Workshop: Buyer in occupation before completion

In most residential transactions the buyer will never take occupation of the property prior to completion. However, it does and can happen and, as a practitioner, you need to be cautious.

There have been many instances, I am sure, of cases where a buyer has requested to take occupation before the contracted date for completion for, what could be, a variety of reasons. It could be that the buyer wants to store furniture, begin decorating, measure for curtains or even move in.

When acting for the seller, the buyer's request should be resisted in the first instance. The main risk to the seller is that if the buyer takes occupation he may be inclined not to complete the purchase on time, or at all. In this situation it is incredibly difficult to evict the buyer from the property. There is also the risk that the buyer causes damage to the property and then decides not to complete. The seller is then left with no sale and a damaged property to deal with.

The occupation of the buyer, in many cases, will be a breach of the seller's mortgage conditions and therefore, the lender's consent should be obtained before occupation is given. In almost all cases, the mortgage will be redeemed by the seller on completion of the sale and so, you may think that obtaining the consent of the lender is going too far. I would suggest that consideration is given to the situation and terms of occupation. If the buyer is taking occupation a day or two before the contracted day of completion, then you may consider the risk small enough not to obtain consent. If the buyer wants occupation for longer, then the consent of the lender should be obtained.

In addition, you should consider your client's insurance situation. It is possible that the occupation of the buyer would invalidate any insurance policy over the building which the seller may have.

If there is to be a long period between exchange and completion and occupation is given, there is the possibility that occupation will trigger completion of the contract for Stamp Duty Land Tax purposes. This means that full SDLT (if any) will fall due on the date of occupation and not the completion date.

A key undertaking

For all the reasons set out above it is important that occupation by the buyer should be strongly resisted. However, if not, then it is important that the status of the occupier is made clear from the outset by placing restrictions on such occupation (see also Standard Conditions of Sale).

For instance, if the buyer simply wants access to measure for curtains, then a key undertaking, under supervision of the estate agent, would be adequate.

For anything else, a licence to occupy should be used (a tenancy agreement could give the occupier security of tenure). It is important to note that irrespective of the method of occupation, a court order will be required by the seller to regain the property in situations where the occupier will not peaceably surrender the property.

Other conditions to consider would be to make the occupier responsible for all repair and maintenance, prohibit alterations, restrictions on use of the property and who may use it. The list is not exhaustive and should be considered in context of the situation.

The buyer will lose his right to object to any defects in the seller's title as soon as he takes occupation and, therefore, if you are acting for the buyer, you must dissuade your client from taking occupation until all investigations have been concluded. Usually occupation is taken between exchange and completion, at which time, title investigations should have been concluded in any event.

Also, from a buyer's point of view, as a licence to occupy will not give any security of tenure, you should discourage your client from spending money on the property decorating or making any alterations (if they are permitted).

There are merits to obtaining ?occupation of the property if you are a buyer. However, the risks involved are heavily weighted against the seller and, for that reason, my personal position is to always strongly dissuade my seller client from allowing it.