What is a Seller Temporary Leaseback: Pros and Cons?

by | Nov 18, 2023 | Attorney Resources, Client Resources

Managing timelines can be a challenging task in real estate transactions, depending on the parties’ individual goals and plans post-sale.   A Seller-Leaseback arrangement is a unique and flexible solution for both buyers and sellers.

A Seller – Leaseback is a transaction where the current owner of a property sells the property and then leases it back temporarily from the new buyer. This allows the seller to remain in the home after closing for a predetermined amount of time. The max lease term allowed under a seller’s residential TEMPORARY lease is 90 days. The buyer becomes the landlord and the seller becomes the tenant, paying rent to the buyer (usually at closing) for the agreed amount of time. 

Image of a house from the front

Benefits 👍🏼 For the seller

It allows them to remain in their home after closing giving them more time to finish a work commitment, school year, pack, move out and/or find a new home. It can also help prevent the seller from having to move twice. For the buyer, it can provide financial benefit and offset the mortgage payments until they are able to move into the home. They receive the benefits of homeownership even before they are able to occupy the home. 

Image of small scale house on a table sitting next to a set of keys

Drawbacks 👎🏼 For the buyer

There are risks that the seller may cause damages to the property during the leaseback period or during the move out. For the seller, he/she is responsible for the expense of repairing and maintaining the property during occupancy. Under the Texas promulgated form, the seller/tenant shall bear all expense of repairing and maintaining the Property, including but not limited to the yard, trees and shrubs and the seller/tenant shall promptly repair at Tenant’s expense any damage to the Property caused directly or indirectly by any act or omission of the Tenant or any person other than the Landlord, Landlord’s agents or invitees.

Also for the seller, there is risk that a portion or all of their security deposit may be retained by the buyer for any additional costs incurred by the buyer to make repairs after he/she moves out. There could be disagreements between the seller/tenant and buyer/landlord regarding the pre and post lease condition of the house. It’s always best to keep careful records, inventory and photos before and after a lease agreement.

How I can Help

It’s essential for all parties involved to enter into these arrangements with careful consideration, transparency, and a clear understanding of the responsibilities and potential risks. 

If you have any questions or would like to discuss more about how temporary leaseback agreements work, please feel free to reach out to me.  I’m here to help!

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