If you are considering buying or selling in New York City during the coronavirus outbreak, you may be hearing more about post-closing possession agreements. This is a contract that allows a seller to remain in the apartment beyond the closing date.
Buyers and sellers generally agree to this arrangement when the seller is not ready to move—a more frequent occurrence these days.
Many buildings are restricting residents’ movements and, even if move ins are being allowed, public health concerns may have you postponing your move date until it’s safer. If that’s the case, a post-closing possession agreement might suit you.
The risk in these agreements falls mainly on the buyer—instead of being delivered a vacant apartment you are technically renting the apartment back to the seller and relying on them to get out by an arranged date.
Both sides need to show flexibility, says Elise Kessler, attorney at Braverman Greenspun. “Normally the post-closing agreements have an outside date by which the seller must move out or pay a per diem amount for each day the seller does not vacate after the outside date,” she says.
The legal term for these per diem costs is liquidated damages. Typically the amount can be “substantial in addition to the maintenance and interest payments being paid by the seller,” Kessler says. This might be a fine of $500 or more for every day the seller overstays beyond the date outlined in the contract.
Although it seems the seller is renting back the apartment they’ve just sold, the contract is a license, not a lease. This is important, Kessler says, because “the parties do not want their relationship to be a deemed a landlord-tenant relationship, which gives the parties different rights.”
A lease agreement would put the parties on a path towards expensive and time consuming eviction proceedings if the seller refuses to move out but a license can be handled differently.
Boards are not parties to a post-closing agreement, however, Kessler says it is possible they could require an escrow to cover cleaning fees, especially during the current public health crisis. A co-op board will typically need to be notified and may make additional requirements, even charging a sublet fee.
Your agreement might also involve the seller putting funds in escrow if you are concerned the apartment won’t be delivered vacant and you will be left dealing with additional belongings that haven’t been removed. Additionally, an escrow term might protect you from damage to the place. The funds are released to the seller after they have moved out and fulfilled all the requirements outlined in the agreement.
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