What To Do When Ex-Tenants Want To Squat In Your Home


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Rarely is it possible to close on the home you’re selling and the one you’re buying in the same day.To bridge the awkward few days that often lapse between closings—and avoid the cost of moving twice—many sellers ask for the right to remain in the old apartment for a specified amount of time after the closing. 

It’s called ‘post-closing possession,’ and in the typical scenario, the seller pays the proportional share of the buyer’s mortgage interest as well as carrying charges/maintenance fees, real estate taxes, utilities and insurance.  

It’s a no-risk proposition for sellers—and the exact opposite for buyers. If you agree to let the seller stay, here is what you need to do to protect yourself:

1. Make sure your lawyer doesn’t use the word ‘lease’ anywhere in the agreement

Legally speaking, in a post-closing possession agreement, the word licence is used to describe the type of occupant the seller is post closing, meaning that the seller has a licence to stay in the apartment rather than a lease.

The distinction is critical.

Landlords must start an expensive and time-consuming eviction proceeding against a seller who refuses to leave.

With a well drafted licence agreement,  a licensor can insert language that bypasses this process, though the threat of stiff monetary penalties (see below) is usually enough.

2. Negotiate a substantial liquidated damages clause 

Nothing says ‘get out’ like the prospect of paying hundreds of dollars per day of overstaying one’s welcome.  To be effective (and in my experience they are quite effective), the penalty should be a lot more than what it costs to stay a hotel and more than the apartment would rent for. 

For example, on a $500,000 one-bedroom that could be rented at about $2,000/month, a $500 per day fine would make sense. 

This is usually the most contentious aspect of negotiating post-closing possession terms.

3. Tell the board  

If the apartment is a co-op, you need to notify the board. Approval is usually easily won if the duration of possession is short (most are no longer than 7 days).

But if the seller is going to stay weeks or months, the board may require a formal possession agreement and may even charge a sublet fee.

In a condo, technically the condo board is required to waive its right of first refusal on any sublets, so language should carefully be drafted so as to not trigger this requirement.

4. Require the seller to put up an escrow 

Without a pre-closing stroll through an empty apartment, you’re basically flying blind. An escrow of around 2-3% of purchase price ($20k-$30k on the average $1m apartment) will likely be big enough to cover damage you couldn’t see when the apartment was furnished as well as any intentional acts  (eg taking the window a/c’s, which were supposed to remain) and move-out damage.  

I also encourage buyers to do two walk-throughs: One before closing, and one after the seller has finally cleared out.

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