Use and Occupancy (U&O)

Use and Occupancy (U&O): Overview

Use and occupancy (U&O) is a short-term real estate agreement that lets one party use or occupy a property before ownership transfers or remain after closing. It can cover scenarios such as a buyer needing early access before the deed is recorded or a seller needing more time to move out after closing.

How U&O Works

• Parties draft a written agreement specifying who may occupy the property, for how long, and on what terms (fees, maintenance, insurance, liability, etc.).
• Many municipalities require a U&O or a certificate of occupancy (CO) when property changes hands. That typically triggers an inspection to confirm compliance with local building codes and permits.
• Inspections must usually be completed within a set timeframe, and any resulting certificate is valid only for a specified period.
• Where local U&O/CO requirements do not exist, buyers and sellers negotiate the terms themselves.

Certificate of Occupancy (CO)

A certificate of occupancy (sometimes called a U&O in local practice) is an official document issued by a local building or zoning authority stating a building is safe to inhabit. COs are commonly issued:
– When a building is first constructed, or
– After a resale inspection in jurisdictions that require one.

Issuance often follows a municipal inspection and may require the seller to correct code violations before the CO is issued.

Common Uses

• Buyer needs early access to move belongings or prepare before the official occupancy date.
• Seller needs extra time to remain in the home because their replacement housing or new construction is delayed.

U&O agreements should be explicit that they do not create a landlord–tenant relationship (unless that is intended), and they should set clear start and end dates as well as removal procedures for unauthorized occupants.

Special Considerations

• Fees: Municipal U&O/CO processes commonly require payment (often by the seller) to cover inspection costs; amounts vary by jurisdiction.
• Repairs: In jurisdictions with mandatory inspections, sellers must complete required repairs regardless of a prospective buyer’s preferences. In areas without municipal U&O rules, sellers can negotiate whether to make repairs.
• Private inspections: Buyers can still obtain private home inspections and condition their purchase on repairs or credits negotiated with the seller.

Advantages

• Flexibility to bridge timing gaps between closings and move-in dates.
• Allows early staging, furnishing, or phased relocation.
• Provides a formal mechanism to protect the legal rights and responsibilities of both parties when occupancy timing is atypical.

Disadvantages and Risks

• Extra costs: occupancy fees or inspection-related expenses that are not part of the purchase price.
• Liability and insurance: unclear responsibility for damage, maintenance, or injuries during temporary occupancy if not properly addressed.
• Property-condition disputes: occupying the home before closing may reveal problems that complicate financing or the sale.
• Transaction risk for sellers: if a buyer occupying early cancels the purchase, the seller may need to relist the property.
• Mandatory repairs: in jurisdictions with municipal inspections, sellers may be required to perform costly corrections.

Practical Tips

• Define all terms in writing: duration, fees, maintenance, utilities, insurance, permitted use, and removal rights.
• Clarify whether occupancy creates any tenancy rights and whether occupancy is contingent on closing.
• Require proof of insurance and specify who is responsible for damages occurring during the occupancy period.

Bottom Line

A U&O agreement can solve timing problems and provide legal clarity when occupancy and ownership dates do not align. Because it affects liability, insurance, and potential municipal code obligations, have a real estate attorney draft or review the agreement so both parties’ rights and responsibilities are clearly protected.