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Make sure you fully understand the occupation and possession clause in your deed of sale

When you enter into an agreement of sale of a property, it is important to understand the meaning of all the clauses contained in the agreement of sale, especially the clauses relating to occupation and possession. It often happens that parties enter into an agreement without being fully informing themselves of these clauses and its consequences, such could potentially cause a dispute between the parties at a later, which could have been avoided.

There is a stark difference between possession and occupation of a property, in that the two terms have different similar consequences.

Possession is when the property has become your property, this is where the property has been registered in your name and the transfer is complete.  The Deeds Office records reflect you as the rightful owner of the property, and all requirements of the agreement of sale have been met.  You are now liable for all the expenses pertaining to the property as the legal owner.

Occupation takes place in two instances, occupation of vacant land/ subject to an existing tenancy:

  1. When the vacant property is not yet transferred to your name, provided that there is an agreement of sale between the Seller and the Buyer. the Buyer can then occupy the property provided that the Buyer pay occupational rent to the Seller until the property is fully transferred to the Buyer and,
  2. When you take occupation after the transfer has been finalised and the key has been handed over.

In both instances the Buyer is liable for all expenses occasioned to the property as a Tenant. If you wish to make alteration/changes (i.e. put in a pool), it would be recommended that you wait until registration has been finalised, as Seller may well cancel the agreement of sale, leaving you with wasted expenses occasioned with the agrees to alterations.

“Possession and occupation” subject to existing tenancies

There is a twist when the parties enter into an agreement of sale of property that has an existing Tenant. Possession that is subject to is when the property is transferred to your name with the tenancy, in that the new owner inherits the benefit and the risks of the tenancy.

This is a common occurrence in practice, where you will find that the parties who concluded an agreement of sale with a clause that the Buyer will have possession and occupation of the property that is subject to the tenancy upon registration of the transfer on a certain specific date and make that date the terms of the agreement.

The question is always what happens when the transfer date of possession and occupation does not coincide with the date of registration? Who inherits the risk and benefits of the tenancy?

If the date of possession and occupation does not coincide with the date of transfer, for example the agreement states that the transfer will take place on the 12 February 2024 same as occupation, but it takes place on the 28 February 2024 and the delay was out of the parties’ , the Buyer automatically takes possession and occupation of the property and inherits all the risks and benefit of the property including its rental income, from the date they occupy the property until the property is legally transferred and registered to their names.

Even though it is not a duty, however it is part of good practice for the Estate Agent and the Conveyancer involved to ensure that the parties understand this clause and to make sure that after the transfer is finalised the occupational rent is paid to the entitled. Using the abovementioned example, the prorata rental income must be paid to the Buyer.

Written by Aviwe Vezi

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.

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