Since my time as a realtor in Northern New Jersey I have encountered many different types of sales and sale structures. One sale, called the leaseback, would come up a few times a year as a concession to the seller, whereby the seller would be allowed to stay in their home post closing until the new place they were moving to was ready. The lawyers didn’t love it as it presented specific problems, including who would be responsible, for example, if a toilet stops working after the closing. Would the original owner, who is now a tenant, force the new owner to fix or replace it?
Attorneys are able to design leases to handle these concerns and we execute a handful of these types of sales in any given year. But these post closing agreements fall under the category of short term rentals for such short term problems, i.e. the construction on the seller’s new home isn’t complete yet, or Mr. and Mrs. Seller must stay an extra month due to a family simcha before they move to Florida.
But now we have seen the “leaseback” make an entirely new entrance onto the stage. One as a much longer term solution. My company recently attended an actual closing whereby all documents were signed and money wired from buyer to seller.
An agreed upon leaseback was then signed by both parties whereby the seller was allowed to stay in the house for an agreed upon period of time. The new tenant (seller) was charged rent and paid all utilities and the new owner (buyer) paid the taxes and not just for 30 or 60 days. The arrangement was structured for an entire year. This process affords the seller the comfort of knowing his/her home is sold and there is a breathing period to strategize and ultimately make arrangements for the next move. This fit the new buyers criteria as they had an apartment in the city but anticipated outgrowing it in the coming year. They felt comfortable staying in Manhattan knowing that they had secured a house that they loved in a neighborhood they were happy with.
The sellers, secure in the knowledge that they had sold their home for top dollar, were more than happy to take their time finding their next home.
Of course, this scenario does not work for every buyer and seller. If a mortgage is involved with this type of transaction, the buyer must also confer with their mortgage banker or broker first, as not all mortgages allow the sellers to occupy the home post closing for more than 60 days. It is an option that can be useful to many in a way that historically wasn’t so relevant before. We like to describe this as “having your cake and eating it, too!”
Nechama Polak is the broker of record and owner of V&N Group LLC, located at 1401 Palisade Avenue in Teaneck. Send your thoughts and comments to [email protected] or call 201 826 8809.
