Taking over of a business before the close of escrow.

Early possession is the taking over of a business before the close of escrow. I've had several business transactions where the buyer wanted to take over the business before the close of escrow. Is this a good idea? NO. For whatever reason, the seller and buyer have for the early possession, it's simply not a good idea.

Some of the reasons why the parties want to have an early possession can range from the seller "done with the business" and moving on, which happened in one of my transactions, to the buyer seeing that the seller is not running the business as it should and the buyer wanting to stop the deterioration of the business.

What if the buyer does take over and then realizes that running a business is not as easy as it sounds. Long hours, problem employees, irate customers, old equipment that starts to have problems, vendors and suppliers don't cooperate, the buyer sees items that were not disclosed, etc. At this point, the buyer may decide to stop the sale and create a lot of problems for both sides.

Another problem for early possession is the possibility of the buyer not running the business properly which may result in detrimental changes that could permanently affect both the closing of the sale and the business itself.

I always discourage the seller from allowing the buyer to take early possession. And if they both absolutely want to make the change, they should have an agreement written up and have it reviewed by their attorney.