Early possession prior to settlement

In certain circumstances property purchasers can have early possession prior to settlement- access to property they have purchased prior to settlement.

A purchaser will typically seek early possession where they require sufficient time to move their possessions, or to allow them somewhere to live until settlement has been completed. This situation often arises when a purchaser has sold their current home prior to purchasing a new one or is required to vacate tenanted premises.

The seller does not have an obligation to allow early possession prior to settlement unless the parties have agreed to this as a special condition in the contract of sale. Purchasers may still decide to request early possession or even negotiate for early possession to be granted.

Consenting to early possession carries various risk to the seller. The property seller themselves may still be residing in the property and may not be in a position to vacate prior to settlement.

Every property transaction is different and each situation will differ completely. Therefore every scenario should be assessed on a case by case basis. All property buyers or seller will have different circumstances and their expectations from taking possession and having access to the property prior to settlement date may be different.

It is important that you seek independent legal advice before purchasing property and before a formal request for early possession is made. As Melbourne property lawyers and licensed conveyancers we can assist in requesting early possession. We will ensure that your rights are protected and all associated risks involved are minimised.

Conditions of a standard licence agreement

It is standard practice for a licence agreement to have the following conditions:

  • The purchaser/buyer must maintain the property in the same condition as at the date of possession of the property with the exception of fair wear and tear;
  • Entry to the property is under a licence and does not create a Landlord and Tenant relationship;
  • The subject property must be insured by the purchaser for public liability and building insurance to the seller’s satisfaction;
  • The buyer indemnifies the seller against any damages or expenses incurred by the seller as a result of the buyer’s possession of the property;
  • Risk as to damage to the property passes to the buyer immediately on them taking possession;
  • On settlement date all adjustments for outgoings including rates and tax will occur from the date of possession;
  • The buyer must not make any additions or alterations without the seller’s prior approval in writing;
  • The purchaser/buyer must allow the vendor/seller to inspect the property with advanced notice and at their discretion; and
  • A licence fee is generally applicable and the purchaser/buyer will need to pay this additional sum at settlement.

Considerations for sellers

Any seller who intends to provide early possession should be aware of the following:

  • Ownership and legal title does not pass to the buyer until settlement has occurred;
  • The seller will not receive settlement monies and the balance of the purchase price for the sale until formal settlement has occurred in accordance with the standard contract;
  • In extreme cases if settlement does not occur, a dispute arises between the parties it may be difficult to evict the buyer. The seller may have to engage in legal action to remove the buyer. This can be a costly exercise for the seller;
  • The sale settlement may be delayed for various reasons and the agreed dates may need to be adjusted to.

Considerations for buyers

Any buyer who intends to seek early possession should be aware of the following:

  • If you are granted early possession you will not be allowed to make any alterations to the property;
  • The place must be maintained in the same condition as it was at the time of possession;
  • If you cause or identify any damage to the premises, you are still under an obligation to proceed with settlement in accordance with the contact of sale;
  • You will be responsible for all outgoings including council rates and water rates from the date of possession;
  • A licence fee will generally be charged by the seller for the time spent occupying the property;
  • If you can’t settle on the settlement date, the seller can still charge penalty interest for delayed settlement; and
  • You may be responsible for the vendor/sellers legal costs to draft a licence agreement for early possession. This fee generally varies from $330 (incl GST) to $880 (incl GST)

Contact us regarding early possession prior to settlement

In any situation where a buyer takes early possession of a property, the specific details of the arrangement need to be carefully documented to provide a mechanism for resolution of any disputes which arise. It is essential that the parties are made aware and completely comprehend their obligations and responsibilities.

We recommend you obtain legal advice before you sign an early possession agreement. As your independent property lawyers, contact us on 8590 8370 to book a no obligation consultation to discuss you situation in detail. We will be able to handle the request formally, thus ensuring that all parties are aware of their rights and obligations.

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

 Last updated: 30 August 2022 Article by: Halil Gokler

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