The ins and outs of occupational rent
Category Advice
If you have ever bought or sold a home before, you will probably be somewhat familiar with the term "occupational rent". The finer details of occupational rent, however, can be confusing unless you've dealt with it before.
"In a nutshell, occupational rent is the amount that a buyer would pay the seller if they move in before date of transfer, or what the seller would pay if they stay in the home after transfer has taken place," says Floris de Kock, Franchisee Leapfrog Polokwane.
In addition to who pays who, there there are a few other things to understand when it comes to occupational rent.
Why does this need to be paid?
The most common reason for occupational rent is a delay between property transfer and moving dates. For example, if you planned to move on the 30th of a month, but transfer takes place on the 20th already, then you are liable to pay for those extra ten days that you are in the house.
It also works the other way around in that if the new buyer wants to move in on the 15th, but transfer only takes place on the 30th, they then need to pay for those 15 days where you still own the property.
This is to cover any bond obligations that you may have as buyer or seller before transfer takes place.
How much is occupational rent?
The figure for this amount is not a thumb suck. It has to be carefully calculated and all parties need to agree on the amount.
"If you are held to an occupational rent amount that you cannot afford, it could be a massive financial burden for you at a time that is already probably quite expensive," warns de Kock.
The agent in charge of the sale will be able to work out this amount based on the cost of rent in the area based on a similar home.
Is occupational rent a must in every sale/purchase?
"An occupational rent clause is in almost every agreement of sale document so be sure to read through it carefully," de Kock advises.
Some sale agreements will specify an occupation date. In this case, a clause clearly stating the rent amount should be in the agreement. If the document doesn't state a date, but rather says "upon transfer" the space for occupational rent might be left blank. De Kock advises against this though.
"There is no predicting to the day when the transfer will take place," notes de Kock. "There are often delays that hold up the process, so it's best to rather have this clause in your agreement to protect all parties."
When is the occupational rent due?
Occupational rent is a billed pro-rata and is best handled by the conveyancing attorney assigned to the sale. It is due before the date of occupation. Should there be any difference in the number of days of occupation and the worked-out amount, the attorneys will correct this, too.
Can you change the occupational rent amount?
De Kock advise: "Read the sale agreement carefully and if you are not happy with the occupational rent amount stated in the document, chat about it before you sign anything."
"If you sign a document before you do a careful read-through, there is no going back."
As with any contract, the sale agreement needs to be carefully considered and understood before signing. By doing this, you will protect yourself from issues down the line and possibly paying a lot more for occupational rent than what you can afford. Or, receiving a lot less in occupational rent than you should be.
Author: Leapfrog Property Group
