Temporary Occupancy and Homeowner’s Insurance Coverage Don’t Get Caught Unaware!
We are seeing more and more Temporary Occupancy Exhibits in this Seller’s market. Consider the following scenario:
The Owner of a property sells and includes a 60-day temporary occupancy in the purchase agreement. The Property closes. The old owner is still in the house and the new owner has not yet moved in.
Yikes! The property burns down! Yikes, a tree falls on the roof! Yikes, a guest slips and falls!
Whose Insurance Pays?
Whose insurance pays for the damage to the real property? Whose insurance pays for the loss of the former owner’s personal property? Whose insurance pays for the slip and fall?
Not the former owner’s policy. They are no longer an owner occupant. Their policy is no longer valid for any of it.
Not the new owner’s policy. The new owner was not occupying the property when it burned. Their policy would not cover either.
Reviewing the language of the GAR F219, Temporary Occupancy for the Seller, the Seller has agreed to hold the other parties harmless from liability to people and property.
6. Seller hereby expressly releases Buyer, Seller’s Broker, Buyer’s Broker and their Affiliated Licensees from any and all liability of any nature whatsoever which may arise as a result of the Seller’s acts or the acts of anyone else entering the Property, including, but not limited to, liability for injury to persons and/or damage to personal property resulting from or in any manner occasioned by such
occupancy. Seller further agrees to hold harmless and indemnify the Buyer, Seller’s Broker, Buyer’s Broker and their Affiliated Licensees from any claim or loss arising out of or occasioned by the Seller’s occupancy of the Property.
7. It is specifically understood that should the Property be destroyed by fire or other occurrence, Seller shall bear the risk of loss to Seller’s personal property.
Buyer’s Temporary Occupancy Prior to Closing
The reverse situation is true. Consider a buyer’s temporary occupancy prior to closing. The Buyer has agreed to hold the seller harmless from liability and loss of personal property.
9. Seller shall, at Seller’s expense, retain fire and extended insurance coverage on Property until the date of closing. Buyer acknowledges
that such insurance coverage does not cover Buyer’s personal possessions and that Buyer shall bear the risk of loss on Buyer’s personal
property or for injuries sustained should Property be destroyed by fire or any act of nature during the time that the Buyer is in possession.
12. Buyer agrees to indemnify and hold Seller harmless from any claim or loss which results from the actions of Buyer or anyone else
entering Property while Property is occupied by Buyer under this Exhibit.
Recommendations in a Temporary Occupancy Situation
First, we recommend that there be a Special Stipulation in the Purchase Agreement for either situation as follows:
The Temporary Occupant
Inquiries as to the best way to handle the temporary insurance should be directed to the insurer. Real estate agents are not qualified to answer that question.
The New Owner
If there is a loan on the property, the lender would have required property insurance. However, unless the property was an investment property, it would have been an owner’s policy. The buyer/new owner should get a rider to their policy to cover during the time the Seller is maintaining possession of the Property or confirm in writing from their insurance company that none is required because it is considered short-term (typically 60 days). Alternatively, if the insurance company will not use a rider or will not confirm that none is required, the buyer/new owner should take out a temporary landlord’s policy. Again, that question must be directed to the buyer’s insurer.
What if the Occupancy is for days, not for weeks or months?
A shorter time period is less risky, but it really doesn’t change the situation. Although a period of days might be overlooked by an insurer, it can’t be assumed. It’s up to the insurer. The buyer and the seller should consult with their insurers, weigh their risks and make their own decisions. We can only make them aware of the risks.
9/6/2022 12:00:59 pm
There are numerous forms of insurance coverage readily available on the market place today, yet every one of all of them concern safeguarding our team, family, or belongings from some type of monetary reduction.
11/17/2022 09:25:35 am
I want to make sure that I can protect my home. It makes sense that I would want to get the right homeowner's insurance. That seems like the best way to ensure that I can fix things easily.
12/7/2022 03:33:33 pm
My cousin has been thinking about getting some insurance for the home that he is currently living in because he is house-sitting while they are on sabbatical. He wants to make sure that nothing happens while he is there in order to be safer. I'll be sure to tell him about how their policy won't cover it because they aren't occupying it, so he might need to get his own.
12/14/2022 03:48:52 am
Very interesting and thanks for sharing such a good blog. Your article is so convincing that I never stop myself from saying something about it. You’re doing a great job. Keep it.
1/17/2023 02:39:33 am
Thank you for pointing out that the lender would have demanded property insurance if there were a loan on the property. My mother wants to purchase a home and rent it out. I'll advise my mother to purchase rental property insurance.
3/16/2023 04:50:40 pm
When it comes to temporary occupancy in a home sale, it's important to consider insurance coverage. The seller's policy will no longer be valid, and the buyer's policy won't cover any incidents that occur before they move in. To mitigate this, special stipulations can be added to the purchase agreement, and temporary insurance policies can be obtained. It's important to consult with insurers to weigh the risks and make informed decisions.
3/17/2023 07:50:36 am
When it comes to temporary occupancy, it's important for both buyers and sellers to understand the potential insurance risks involved. In situations where the seller retains possession after closing or the buyer moves in prior to closing, special stipulations in the purchase agreement can help ensure adequate insurance coverage for both parties. It's also important to consult with insurance companies to determine the best course of action.
3/24/2023 09:01:25 am
Temporary occupancy exhibits in real estate transactions can present insurance coverage challenges for both buyers and sellers. It is important to review the language of the purchase agreement and consider adding special stipulations to ensure adequate insurance coverage. Consultation with insurance providers is necessary to determine the best course of action.
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