The reader is busy finalising the agreement of sale and occupational rental is one of the aspects that is often addressed in such documents.
Sean Radue of Radue Attorneys, says occupational rental generally applies where the date of registration of the property transfer does not coincide with the granting of occupation to the purchaser.
“The agreement of sale may set out various alternatives for the date of occupation, generally in relation to the date of transfer.”
Radue says a seller may stay in occupation of the property beyond the date of transfer, in which case the parties may agree that the seller pays the purchaser an amount equivalent to a monthly rental sum.
“This is often the case where the purchaser buys the property for investment purposes and is thus not particularly bothered with who is in occupation but rather that he or she receives a rental amount for the use of the property.”
This may also be the case where the purchaser is unable to take occupation at the date of transfer, says Radue.
“For example, the purchaser may have to give notice at his or her current residence if renting and may not want to pay both rental and a bond instalment.”
Radue says this arrangement must obviously also suit the seller and, perhaps most importantly, the amount must be subject to agreement.
“Certain factors must be considered, one of which is the bond instalment payable by the purchaser on the newly acquired property.”
In the aforementioned instance where the purchaser is still paying a rental, it may be quite convenient for the bond instalment to be covered by the seller who remains in occupation, says Radue.
However, says Grant Hill of Miller Bosman Le Roux Attorneys, the bond instalment payable by the purchaser may now exceed the amount that the seller is used to paying as the property was possibly purchased at a much lower price.
“Where the purchaser wants to take early occupation, the parties will similarly agree on a rental amount payable by the purchaser in the interim period.”
Usually the amounts payable in either instance are the same but, as the amount is contractually stipulated, it could be agreed to work in a certain manner and at a certain amount, says Hill.
“Occupation is often agreed to be granted to the purchaser on the date of registration of transfer, as the conveyancing attorney can usually predict the intended date quite accurately.”
Hill says the obligation is then typically on the seller to vacate and grant occupation fairly swiftly.
“Recording the occupational rental payable is quite usual and sometimes necessary as there may be a problem that delays the seller in vacating the premises.”
Another problem scenario could be where the seller vacates in anticipation of transfer and the purchaser takes occupation but the transfer is then delayed, says Hill.
“This may result in a situation where either party is then in occupation without a stipulated sum having been recorded, which could lead to potential issues and disagreements.”
The reader asks what percentage of the purchase or selling price should be paid as an occupational rental.
“While a percentage could be determined, it may be prudent to rather stipulate an amount that makes sense for both parties considering their respective positions and personal circumstances.”
The agent involved, if any, could assist in this negotiation, says Hill.
See the reader’s question here.