For one reason or another, a Buyer may need to take possession of real estate before a closing. For instance, if there is a "dry-closing" (ie. one where the lender fails to fund but all other parts of the closing are done and the lender's funding should take place shortly thereafter), a Seller may be willing to allow a Buyer to take early possession of real estate. Most attorneys disfavor pre-closing possession. Why? Mostly because of liability concerns. What if the deal fails to close? What if the Buyer discovers a condition in the property that causes the Buyer to decline to close? What if the Buyer burns down the property? What if the Buyer's property moved into the real estate is stolen?
A proper and well thought out pre-closing possession agreement can address some of those concerns. While granting possession only at the time of closing is preferable, sometimes pre-closing possession is necessary.
What happens if, having transferred possession, the property is destroyed? In such as case, the Illinois Uniform Vender and Purchaser Risk Act shall apply. Unless specifically disclaimed or modified, all real estate contracts in Illinois are subject to the Act.
The act provides first that when neither legal title nor possession of the real estate have been transferred, in the case that all or a material portion of the real estate are destroyed without purchaser's fault, the Seller can not enforce the contract against the Buyer.
The act makes provision, however, for pre-closing possession. When either legal title or possession of the real estate has been transferred, in the case that all or a material portion of the real estate are destroyed without Seller's fault, then in such a case, the Buyer is not relieved of the duty to purchase the real estate.
Thus, if a buyer takes pre-closing possession of a property and the real estate burns down, the Buyer is still on the hook to buy the property.
