The following are instructions for the preparation and use of Form 271, the Interim Occupancy Agreement.


Analyzing the interim occupancy agreement

first tuesday Form 271, Interim Occupancy Agreement is used to establish a landlord-tenant relationship between the seller and the buyer when the seller agrees to give the buyer possession to the property being sold at any time prior to the close of escrow. The conditions which cause the seller to agree to the premature transfer of possession typically find the property vacant, the seller eager to accommodate a prospective buyer who wants to occupy the property immediately and a weak real estate market producing few buyers, fewer lenders and levels for qualification, and thus fewer sales.

The purpose for the use of the Interim Occupancy Agreement by a seller is to establish grounds for eviction under landlord-tenant law should the buyer take possession and fail for any reason to timely close escrow. A buyer with possession under an arrangement to purchase the property, not a separate rental agreement, is not subject to landlord-tenant law.

Preparing the interim occupancy agreement

The following instructions are for the preparation and use of Form 271, the Interim Occupancy Agreement. Form 271 is designed for the listing broker to prepare to formalize negotiations between the seller and the buyer to transfer possession prior to the close of escrow. The function of the occupancy agreement is to establish the legal relationship of the buyer with the seller relating solely to the occupancy prior to closing as a landlord-tenant arrangement, not a mere buyer who has been given possession under the purchase agreement or escrow instructions. The remedies for the seller on a failure of the sales escrow are dramatically different under the two arrangements, the occupancy agreement in this regard, favoring the seller. Without it, the buyer’s occupancy is as a buyer and runs the duration of any dispute.

Editor’s note — The instructions correspond to the provision in the form bearing the same number.

Document identification:

Date: Enter the date and name of the city where the interim occupancy agreement was prepared. This date is used when referencing this document.

Facts:
1. Referenced agreement: Check the appropriate box to identify the agreement to which this interim occupancy agreement is an addendum.
  1.1 Date of referenced agreement: Enter the date and the name of the city given in the referenced agreement to identify it.
  1.2 Parties to the referenced agreement: Enter the names of the buyer and the seller who entered into the referenced agreement.
  1.3 Subject property: Enter a common description of the property which is the subject of the referenced document.
Agreement:
2. Purpose of agreement: States the purpose of the interim occupancy agreement is to establish the buyer’s right to possession prior to close of escrow. The provision changes the date of transfer of possession called for in the purchase agreement from close of escrow to and agreed-to earlier date.
3. Commencement of occupancy: Enter the date the buyer is to be given possession by the seller. The provision states the expiration of the occupancy is the sooner of the close of escrow or termination by cancellation of the referenced agreement.
4. Elimination of sales contingencies: Check the box and enter the number of days in which the seller may terminate this interim agreement after entering into the referenced agreement (purchase agreement) by reason of the right to cancel the referenced agreement, usually due to a contingency provision calling for an event to occur or a further approval to be given.
Rent:
5. Enter the dollar amount of rent monies and the security deposit the buyer must hand seller prior to transfer of possession.
  5.1 Rent payment date: Enter the dollar amount of the rent due periodically, and check the appropriate box to indicate the period covered by the rent amount.
  5.2 Form of payment: Check the appropriate box to indicate the form in which the rent will be paid.
  5.3 Hours and days for delivery: Enter the beginning and ending time during the day the rent may be tendered by personal delivery. Enter the name of each day during the week during which the rent may be personally delivered.
  5.4 Delivery to depository: Enter the account number and the name and address of the depository where the buyer can deposit the rent money. This method of payment is an elective to be provided if the seller so chooses. The problem with this elective is the deposit of a partial amount of rent and the resulting need to make formal three-day notice for demand of the balance.
  5.5 Due date for payment of rent: Enter the numerical day of the week or month on which rent is due and check the appropriate box to indicate whether the numerical day is by week or by month.
  5.6 Proration on termination: States the rent will be prorated as of the termination of tenancy.
  5.7 Holdover rent: Enter the per diem (daily) amount of rent due if the occupancy is terminated and the buyer remains in possession.
6. Security deposit refund: States the security deposit will be refunded on the close of escrow, unless the referenced agreement is cancelled, in which case, the refund is to comply with residential security deposit refund law.
Property conditions:
7. Condition of premises: Check the box if a Condition of Premises Addendum is to be entered into and attached to this agreement.
  7.1 Buyer inspection: Check the box to indicate the buyer has inspected the premises and they are satisfactory for occupancy.
  7.2 Risk of loss: States the buyer has, on the destruction or damage of the premises prior to close of escrow, the options of 1) termination of the reference agreement and this occupancy agreement, or 2) continuing performance of the reference agreement and this occupancy agreement and receipt by buyer of the insurance proceeds seller is entitled to under casualty insurance policies held by the seller.
  7.3 Repair and maintenance:
  7.4 Additional improvements: States additional improvements by the buyer require the seller’s prior consent and the buyer obtaining fire and hazard insurance coverage for them.
  7.5 Ownership of improvements: States the additional improvements made by buyer are the property of the landlord, without payment, should the referenced agreement be cancelled.
8. Payment of utilities: States the buyer is obligated to pay all utilities during this occupancy.
9. Tenant insurance: States the buyer is obligated to obtain tenant insurance coverage naming the seller as a loss payee.
10. Seller entry: States the seller has a landlord’s right to enter the property on proper notice or an emergency.
General Conditions:
11. Assignment and subletting: States the buyer may not sublet or assign his rights under the occupancy agreement.
12. Attorney fees:

Signatures:

Buyer/Tenant signature: Enter the date the buyer signs. Enter the address, phone and fax numbers and email address of the buyer. Obtain the buyer’s signature.

Seller’s signature: Enter the date the seller or the seller’s agent signs. Enter the address, phone and fax numbers and email address of the seller or agent signing this occupancy agreement.