Start lease on closing date or the day after?

Question

Hi, I'm closing on a property of which the Seller will become by tenant. Our closing is scheduled for 2pm on Monday. Keeping insurance and ownership in mind, what is the correct day to start the lease?

Thank you for the absolute TREASURE trove of knowledge and selfless peer education provided on this forum.

Fareen

Thank you for the absolute TREASURE trove of knowledge and selfless peer education provided on this forum.

Fareen

Kyle Mccaw · Answer

@Fareen E.

Great question, and it’s excellent that you’re thinking ahead about this scenario. Based on my experience managing a significant number of rentals, leasing back to a seller can work, but it’s essential to approach it carefully.

• Lease Start Date:The lease should be signed at closing and start on the same day—Monday in your case. This ensures a clean transition of ownership and responsibility for insurance purposes. As the new owner, you’ll want the lease and your landlord insurance policy to take effect as soon as you take title to the property.
• Temporary Lease Considerations:While short-term leases can work well, leasing to a seller long-term often leads to complications. Sellers may struggle to mentally shift from "owner" to "tenant," which can create challenges with boundaries and property care.
• Security Deposit:If you’re doing a temporary leaseback, be sure to collect a substantial security deposit to cover potential damages and ensure they vacate on time. This protects your investment and gives you leverage if there are issues.
• Other Tips:Make sure the lease explicitly defines the move-out date.Conduct a thorough walkthrough with documentation before and after the lease period to avoid disputes.
• Make sure the lease explicitly defines the move-out date.
• Conduct a thorough walkthrough with documentation before and after the lease period to avoid disputes.

• Make sure the lease explicitly defines the move-out date.
• Conduct a thorough walkthrough with documentation before and after the lease period to avoid disputes.

Handling a seller-to-tenant situation can be tricky, but with the right precautions, it can work smoothly.

Fareen E. · Answer

Thank you so much. I agree 100% and appreciate this. I am drafting the lease and planning to take it with me to closing, where we will be executing the document. It's tricky because we are doing the pre-lease inventory of the premises during *my* purchase final walkthrough lol. But it works. Thank you for your advice :)

Kim Meredith Hampton · Answer

Honestly, I would not sign any lease until you positively close and legally own the property. Anything can and does happen all the time. I have seen these circumstances; people die, go out and buy a car, lose their job, etc…

Just my own two cents, I’m not an attorney, just play one on TV

Jaron Walling · Answer

I'd pick the closing day if they already live there, but haven't signed the lease. The lease starts once you close on the property, collect rent, security deposit, etc.

Phillip Austin · Answer

@Fareen E. You’ll want to start the lease on your closing day. But following @Kim Meredith Hampton’s advice, do not countersign the lease until you actually close.

If closing gets pushed, adjust the lease start date accordingly.

Fareen E. · Answer

KYLE, Kyle, Kyle.......🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆

Your post reply is LITERAL gold. THANK YOU! FTR, I'm doing exactly what you outlined. Signing at closing, it's a short-term lease, sec deposit is a full month's rent, and there is a clearly defined move-out date.

Get ready -- I'm sending you a connect request! Thank you :)

Jaron Walling · Answer

Follow your lease. Prorate the rent for the first month. Call your insurance and tell them it's about to be a tenant occupied property on 1/13/2025.

Fareen E. · Answer

Yes :) but I am drafting it ahead of time. Also, she's my elementary school teacher and I know her well and I'm the agent.

Fareen E. · Answer

Thank you. Let me clarify. I'm trying to understand if the lease begins on the day of closing or the day after, if closing is at 2pm.

Start lease on closing date or the day after?

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