Rent-back clauses are very common in real estate contracts. They provide the seller with maximum flexibility when it comes to their actual “move out” date, which can be invaluable when the seller is struggling to juggle a second closing date or find a new home.
However, rent-back agreements put the new homeowner in the “landlord” position, while the home’s old owner becomes their renter. As such, these agreements need to be carefully written so that expectations are clear.
7 things every rent-back clause should discuss
Essentially, every rent-back agreement needs to be comprehensive so that both parties know that their interests are protected. The agreement should include:
- The maximum duration of the rent-back period, whether it can continue for a few days or even several months
- The rental rate and payment terms, including whether payment is to be made daily, weekly or monthly and how
- The security deposit required from the seller, if any, to protect the buyer against damage to the property or unpaid rent
- The conditions under which the security deposit will be subject to deductions or withheld and the process for any move-out inspection
- The responsibility for any utility payments during the rent-back period, as well as routine maintenance (such as lawn care or snow removal)
- The insurance requirements during the rent-back period and assumption of liability in case of accidents or damages during the rent-back period
- A clause that requires the seller to maintain the property in the same condition it was in when the sale was finalized
In addition, you may wish to include language that clarifies what a default means under the rent-back agreement and what remedies the buyer may have if the seller causes any significant damage to the property, fails to pay their rent or does not vacate the premises by the end of the rent-back period.
As always, when a lot of money is on the line, it’s wisest to seek experienced legal guidance about your real estate agreements.
