This is how much occupational rent you should pay
Taking a step back, what is occupational rent? Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest mortgage originator, says buyers are sometimes allowed to occupy their new home before the transfer process has been completed.
“Many sale agreements provide for the buyers to be able to move into the property by agreement with the seller as soon as their bank provides ‘guarantees’ to the transferring attorney that the purchase price will be paid,” he says. “But this does not mean that they actually own the property yet, and in most instances, they will be required to pay occupational rent to the sellers for the period between the day they move in and the actual date on which formal transfer takes place.
When a seller rents
Rademeyer says property sellers sometimes have a reason that they need to stay on the property even after the date of transfer. “They could be waiting for their own new home to be renovated, for example, or finishing a school term or a work contract,” he says. “And in such cases, if the buyers are amenable to them staying on, they would be the ones having to pay occupational rent for the time between the date of transfer and the day they actually move out.”
They will most likely be paying more than the monthly bond repayment they have been used to, and will need to budget for the extra cost.
“In addition, if such arrangements are being made, the actual date on which the buyer will be given occupation, the anticipated transfer date and that rate of occupational rent to be paid, must all be clearly written into the sale agreement and signed by both parties to avoid the possibility of misunderstandings and disputes.”
The agreement should also provide for the seller to keep up the homeowner’s insurance (HOC) until the date of transfer – even if the buyer is already living on the property – to ensure the home is covered in case of fire, flood, wind or other damage.
“Also, the buyer should not be allowed to store anything on the property while the seller is still living there, and the seller should, in turn, not be allowed to leave any belongings on the property after the buyer has taken occupation,” says Rademeyer. “The risk of a dispute over damage – real or imagined – to one another’s goods is very high, and insurance issues could then also become very complicated.”