In most transactions, “Possession” and “Closing” occur at the same time. In the Oregon REALTORS® sale agreement, “Possession” means, “When the Buyer has the legal right to occupy the Property.” “Closing” means “when all documents are recorded and the sale proceeds are available or dispatched to Seller.” Typically, these two things occur simultaneously because—absent an agreement otherwise—the legal right to occupy (along with all the other sticks in the property rights bundle) transfers to the buyer at Closing. Even though the buyer may not physically occupy the property for a matter of days, weeks or months, the legal right to do so rests solely with the buyer at Closing, unless the parties have agreed otherwise.
In some instances, the parties may want to separate out the right to occupy from other property rights and transfer the right to occupy from seller to buyer either before or after Closing.
Using Oregon REALTORS® forms, the Buyer and Seller can effectuate an expedited or delayed transfer of occupancy rights by using Section 7 (“Closing”) of page one of the Oregon Residential Real Estate Purchase and Sale Agreement, along with an addendum (either Form 2.16 or 2.17 as discussed below). Section 7 allows the parties to indicate a Closing Date and, if different, a Possession Date. If the Closing Date and Possession Date are the same, then a Possession date need not be entered in Section 7. As an aside—we often get asked why no time field is included in Section 7. That is because “Closing” will occur not based on a particular predetermined time on the clock but rather “when all documents have been recorded and the sale proceeds are available or dispatched to the Seller,” as defined in the Sale Agreement. The notion that the parties, at the time of entering into the Sale Agreement, could predict and coordinate with the Title/Escrow company the precise clock time that Closing will occur is a bit fanciful. That’s why the Oregon REALTORS® sale agreement says in Section 46 that “Closing shall occur on the date identified on Page one of this Agreement as “Closing Date,” or earlier if agreed upon by the Parties. Unless otherwise agreed in writing, Closing and Possession shall occur by 5:00pm on the Closing Date.”
If the parties do input a Possession Date that is different than the Closing Date, then Oregon REALTORS Sale agreement instructs the parties to include either Form 2.16 or Form 2.17. Form 2.16 is the “Seller Occupancy Agreement.” Form 2.17 is the “Buyer Pre-Closing Occupancy Agreement.”
Form 2.16 and 2.17 are the legal instruments used to transfer the right of occupancy independently from the other legal rights of ownership. Those agreements address important issues such as the timeframe of occupancy, the condition of the property including the responsibilities of maintenance and repair, and the legal remedies available to the party granting the occupancy right, should the other party fail to vacate or otherwise violate the terms of the agreement. Rights to occupy property before and after closing are not subject to Oregon’s Residential Landlord Tenant Act (ORS Chapter 90) so long as the agreement to occupy does not last longer than 90 days. Thus, while a typical “landlord-tenant” relationship is defined in large part by statute, the terms of an agreement to occupy before or after closing are defined almost exclusively by the contents of the written agreement between the parties, with little interference from the Legislature.
For a section-by-section video walk-through of how to use Form 2.16 Seller Occupancy Addendum, see this week’s Guided Form Spotlight.