All you need to know about occupational rent

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Selling your current house and moving can be a very stressful and confusing time, especially if the two properties don’t get sold and bought in such a way that you can just move from one to the other. Getting a place to rent for a couple of weeks of months is often something you need to consider, and that is where occupational rent comes in. If you are buying your first home, your might also find that you either want to move in before the property has actually been transferred or that the current owners need to stay for just a bit longer, this is also covered by occupational rent.


What is occupational rent

This form of rent is usually part of every sales agreement. It is essentially an agreed to rental amount to stay in the property that you do not own just yet or that you used to own but is no longer yours. It often happens that the new (or old) owner stays in a home as the occupational tenant because the transfer of the property (or the new property the previous owner wants to move to) has not gone through yet. Transfers can take months to complete, and, in that time, you still need somewhere to live. Occupational rent is one option.


It puts you in the same position as most any rental agreement does. Until such a time as the transfer of the applicable property goes through, you are the tenant responsible for paying rent to the current owner of the property and all that it entails (like water and electricity). The owner of the property will typically be responsible for rates, taxes, levies and so forth. The amount that the rent is set at has to be stipulated in the offer to purchase and it can be a make-or-break aspect of the contract if it is set too high or too low. A general rule of thumb is that it has to be set at the same amount that would reasonably have been set for renting such a property under normal circumstances in the market.


Why would you agree to be an occupational tenant?

Occupational rent can benefit both the seller and the buyer of the property. If you just sold your home and can’t move into your new one just yet, you can comfortably stay on in your sold home and not worry about moving to a temporary one and then moving again. It saves you the hassle, time, and money. The same is true if you can move into your new property before the transfer is complete. Should you live in your new home as an occupational tenant, you are not allowed to make any alterations to the home. Only once the transfer is complete may you do so. In this situation, it is also very beneficial for the seller as the occupational rent can help cover the bond payments and upkeep of the property that is still his/her responsibility.


What to watch out for…

You should never skip the part where you carefully read through the offer to purchase and the sales agreement. Never glance over the occupational rent section of these contracts. It will stipulate the rental amount and any other specifications concerning occupational rent and as the buyer or seller, it can be a point of negotiation. You have to check that the amount of rent is reasonable, who is contractually responsible for water, electricity, rates, and taxes, and that there is a stipulation that the owner has to remove all moveable property and cannot store any items on the property. You should also ensure that the occupational rent clause stipulates that the Homeowner’s Cover will be in place until the date of transfer. Do this and you can avoid nasty surprises about who pays for what, allegations that you damaged moveable property, and ensure that the property is insured against major damage.


It is vital that you go over your contract with a fine-tooth comb before signing anything. It can be a challenge, though, if the contract lingo is unfamiliar to you. At Karis, we will ensure that the contract is fair and help you understand every word.