In conveyancing transactions, sometimes clients wish to gain access to a property they intend to purchase in between exchange and completion to carry out specific tasks like repair works, store boxes or furniture, lay new carpets or carry out repairs.

Generally, occupying a property between exchange and completion is not permitted unless specifically agreed upon and this is legally formalised by way of a Key Undertaking or License to Occupy.

Although rare, because it involves penalties, the Seller or Buyer can change their mind after exchange and pull out of the transaction. There are therefore risks to the Seller associated with granting access to the property in between exchange and completion as follows:-

  • If a Buyer wants access before completion they can, once inside the property, refuse to leave and as it is illegal to remove anyone a property a legal process would need to commence by the Seller to remove them.
  • If the Buyer damages the property in any way and subsequently withdraws from the transaction, the Seller would be liable to pay for the repairs.
  • After exchange of Contracts the Buyer is responsible for insuring the property and contents insurance is usually taken out after completion. The Buyer may need to take out contents insurance earlier if they are storing furniture or belongings at the property. If any damage is caused to the property this may compromise the Seller’s ability to make a claim.
  • The Seller remains the legal owner of the property until completion so if any works are carried out the Buyer and then the transaction fails there would be no compensation to the seller for any losses or if any further repairs are needed.
  • Any access may require the prior approval of the Lender if the Seller has a mortgage on the Property.
  • HMRC may consider early occupation as ‘substantial completion’ for Stamp Duty Land Tax purposes which would mean that Stamp Duty would be payable from the date of occupation instead of the date of completion.

Key Undertaking

A Buyer can gain access before completion with a Key Undertaking. This is an agreement drafted by a conveyancing solicitor which states that the Seller will grant access to the keys of the Property before completion. The Undertaking contains a detailed schedule as to specifically what access is required for at the property and can include conditions or restrictions on key release and times of access. It is usual for the key to be returned to the Estate Agent at the end of each day. The Buyer signs the Key Undertaking to confirm that they will not take possession of or occupy the Property in between exchange and completion. A Key Undertaking can allow the Buyers to carry out any necessary works at the Property or to store furniture, but they are not usually allowed to move in their personal belongings to the Property. If the Buyer was to breach the Key Undertaking, they would be in breach of a legally binding contract, and it would be possible to pursue a claim against them.

Licence to Occupy

An alternative option is to seek a Licence to Occupy. This is an agreement that permits someone to occupy a property without granting them the same legal rights as a tenant under a lease and the occupier has fewer legal protections. It does not convey exclusive possession or security of tenure. They are not afforded the same security and protection as a tenant under an Assured Shorthold Tenancy Agreement however they do have limited protection under the Protection from Eviction Act 1977.

A licence to occupy is generally used if the Buyer requires temporary occupancy for a few weeks or months before completion can take place. Any such agreement will need specialist drafting by a legal professional. The licence can permit the Buyer and members of their household to occupy the Property and move in before completion. It is a short-term arrangement and generally for a limited time, no longer than 12 months.

The licence includes that the Buyer must pay or indemnity the Seller against all outgoings and expenses in respect of the Property and pay the Seller a fee calculated at the contract rate on a sum equal to the purchase price for the period of the licence. The Buyer must also keep the Property in a good state of repair and not alter it. The licence to occupy expires on the completion day; the end of the contract or within the agreed notice period stated by any of the parties.

The risk to the occupier is that they can be asked to leave the property at ant time with relatively short notice and the licensor retains the right to enter and use the property as well.

Speak to Sarah Rowles

Sarah is a Licensed Conveyancer at Wollens and can advise you. Contact Sarah via email sarah.rowles@wollens.co.uk or call 01803 396613.

Sarah Rowles - Wollens Solicitors Devon

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