Early possession is where a purchaser requests access to the property they are purchasing before settlement has been completed, to move into or for some other purpose.
A purchaser will typically seek early possession where they require time to move their possessions, or to allow them somewhere to live until settlement has been completed. This situation often arises when a purchaser has sold their current home prior to purchasing a new one or is required to vacate tenanted premises.
The vendor is not under any obligation to allow early possession unless a special condition has previously been agreed, prior to contracts exchanging. Purchasers may still elect to request early possession after exchange if circumstances arise requiring it.
A vendor may be reluctant to grant early possession, as there are some associated risks involved as outlined below. However, early possession can be a useful negotiation tool and with careful contract drafting the position of both vendor and purchaser can be mostly safeguarded.
Each situation will differ completely as every conveyance is individual and unique, and all purchasers and vendors have different needs and objectives.
Early Possession under the Standard Contract
The standard Contract for sale of land in NSW outlines some basic conditions for early possession, summarised as follows:
- The purchaser must maintain the property in an ‘as is’ condition at the date of possession. Fair wear and tear is accepted as reasonable;
- The purchaser must not make any structural alteration or addition to the property;
- The vendor must be allowed to enter and inspect the property;
- Entry to the property is under a licence and does not create a Landlord and Tenant relationship;
- Risk as to damage to the property passes to the purchaser immediately on them taking possession.
It follows that a purchaser taking early possession should insure the property from the date they take possession, not the settlement date. A prudent vendor will also maintain their insurance to cover a period of early possession given they remain the legal owner of the property until settlement occurs.
If a fee or rent is payable for the period of early possession, that must be set out in writing (preferably in a contract special condition).
There are other additional special conditions which we recommend be included in a contract allowing early possession, depending on the specific circumstances in each matter. You should always obtain legal advice if you are considering granting or seeking early possession under a contract for sale of land.
Considerations for the Vendor
- Legal title does not pass to the purchaser until settlement has been completed.
- The Vendor will not receive settlement monies until the formal settlement.
- If settlement does not occur, or if a dispute arises with the purchaser, it may be timely and costly to remove the purchasers from the property. You may even be required to resort to legal action to remove the purchasers from the property.
- The sale might be delayed for several reasons, in extreme cases it may be that settlement would not occur.
Considerations for the Purchaser
- You will not be entitled to make alterations to the property until after settlement.
- The house must be maintained in the same condition it was at possession.
- Should the property be damaged you will still be obliged to proceed with settlement.
- If it becomes part of the agreement you may be responsible for rates from the date of possession.
- You may also be charged a fee by the vendor for the time spent on the property before settlement.
- In the unlikely circumstance that the contract does not settle, you will be required to vacate the property.
In any situation where a purchaser takes early possession of a property, the specific details of the arrangement need to be carefully documented to provide a mechanism for resolution of any disputes which arise. It is essential that the parties are made aware and completely understand their obligations and responsibilities.
If you have any queries in relation to early possession, please do not hesitate to contact our office.
The content of this article is intended to provide a general guide to the subject matter. Specialist individual advice should be sought about your specific circumstances.