But, real estate agents warn, going from owner to tenant can cause some trouble if they’re not careful.
For one, sellers may overstay their welcome.
In one notable case, developer Mohamed Hadid sold his 40,000-square-foot Los Angeles home for $50 million in 2010. Hadid, the father of fashion models Gigi and Bella Hadid, requested six months to move out of the home. But in that time span, he sold the next home he planned to move into as well.
“Six months became a year, a year became two,” Hadid, who has been renting back the mansion for about six years, told The Wall Street Journal. Hadid has been paying rent to the owners and maintenance costs and agreed to reside there until the buyers decide to move in.
Stacy Gottula with The Agency says lease-back agreements in the ultra-luxury market are becoming more commonplace. The cost of moving out of a luxury home can be pricey and sellers, as such, may wait until the final hour to make sure the deal goes through before making plans of their own to move out.
But the arrangement can create complications. Damage deposits are often negotiated beforehand, but any major disasters post-closing fall to the new owners and their insurance policy, says Adam C. Wilner, an attorney and partner with Greenberg and Wilner in New York. Also, in sales that involve financing, renting the property for too long could jeopardize the lender terms, Wilner notes.
Further, a post-possession agreement that is longer than 60 days could make it more difficult to evict the former owner if something does go wrong, says attorney David Deckelbaum of Setttlementcorp in Washington, D.C. Rules vary in markets, however, he adds.
Source: “When Home Sellers Stay on as Tenants,” The Wall Street Journal (March 9, 2017) [Log-in required.]
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