When a real estate deal is made, both buyers and sellers seek to tilt the contract in their favor – but there are some clauses in a real estate deal that can benefit both.
A rent-back clause has that potential. Sometimes called a “leaseback” agreement, it’s essentially an occupancy agreement that allows the seller to act like a renter – and the buyer like a landlord – for a specific time after closing.
How does this benefit each party?
Moving out of one home and into another can be a logistical nightmare, especially for sellers who are older or who are trying to close on another property at the same time they’re selling their current home. The rent-back clause gives them some breathing room so they don’t have to find temporary housing if the closing date doesn’t exactly line up with the first date they can get into their new space.
For buyers, a rent-back clause can make an offer more attractive to sellers, and that can sometimes tilt things in a buyer’s favor when it comes to a tight real estate market. If a buyer doesn’t need immediate occupancy as they relocate, they can even generate a little extra money that will help offset their move.
When negotiating a leaseback agreement, here are a few things to consider:
- A limit on the rent-back period and a clearly defined lease
- Whether or not a security deposit will be required from the seller
- Whether the seller must carry renter’s insurance during this time
- Who will perform any maintenance on the property during the rental period
- What penalties will be levied if the seller overstays their rental agreement
Rent-back clauses are practical solutions to common problems with house sales. You can gain a better understanding of your options – and the protections you need – with experienced legal guidance.