Buying a Property – Understanding the ‘Occupational Rental’ Clause

occupational-rentSigning an Offer to Purchase is one of the final steps in buying a property. Once this document has been signed, the buyer is legally bound to purchase the property within the expiry period of the Offer, with both the buyer and seller being bounds by its terms and conditions.

Before you finalise your Offer to Purchase as a buyer, or accept one as a seller, make sure that you have read the occupational rental clause and that it meets with your approval, as this can become a serious issue for both parties if the property transfer takes longer than expected.

What is Occupational Rental?

When a property changes ownership, the seller usually agrees to vacate by a certain date – usually the date of transfer. However, because transfers don’t always go through as quickly as they should you may find yourself in a situation where you’ve bought a home but cannot move in because the property has not been transferred to your name yet.

In situations like this, occupational rental is a convenient agreement that allows both buyer and seller to move on while they await a property transfer. The seller may agree to vacate the property before the agreed date, and will charge the buyer a rental amount until the transfer goes through. This amount should be specified in the offer to purchase to avoid any confusion.

The Occupational Rental Clause

When you draft your offer to purchase, remember to include an occupational rental clause which states how much occupational rent you would be paying and for how long – ideally the period of time should never go beyond the date of transfer. Since the seller has recently sold the property, he or she may be willing to accept a lower rental figure than the property would usually attract. Once the Offer is agreed to, you’ll have the comfort of knowing that you’re able to move in to your new home even if the transfer is still pending.

12 thoughts on “Buying a Property – Understanding the ‘Occupational Rental’ Clause

  1. I am supposed to move in to the new house I bought as of 1st May 2014. However, the transfer and registration hasn’t been done due to the seller fault. Can the seller ask me to pay for occupational rent and still remain to occupy part of the property I bought in the premises?

  2. I went to the attorneys on 8 October 2014 to sign the transfer and registration documents, the final document that I was given to sign was the letter of occupancy which was 1 November 2014. I enquired when the transfer will go through and I was told it will take around 3 months. I intended to take occupation only on the date of transfer. I had enquired several times from the agents and I was informed that the approximate time of transfer in order for me to select an occupation date would be by end of October, therefore I had intended to take occupation on 1 November 2014. My bond was approved in August 2014.

    I am a 1st time buyer and this was never explained to me that it will take 3 months from the date of signing for the transfer of the property. The property is new and I would be the 1st owner, so there should be no delays for the transfer. The developer has a clause that I have 45 days from signing transfer documents to take occupation, which also means I need to pay occupational rent. How can I avoid occupational rent until transfer?

    • I referred this to our property expert Cheryl Bluff who is a well known REMAX Agent in Plumstead. Her comments are listed below:

      ‘I went to the attorneys on 8 October 2014 to sign the transfer and registration documents, the final document that I was given to sign was the letter of occupancy’ which was 1 November 2014.
      (CB: I usually call this an addendum; perhaps it’s different for new homes…? Did she actually sign this? If so, she would then have bound herself to take occupation on this 1 Nov. date.)

      ‘I enquired when the transfer will go through and I was told it will take around 3 months. I intended to take occupation only on the date of transfer.’
      (CB: did the agent / developer reflect her intention correctly, ie in writing, in the contract? Only that which is committed to writing may be enforced and upheld in a property transaction. If the POSSESSION clause in the contract states that “possession with vacant occupation will be given and taken on transfer,” then she can safely rely on this and they cannot force her to move in early. However…– see my next point)

      ‘I had enquired several times from the agents and I was informed that the approximate time of transfer in order for me to select an occupation date would be by end of October, therefore I had intended to take occupation on 1 November 2014.’

      (CB: contd. however – If this “intention” is what she expressed to the agent at the time of making her offer, and “1 November” is accordingly what the agent had then written into the Offer to Purchase as a date under the Possession clause, then this date is unfortunately what she would be bound by. ) ‘My bond was approved in August 2014.’

      ‘I am a 1st time buyer and this was never explained to me that it will take 3 months from the date of signing for the transfer of the property. The property is new and I would be the 1st owner, so there should be no delays for the transfer. ‘

      (CB: Unfortunately, the transfer process is what it is and a property’s “newness” cannot change this. Transfers can take between 6 to 8 weeks after the approval of any suspensive conditions to be registered. The agent should indeed have explained the transfer process and its duration properly to her. )

      The developer has a clause that I have 45 days from signing transfer documents to take occupation, which also means I need to pay occupational rent.
      (CB: Did she sign the document containing this clause? If so, she accepted it at the time and is therefore bound by it. She’d presumably then have to start paying from 45 days after the 8th Oct)

      How can I avoid occupational rent until transfer?
      (CB: the only way she can legally avoid occupational rental is if the contract were worded at the outset that she would take possession “on transfer”; in which case, they would not be able to make her take occupation early; the rand amount of the occupational rental should also have been clearly stated in the OTP from the outset, to avoid their now being able to charge her just anything they please.

      • Thank you so much for your response Cheryl. I did not sign the occupational letter at the attorneys, however I did sign the OTP that contained the clause regarding occupation. Do you have an e-mail address so I can forward you that part of the OTP.

  3. May I ask how much occupational rent a seller may ask? Is there an spesific persentage or can she ask any amount?

  4. Good day. I sold my house in October 2016 and the buyer was approved subject to the sale of his house, finally his house was sold and registered in the new owner’s name as a result he requested that he occupy my house while the registration process is taking place, see that my house was already vacant I agreed and on the Offer to Purchase the occupational rental amount is stated, he occupied from the the 10th March 2017 and till today I am struggling to get my rental money, the buyer and the agent are taking me from pillar to post whenever I ask about the money. I need to know which step can I take to make sure that the agent and the buyer do not neglect what was initially stated on the Offer to Purchase. I am beginning to feel stranded as if I am not entitled to this rental.

    • I referred this to Cheryl Bluffs who works in Plumstead area with Remax. These are her comments:

      Hi Nico

      I’d be happy to look over his actual agreement of sale with his buyer; but Mr Mabele’s first port of call should be the transferring attorney managing the process of transferring it out of his name and into the buyer’s. (He does not say how far from registration his sale is at this point.)

      My contracts always have the attorney collect occupational rental, rather than the estate agent; but if it’s his agent in Mr Mabele’s case, then a call to the principal of the estate agency is necessary. The agent’s job is to be reminding the buyer in writing of his debt, and also to be notifying the conveyancer / transferring attorney to call for this rental. If the agent is slack or colluding with the buyer, this must be reported to the conveyancer asap; and possibly also to the Estate Agent’s Board. If he has worked through a “one-man band” agent, that’s a whole new ball game and he’d best get his transferring attorney on board and fighting on his behalf pronto.

      A closer reading of his contract would shed more light on the specifics of his case. e.g. was his date of taking occupation recorded in writing by way of an addendum?

      Hope this helps!

  5. Hi

    In the event that a seller would like to remain in the property after transfer ( to find other accommodation etc ), how long may the seller stay on the property while paying the agreed upon occupational rent? Assuming that a maximum period was not stated on the contract.

    Kind regards

  6. Hi

    In the event that a seller would like to remain in the property after transfer ( to find other accommodation etc ), how long may the seller stay on the property while paying the agreed upon occupational rent? Assuming that a maximum period was not stated on the contract.

    Warm regards

    • It depends on the terms under which you bought the property. Contact the agent and ask them to confirm when you are entitled to occupancy. This is urgent. You don’t want them to be paid when they have not complied with the terms of sale.

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