Negotiating One Deal ” or Two??
[Editor’s Note: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway, or any other entity referenced. If you need legal advice, please consult an attorney.]
Good agents instinctively know that “he who negotiates least, negotiates best.”
Which is why they avoid drafting early move-in and holdover agreements ” and discourage their clients from entering into them.
The vast majority of the time, the issue never arises because the Buyer takes possession from the Seller immediately after closing.
However, occasionally a Seller can’t be out by closing, or, a Buyer wants to move in early.
No problem, right?
The catch is, at least to play it safe, it’s important for the parties ” now landlord and tenant ” to address a host of significant issues.
—How much rent;
—How much security deposit (and terms for getting it back);
—Liability and damage risk as well as insurance responsibility;
—Who pays for utilities?
—Rental term, and consequences for exceeding it.
Forms, Forms, Forms; Negotiating Fatigue
Of course, to be binding, all these agreed-upon terms have to be in writing.
Fortunately (unfortunately?), there are special forms for just such situations (what a surprise).
But, that doesn’t reduce the back-and-forth to flesh out key terms.
Coming immediately on the heels of negotiating the Purchase Agreement and Addenda, it’s not unusual for negotiating fatigue to set in.
Buyer & Seller + Landlord & Tenant
Once upon a time, when I was a CPA auditing Prudential Insurance’s commercial real estate portfolio, Prudential and developer Trammel Crow entered into a series of joint ventures.
The saying (at least at Prudential) was that, at the beginning of the relationship, “Prudential had the money and Trammel Crow had the experience.”
By the end of the relationship, “Prudential had the experience, and Trammel Crow had the money.”
The residential real estate equivalent?
Before closing, the Buyer has the money and the Seller has the house.
With a holdover agreement, after closing, the Seller has the money and the house.