use and occupancy agreement

Asked by Savinganimals, Brookline, MA Thu May 17, 2012

What are the potential risks of doing a 'use and occupancy agreement' as a seller ?
Also i have been in my apt for 1yr and 11 months and i'm doing a 1 month use and occupy agreement so i can get over the 24 month period which is required to avoid capital gains tax. This was suggested by my realtor - i just want to know if this will work.


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Howard Koor’s answer
Howard Koor, Agent, Brookine, MA
Tue May 29, 2012
I would ask a real estate attorney and an accountant to cover the full range of issues that can arise out of this arrangement. If you need any names and phone numbers please contact me at or 617-257-3868.

Good luck.

Howard Koor

Vanguard Realty
Brookline Village
0 votes
Bill Gassett, Agent, Hopkinton, MA
Tue Sep 8, 2015
Use and occupancy agreements are a great type of contract to have when some form of gap is needed in residency. They are commonly used when there is a delay in closing and the buyer has nowhere to go for example. There are many uses however for a use and occupancy. In the link below you will see a comprehensive explanation. There are of course risks involved with these types of agreements as well. It is always wise to consult with an attorney but the article will give you lots to think about.
0 votes
Greer Swiston, Agent, Newton, MA
Mon Mar 23, 2015
I wonder how this panned out for you. I imagine that ownership AND residence would be necessary for the capital gains tax waiver and therefore I don't see how a "use and occupancy agreement" would have addressed that for you ... but that may just be my simple understanding of the law.

I assume you were talking about giving the buyer a "use and occupancy agreement", not you getting a "use and occupancy agreement" from them. I've seen them go both ways these days.

I hope it worked out for you, but would love to hear how it all ultimately settled out.
0 votes
Mary Gillach…, Agent, Chestnut Hill, MA
Thu May 17, 2012
Hi -

Use and Occupancy agreements (also called "lease-backs") are a strategy we as realtors recommend with great frequency these days - both as a tax minimization strategy like you are doing, and because most people who currently OWN a home and simultaniously want to BUY a new one rarely have the funds to buy without first selling. Use of a lease-back arrangement gives the seller the abiltity to close on the sale of their property, and remain in it for an agreed upon period of time, in exchange for paying a rental fee to the new owners. It is a strategy sellers love because they do not have to move to a short-term rental while they seek new housing. Buyers, in this competitive market, are using the offering to "sweeten the pot" and actually get their offer accepted. Both parties can really benefit.

However, there are risks you need to be aware of - especially as the new owner that is leasing back to the party they are buying from. What if there is damage to the property during the rental period? what if someone gets hurt on the property during that time? What if the former owners (now renters) decide they can not vacate on time? These things seldom happen, but there can be significant risk if they do. It behooves both parties to engage this discussion with their legal counsel, and craft "tight" Use and Occupancy agreement that protects interests of both parties and clearly spells out expectation of both.

If you do not have legal counsel - my guidance is to seek one that specializes just in real estate. It wil save you money and serve you better than your neighbor's uncle's cousin in Florida who used to be an attorney :>) If you need referals to the top attorneys in Boston's real estate law community give me a call. I am happy to forward you some recommendations.


0 votes
Below is info from

One of the most important aspects of a Use and Occupancy Agreement is what it is versus what it is not. The agreement should specify that it creates a mere license to occupy the premises, not a tenancy or a landlord-tenant relationship. This will make it easier to remove/evict the occupants if something goes wrong. In any event, if the sellers are forced to remove the occupants, they will still have to resort to judicial eviction proceedings, which in Massachusetts can potentially take several months. This alone is the biggest drawback of a Use and Occupancy Agreement. The seller should always put language in the agreement that the buyers will be responsible for all attorneys’ fees and costs in case of an eviction.
Flag Wed Aug 19, 2015
Thank you for responding Mary.
Just want to confirm something : So if i as a seller go in for the 'use and occupancy agreement' am i legally ok to take advantage of the fact that once the use and occupancy agreement is over i would've completed 2 years as an owner and therefore avoid any long term capital gains ?
Thanks again.
Flag Thu May 17, 2012
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