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Understanding Leaseback Agreements

 Posted on May 21, 2024 in Real Estate Law

TX real estate lawyerWhether you are planning to purchase residential or commercial real estate, there is a chance that the seller will request what is called a leaseback agreement. A leaseback agreement allows the seller to continue to occupy the property for a brief period of time after closing in exchange for paying rent to the buyer. There are many reasons sellers request these agreements. For example, the seller might find out that there will be a delay in when his new home or business location will be ready to move into, or the seller might have difficulty getting his belongings cleared out before closing. Although leaseback agreements are common, they are risky for the buyer. Always consult a Cleburne, TX real estate lawyer before agreeing to a leaseback.

The Risks of a Leaseback Agreement

When you enter into a leaseback agreement, you legally become the seller’s landlord as soon as you close on the property. Some of the risks involved include:

  • The seller does not leave on time - Depending on why the seller requested a leaseback, he may well find that he is not yet ready to move out when the leaseback agreement officially expires. For example, if the seller leases back a residential home because his new home is under construction, there is a chance that his new home will still not be ready when the leaseback agreement ends. He may request an extension - or he may simply fail to vacate the premises, forcing you to evict him. 
  • Property damage - The relationship between you and the seller will change if you become his landlord. Once the seller is just a tenant in the property, he may not care so much about keeping it in good condition, especially if the relationship between you sours. There is a risk that the seller will begin causing property damage, either out of carelessness or out of spite. If you are going to enter into a leaseback agreement, it is best to collect a security deposit. 
  • Property left behind - When the seller vacates before closing, you can do a final walkthrough and ensure that the seller has removed all his belongings. In a leaseback, you do not have this opportunity. The seller may leave behind worthless property or even garbage that you will then need to haul away at your own expense. 

Contact a Tarrant County, TX Real Estate Attorney

Cain & Kiel Law is committed to protecting buyers in their real estate transactions. Our experienced Cleburne, TX real estate lawyers work as a team to better serve our clients. Contact us at 817-645-1717 for a confidential consultation.

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