What is a post-closing possession agreement and what are the risks for buyers and sellers?

  • Instead of being delivered a vacant apartment, you rent the apartment back to the seller for a specified period of time
  • The contract is a license, not a lease—meaning you are not stepping into a complicated landlord-tenant relationship
  • Typically the agreement will set forth a per diem penalty of $1,000 or more if the seller stays past the end date
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By Emily Myers  |
August 10, 2023 - 2:30PM
manhattan apartments

This type of agreement allows a seller to remain in the apartment after the closing date. 


When you are buying in New York City, a good strategy for beating the competition is to find out what the seller wants and be the buyer who meets their needs. That could mean offering to accommodate a seller who needs to show proof of funds from the sale in order to buy their next place. In these cases, the seller’s attorney might suggest a post-closing possession agreement, which allows a seller to remain in the apartment beyond the closing date. 

According to attorney Daniel Gershburg, a partner at Konner Gershburg Melnick Darouvar, these arrangements usually occur when the seller needs to qualify for the purchase of their next residence by “either getting rid of the debt of the first place and netting the profit to buy another place or just netting the profit of the first place to buy another place."

[Editor’s note: A previous version of this article was published in August 2022. We are presenting it again with updated information for August 2023.]

In other words, a post-closing agreement "allows the seller to only move once—from the home they are selling into the new home once they close on that purchase," says Adam Stone, a real estate attorney at The Stone Law Firm. "It may be too difficult for the seller to close on their purchase until they have the proceeds from their sale."

As a buyer, instead of being delivered a vacant apartment on the closing date, you will be renting the apartment back to the seller. Gershburg says most agreements are fairly short, such as a week to 10 days, although he has negotiated agreements of up to 45 days.

Read on for the ramifications of signing this seller-initiated contract. 

Why you should weigh the pros and cons carefully

Being adaptable around closing and moving schedules could result in a winning offer if it comes to a bidding war, but be aware that post-closing possession agreements come with risks—and those risks fall mainly on the buyer.

"I see it as a risk for a purchaser to agree to this," Stone says. "The risks can be lessened with a well-drafted post-closing possession agreement, but the risks wouldn’t be eliminated."

That's because, as a buyer, you are relying on the seller to leave by the arranged date, and there will be penalties if they don’t.

Note that sellers who introduce a post-closing possession agreement might scare off potential buyers who don’t want to take on these kinds of risks, so it works both ways. And again, you might be able to close on the deal by agreeing to sign the dotted line (assuming you really, really have your heart set on the place). 

What the possible penalties are for the seller

With a post-closing possession agreement, both sides need to show flexibility, says Elise Kessler, an attorney at Braverman Greenspun. “Normally, the post-closing agreements have an outside date by which the seller must move out or pay a per diem amount for each day the seller does not vacate after the outside date,” she says. 

The legal term for these per diem costs is liquidated damages or penalty provisions. Typically the amount can be “substantial in addition to the maintenance and interest payments being paid by the seller,” Kessler says. For example, this might be a fine of $1,000 or more for every day the seller overstays beyond the date outlined in the contract. 

Why being a license vs. lease matters

Although it seems as though the seller is renting back the apartment they’ve just sold, the contract you sign is actually a license, not a lease. This is important, Kessler says, because “the parties do not want their relationship to be deemed a landlord-tenant relationship, which gives the parties different rights.” 

"A tenant has many more rights in NYC and New York State, and any eviction proceeding would have to go through housing court, which can take a very long time and is generally skewed in favor of tenants.," Stone says, explaining that a lawsuit based on a different type of contract such as a license agreement should be in civil court or supreme court.

What co-ops may require

Boards are not parties or signatories in post-closing agreements, but Kessler says it is possible they could require an escrow payment to cover cleaning fees or other costs. As a general rule, a co-op board will need to be notified and may make additional requirements, even charging a sublet fee. 

Your agreement might also involve the seller putting funds in escrow if you are concerned the apartment won’t eventually be delivered vacant and you will be left dealing with additional belongings that haven’t been removed. Additionally, an escrow term might protect you from any damage to the place. The funds are released to the seller after they have moved out and fulfilled all the requirements outlined in the agreement.


Headshot of Emily Myers

Emily Myers

Senior Writer/Podcast Producer

Emily Myers is a senior writer, podcast host, and producer at Brick Underground. She writes about issues ranging from market analysis and tenants' rights to the intricacies of buying and selling condos and co-ops. As host of the Brick Underground podcast, she has earned four silver awards from the National Association of Real Estate Editors.

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