What is a Use and Occupancy Agreement?

Posted by ANGELA RICH HARTMANN | Mar 30, 2021

What is a Use and Occupancy Agreement?

A Use and Occupancy Agreement is an agreement between the Buyer and the Seller in a residential real estate transaction that that allows one party the right to use and occupy the property for a set period of time without having an otherwise legal right to do so.  It can be put in place to allow a Buyer to move into the property before title is transferred, or to allow a Seller to remain after title is transferred.

A Use and Occupancy Agreement is not the same as a lease.  If affords the party only the use of the property does not create a tenancy, nor the rights associated with same.  

When might I need a Use and Occupancy Agreement?

Generally, a Use and Occupancy Agreement   may be negotiated if a Buyer has a need or desire to use the property in advance of their closing and before taking ownership.  This use may be limited to a portion of the property to store items, for example a basement or garage.  Alternatively, the entire property may need to be used because Buyer's lease will expire, their current home will be sold and close in advance of the purchase closing, or some other exigent need. 

The Seller may have a need or desire to remain in the home after closing and transfer of ownership to the new Buyer. This could be due to a delay in closing on a new home, new construction, or some other circumstance.

While the parties may be aware that a Use and Occupancy Agreement   will be necessary, the agreements are often negotiated only after the intervening circumstances are made known. 

Whenever the need for the Use and Occupancy Agreement   is made known, and for whatever circumstances the parties may agree, it is essential that the agreement must be in writing, and the terms are clear.  The parties will generally agree to a per diem charge sufficient to cover the expenses associated with the ownership interest.  Risk of loss should be discussed, insurance may be required, and escrow should be held.   The written Agreement must be executed by the parties evidencing the agreement and acknowledgment of the terms.

Contact Hartmann Law for more information about Use and Occupancy Agreements.

About the Author


Angela Rich Hartmann is a New Jersey attorney serving clients in the areas of estate, business, and real estate law.