Occupation Date & Rent
Category Legal
Occupation Date
What it is:
This is simply the date on which the property will become vacant and therefore ready for occupation by the new owner.
Why an occupation date:
Ideally, buyer and seller should agree on this vacancy date well in advance and put this date in writing in the Offer to Purchase ("OTP"). Remember, both parties have to arrange moving companies, or get tenants in time, arrange transfer of wi-fi, security, to name but a few. Having a set date makes matters simpler for all parties.
How to use it:
We suggest the following 3 ways to handle the occupation date in the OTP:
- Occupation on a fixed calendar date agreed to by the parties; or
- Occupation on date of registration of the transfer of the property; or
- Occupation subject to an existing lease agreement on date of registration of the transfer.
Occupational Rent
What it is:
Also referred to as "occupational interest", occupational rent is most simply understood as the financial compensation for occupying a property that you do not own - either because, as the buyer, you've moved in before the transfer and registration has been finalised or because, as the seller, you continue to occupy the property after the sales transaction is completed.
Why occupational rent?
Occupational rent is a mechanism that serves to protect the interests of both the buyer and the seller by ensuring that the parties are in agreement around the occupation of the property and that compensation in this regard happens in a fair and transparent manner. Occupational rent will cease upon the change of property ownership.
How to use it:
The industry standard is for the occupational rent amount to be similar to market related rental the property would achieve in the open market.
We suggest that the amount considered to include all costs relating to municipal services (excluded levies & property rates) charged by the municipality and is payable to the registered owner for the period from the occupation date up to the date of registration of the property in the name of the purchaser.
Ensure it is noted in writing and added in the OTP upon signing, alternatively added as an Addendum to the OTP.
Don't overlook Occupation Date & Rent! If you need advice, always talk to your real estate agent or attorney.
Read more: Signing the Right Way
Author: Louw & Coetzee Properties
