A seller leaseback, also called a seller rent back or sale-leaseback, is a financial transaction in which a person sells property and then leases or rents from the new property owner.
In this scenario, the seller no longer owns the property, but lives in the property for the length of time stated in the rental agreement. The seller realizes profit from the sale of the property while the buyer is assured of rental income from the lease agreement.
A seller can benefit from a seller leaseback if the seller wishes to sell his or her home, but has not yet found another place to live. Even if the seller has found another residence, the seller may require the proceeds from the sale of the home in order to purchase the new property. Thus, the seller will need a place to live from the time between the closing on the sale of the home and the time of the closing on the purchase of the seller’s new home. Ideally, both transactions would occur nearly simultaneously, with only a 30-day lapse between them. It is during this 30-day period that the seller could lease back the home from the buyer.
Whether you are the buyer or the seller in a seller leaseback, it is recommended that you safeguard your rights by stipulating the terms and conditions of the rental agreement in a residential real estate contract. By completing the California Association of Realtors (C.A.R.) form called a Purchase Agreement Addendum (PAA) in California, a realtor can specify the terms and conditions of the seller leaseback; this form modifies the purchase contract.
If the seller intends to lease back the property for fewer than 30 days, then on the PAA form, check the box next to where it says, "Seller to Remain in Possession After Close of Escrow." If the seller plans to lease back the property for 30 or more days, then use the form called Residential Lease After Sale (C.A.R. Form RLAS).
On the PAA form, the seller and the buyer can agree upon the following:
- Rental amount
- Security deposit
- Late charges in the event of late rental payments
- Utilities to be paid by the seller
- Utilities to be paid by the buyer
The PAA form also stipulates that the seller shall maintain the property and make the property available to the buyer to make repairs, that the seller shall not sublet or assign the property without the buyer’s prior written consent, and that the seller’s personal property is not insured by the buyer. Seller must have his or her own insurance.
Real estate transactions can be complicated. If you would like to obtain legal advice regarding a seller leaseback, you should consult a real estate attorney.