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BROKER CORNER

Holdover Occupants in Temporary Occupancy Agreements

4/25/2022

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​Often sellers are not ready to move out on the date set for closing and require a Temporary Occupancy Agreement.  In a seller’s market, the buyer usually agrees to win the property. The GAR Temporary Occupancy Agreement (TO) offers protections for the buyer against a seller holding over past the agreed occupancy period.
 
Temporary Occupancy Agreements are generally limited to 60 days.
The reason behind this provision is that most standard deeds to secure debt and standard FNMA and FHLMC requirements provide that the buyer must occupy the property as their principal residence on or before 60 days from the date of closing.  However, if the buyer pays cash for the property, the 60 day limit is not relevant.  The buyer should consider, in the case of a cash sale, whether a lease would be more appropriate than a Temporary Occupancy Agreement.
What Happens If The Seller Does Not Move Out?
 
The TO includes a provision for daily rent if the Seller holds over beyond the agreed time period.  The daily rent for holdovers should be high enough to incentivize the seller to stick to the terms.  The daily rate should not be a reasonable daily rate, because it disincentivizes the seller to leave.  If the seller can stay put for another month at $100 or $200 a day, they are paying less than a hotel would charge.  (Not even considering the cost to store personal items.) Instead, we advise charging a daily fee that make the seller leave on time.  Depending on the property, $500, $750 or even $1,000 a day will make most sellers pay attention to moving out on time.  Consider, too, the consequences to the buyers for their own loan if their deed to secure debt requires occupancy within 60 days of closing.  Make the daily holdover rate meaningful.
 
If the Holdover Seller Won’t leave, What Legal Action Must The Buyer Take ?
 
First, what the owners cannot do. They cannot forcibly remove or lock out the seller.  That could lead to claims by the seller for wrongful eviction. Some owners think they can use the Georgia Innkeeper’s Statute and simply call the police to evict the holdover.  This works in a hotel situation, but it does not apply to purchase temporary occupancy situations. 
 
Here’s what the owner can do. Under the Georgia Termination of Lease for Holdover Law, the buyer would have to evict the holdover seller.  The buyer would have to go to court and obtain a writ of dispossession, which is then served on the seller. Filing a dispossessory lawsuit (an eviction) to remove the temporary occupant from the property can take weeks or months.  This is why it is so important to make the daily rate for holdovers high. 
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