A temporary residential lease agreement can be negotiated as part of contract terms and conditions in Texas. The temporary residential lease, sometimes known as a sale/leaseback or sale and leaseback (on seller's side) is a transaction where the seller/owner of a property sells the property and leases it back from the buyer. The temporary residential lease on the buyer's side establishes temporary tenancy prior to closing. Any possession by Buyer prior to closing or by Seller after closing which is not authorized by a written lease establishes a tenancy at sufferance relationship between the parties. If negotiated properly, a leaseback can be beneficial for the buyer and seller alike. Temporary Residential Lease Agreements are for short-term leases up to 90 days (typically). Leases that go beyond that should enter into actual Residential Lease Agreements for the protection of both parties. Remember, real estate agents cannot give legal advice, please consult with your attorney if you do not understand the effects of the Temporary Lease or any real estate related legal document.
Seller's Temporary Residential Lease
The purpose of the leaseback is to free up the original owner's capital/equity while allowing the previous owner to use the property. The lease amount provides periodic income and may even be enough to pay the buyer's mortgage, if he or she borrowed money to obtain the property. A seller/lessee in a lease buyback obtains the immediate cash from any equity in their home AND retains the ability to remain in their home. Many sellers are negotiating this as part of their contracts to insure the closing of their property (usually enough time for them to move out after the closing date). Seller Temporary leases are common with homeowners that need immediate cash, avoid foreclosure or retirees who want to use the equity built up in their home and stay in their home. The Buyers become the Landlord and the Sellers become the tenant in this transaction. For your protection, request TAR 1910 to be used for Seller Temporary Residential Lease Agreements. Seller termination of this type of lease is either upon the agreed termination date or upon the default of the lease itself.
Buyer's Temporary Residential Lease
The purpose of a Buyer Temporary Residential Lease is for buyers who wish to occupy the property prior to closing. Although not the best of options for sellers to allow buyers to occupy the property before closing, it does happen. Buyers periodically need to lease the property prior to closing when their existing leases have expired and they've negotiate with the existing owners to establish short term tenancies while in contract. Sellers must consult their insurance agents prior to changes of ownership and possession because insurance coverages may be limited or terminated. The Sellers become the Landlord and the Buyers become the tenant in this transaction. For your protection, request TAR 1911 to be used for Buyer Temporary Residential Lease Agreements. Buyer termination of this type of short term lease happens upon (a) closing of the sale under the Contract, (b) termination of the Contract prior to closing, (c) Tenant's default under the lease, or (d) Tenant's default under the Contract, whichever comes first.
Seller & Buyer Temporary Residential Lease Agreements must contain the following items:
1. Specify Parties to Lease
2. Specify Contract Date and Property Address
3. Establish Contract Term - Express Commencement and Term.
4. Rate & Deposit - Establish per diem rate and deposit amounts (research local rental market).
5. Utilities - Included or Excluded
6. Pets - Inclusion or Exclusions
7. Property Conditions - Improvements & repairs made per Contract.
8. Property Alteration - Improvements/fixtures added to property during lease become a part of the property.
9. Repairs & Maintenance - Tenant usually bears repairs/maintenance expenses.
10. Insurance - Possession of the Property by Buyer as Tenant may change insurance policy coverages.
11. Termination - Establishes reasons for termination of lease.
12. Holding Over - Establishes possession after the agreed tenancy and per diem rate after termination.
13. Notices - Establishes where parties must deliver notices in writing.
Benefits to Retirees
Elderly individuals who need additional income but do not want to move from their homes or do not qualify for a reverse mortgage might consider a sale-leaseback arrangement. In a sale- leaseback, an elderly individual or couple can sell their home to an interested party, who would then lease the home to the couple. A seller-financed version of this transaction would enable elderly homeowners to achieve two favorable results: 1) an immediate inflow of cash and 2) the possibility to remain in their homes.
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Sincerely,
Diego E. Jaramillo
Realtor, ABR, e-Pro
Keller Williams Houston Metropolitan
Cell: 832-282-2069
Online at www.houstonheritage.com
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