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Occasionally, a buyer may decide to take possession of a property prior to settlement. Under such circumstances, the buyer is not a tenant; a special license is drawn up instead, stating that if the buyer is found to be in breach of contract, then the property will be handed back over to the seller. If you’re thinking about taking possession of a property prior to settlement, you should consult with a conveyancing expert in Brisbane first – and educate yourself about the basics.
The Standard REIQ Commercial Tenancy Agreement does allow for buyers to take possession of a property under certain circumstances. However, since they are not yet legally the owners of the property, special terms and conditions do apply. An experienced conveyancing firm in Gold Coast can help you navigate the sometimes-confusing waters of the REIQ contract to ensure that your rights are protected in such a situation. In the meantime, it helps to familiarise yourself with what your responsibilities are, as a buyer, in such a situation.
As a buyer taking possession of a property prior to settlement, Clause 8.5 of the Standard REIQ Commercial Tenancy Agreement says that you must:
• Insure the property according to the wishes of the seller. If you are unwilling to adequately insure the property based on the seller’s requirements, then you will be unable to take possession of the property before settlement occurs.
• Maintain the property so that it remains in the same basic condition as when you originally took possession of it. In other words, you are not to make any major changes to it, and you must make repairs as necessary if any mishaps occur. Of course, normal wear and tear are excluded from this situation.
• You must agree to be responsible for any damages or expenses that occur while you have possession of the property, and indemnify the seller from being responsible for them.
When taking possession of a property prior to settlement, most buyers do not pay rent. Therefore, no tenancy agreement is needed, and the buyer can request that the seller move out if he is in breach of contract. In some situations, though, rent is charged. If so, an agreement must be made and notice must be given if the buyer wants the seller to move out. This inconvenience is why most people do not bother charging rent in such a scenario.
Finally, it is always wise for the buyer to hold off on making any improvements to the property until after settlement has occurred. If something goes wrong and the sale isn’t made, improvements that are made during his possession of the property most likely will not be repaid, and he will lose money on the transaction.