It was once common for the keys to be handed over days or even weeks before the settlement of a property. However, more recently early access to the property is rarely permitted except under a Licence Agreement.

A buyer may seek early possession because they require sufficient time to move their possessions or somewhere to live until the settlement has been completed.

The seller is not obliged to allow early possession unless a special condition had previously been included in the contract. A buyer may nonetheless choose to request early possession or even to negotiate for early possession to be granted. A seller may be reluctant to grant early possession as they can see the associated risks to them as being too great or they may wish to remain living in the property until the day of settlement.

Each situation will differ as every conveyance is unique and buyers and sellers have different needs and goals.

We recommend that, before you request early possession or agree to the grant of early possession, you seek legal advice. If you engage a solicitor they can handle the request formally, ensuring that all parties are aware of their rights and obligations.

Possession under a licence agreement will outline the following conditions for early possession:

1. Entry to the property is under a licence and does not create a Landlord and Tenant relationship;
2. The buyer indemnifies the seller against any damages or expenses the seller incurs as a result of the buyer’s possession before settlement.
3. The buyer must maintain the property in an ‘as is’ condition at the date of possession (fair wear and tear is accepted as reasonable); and
4. The property must be insured to the seller’s satisfaction.

Potential disadvantages of early possession – from the seller’s perspective

1. Legal title does not pass to the buyer until the completion of formal settlement;
2. The seller will not receive settlement monies until the formal settlement;
3. The sale might be delayed for several reasons: in extreme cases, settlement may not even occur; and
4. If settlement does not occur, or if a dispute arises with the buyer, it may be difficult and costly to remove the buyer from the property. You may have to resort to legal action to remove the buyer from the property.

Potential disadvantages of early possession – from the buyer’s perspective

1. If it becomes part of the agreement, the buyer may be responsible for rates from the date of possession;
2. A grant of early possession does not entitle the buyer to make alterations to the property;
3. The buyer must maintain the property in the same condition it was at possession;
4. If the property is damaged, the buyer must nonetheless proceed with the settlement; and
5. The seller may also charge the buyer a fee for the time they spend on the property before settlement.

Considerations for early possession

1. The specific details of the agreement;
2. The parties should be aware and completely comprehend their obligations and responsibilities before agreeing to anything.
3. The seller still owns the home so they should maintain their insurance; and
4. The costs to each party;
5. Buyers should agree to maintain the property in an ‘as is’ condition;
6. Utilities should be moved into the buyer’s name;

What now?

If you or someone you know is considering possessing a property before settlement, contact us for legal advice or representation.