What is occupational rent? Moving in before registration of transfer
When you purchase a property, you can usually only move into the property once the transfer is registered in the Deeds Office. That said, it is, however, possible to move in earlier according to the Seeff Property Group.
Reasons for wanting to move into the property earlier are varied. It might for example be that the particular property that you are purchasing is vacant, and the seller is therefore amenable to agreeing to an early occupation before registration of transfer.
It may also be that the seller is keen to move earlier, and there is then an opportunity for the buyer to move in, especially in instances where the buyer does not first have to sell another property.
Early occupation is, however, not a right, and the seller is under no obligation to let the buyer move in early. It is usually recommended that occupation takes place only once the registration of transfer is effected as there are risks involved in letting the buyer move in early. In the event where a seller agrees to early occupation, it is vital that specific terms and conditions that deal with the occupation including transfer of risk, costs and so on are specifically included in the agreement of sale. These should preferably be vetted by a Conveyancer.
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In the event that the buyer then takes early occupation of the property, the buyer will be required to pay occupational rent to the seller until such time as the registration of transfer of the property to the buyer. The buyer will also be responsible for costs in connection with the occupation of the property such as water and electricity, and any other stipulated costs. The amount of occupational rent to be paid is usually set out in the Offer to Purchase so that there is an upfront understanding of what the applicable rent will be in the event of early occupation.
Buyers should also be aware that they will occupy the property as tenants, and not as owners. They will therefore not be entitled to make any changes to the property unless it is agreed to by the seller. If the property is vacant at the time when the buyer puts in their Offer to Purchase and they are thinking about moving in earlier, it is recommended that they negotiate that upfront, says Seeff.
Should the property transfer be registered earlier than the occupation date, then the rent paid by the buyer must be refunded, unless otherwise agreed.
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According to Quay1 Regional Manager Christine Marsh, addressing these legal considerations helps buyers and sellers protect their interests and ensure a successful transaction.
Marsh says when buying or selling a property, several key legal considerations must be taken into account to ensure a smooth and legally compliant transaction.
- Clear Property Title Deed: One of the foremost legal considerations is ensuring that the property has a clear and marketable title. This means that the seller has the legal right to sell the property and that there are no disputes or claims against it. A conveyancer will typically conduct a title deed search to verify this.
- Compliance with FICA Requirements: The Financial Intelligence Centre Act (FICA) mandates that both buyers and sellers provide proof of identity and address to prevent money laundering and other illegal activities. Ensuring FICA compliance is a critical step in the property transaction process.
- Sale Agreement: A comprehensive sale agreement is essential. This legally binding document outlines the terms and conditions of the sale, including the purchase price, deposit amount, transfer duty, and any special conditions. Both parties must fully understand and agree to the terms before signing.
- Due Diligence on Municipal Rates and Taxes: It is crucial to check that all municipal rates and taxes are up to date. Any outstanding amounts must be settled before the transfer of ownership can take place. The seller is responsible for ensuring that these payments are current.
- Property Encumbrances: Encumbrances, also known as liens, are claims or liabilities attached to the property, such as mortgages or unpaid taxes. It's essential to verify that there are no unresolved encumbrances that could affect the transfer of ownership.
08 Aug 2024
Author Property24