that this is in the form of licence and not as tenant so as to avoid problems relating to the tenure of possession. This is laid down in Standard Conditions 5.2 where it is expressly stated that the buyer’s possession shall be considered as a licence so as to prevent inadvertent tenancy. But even when possession is allowed under a licence, the order of the court is necessary to evict a residential occupier who refuses to vacate the property. Such a court order is also necessary in the case of non-residential property and when the tenant refuses to vacate.
Conditions of the buyer’s occupation
A seller who agrees to let the buyer occupy the property often sets certain restrictions on its enjoyment.
Standard Conditions of Sale
Under SC 5.2.2, it is provided that the buyer shall
- Not transfer a property;
- Permit members of his household to occupy the property;
- Pay for or indemnify the seller against all outgoings;
- Pay the seller a stipulated amount as fee. This fee is calculated at the rate of balance of the purchase price;
- Be entitled to any rent from the property;
- Keep the property in good condition and as it was when he took possession. He shall also not make any alterations;
- Not breach any terms mentioned in the lease agreement if the property in question is a leasehold;
- Quit the property at the end of the licence period.
Either party to the agreement is free to cancel the licence with five working days notice. But some of these terms can be altered by the buyer. For instance, he may wish to take possession to carry out repair works. However, this is not allowed under Standard Conditions 5.2.2. It is up to the seller to decide if can allow the buyer to carry out alterations, because in the event of the contract failing the seller would end up with a damaged property effected by the half finished work. SC 5.2.3 provides that the buyer is not deemed to be in possession when he accesses the property only to carry out alterations. If the seller allows the buyer access for repair purposes he should also make express provisions in the agreement to provide for termination of licence and obtaining adequate compensation for the damage caused. It is now common for sellers to allow access to buyer only to obtain estimates for renovation to be made after the completion of contract.
25.4.2.2 Standard commercial property conditions
In the case of commercial property transactions, there is no provision allowing the buyer to take possession before completion of contract. If the buyer intends to occupy the property, it has to be discussed with the seller.
Tenanted property
The Standard Commercial Property Conditions also contains provisions for tenanted properties. These provisions are applicable for properties under leaseholds and also for those where freehold properties are sold as tenancy. SCPC 4.2 deals with general management issues, while SCPC 5 deals with rent reviews that may arise between exchange and completion. SCPC 4.2.6 states that the seller shall not give or withhold a license or approval under a lease without the buyer’s consent. Also, under SCPC5.5 neither the buyer, nor the seller shall agree to a new rent amount unless the other party agrees.
Photo courtesy: Matt Buck
