When you work in the law like we do, you become an expert on all sorts of serious and important topics that people don’t like you to talk about at social events. Though we’re fairly notorious for getting overexcited about drainage surveys, we also find that our companions tend to make a quick exit anytime we mention the other ‘d’ word: death.
Though we do know that it’s not nice to have to think about dealing with a death, it’s often an unavoidable reality. One of the biggest things you might have to handle after the loss of a loved one is selling property on their behalf, and we hope this post proves helpful if or when you ever need it.
After all, selling property can be a huge pain in the behind at the best of times… having to handle it when in the midst of grief can really take the biscuit.
Let’s start at the beginning: what happens to property when the owner dies?
When a loved one dies and leaves behind property, the responsibility for dealing with that property will fall to whoever has been tasked with administering their estate. This might be the executor or group of executors appointed in the will (apparently there isn’t a collective noun for a group of executors, which seems a crying shame to us), or it might be whoever has been appointed by the probate office as the administrator.
Once the responsible person or people (a troupe of executors? A swarm of executors?) have stepped up to the plate, they will need to decide what to do with the property. Depending on the will and the wishes of the beneficiaries, the property will either need to be transferred into the name of the beneficiaries or the property will need to be sold and the profits distributed.
If a property is transferred directly to beneficiaries, they can then choose to live in it, rent it out or even sell it themselves at a later date. This might be a good option if family members don’t want to rush into selling the property, or if there are a lot of personal belongings to sort through. However, this might not be quite so simple (is it ever, with the law?!) if there’s an inheritance tax bill to pay, as the executors may well need the money from the sale of the property to cover it.
In situations where there’s a disagreement over whether a property should be sold, the final decision on this will usually fall to the executor (or the pack of executors).
What do you need to know before you start the selling process?
When you sell a house in this situation, it’s called a ‘probate sale’. Handily, there’s a clue in the name about what exactly it is that’s different about selling a house like this rather than selling a home for yourself: probate.
Before you can sell a property on behalf of an estate, you’ll need to apply for and receive a Grant of Representation. If the person who has died left a will, this will be called a Grant of Probate. If no will has been left, the document you will receive will be called the letters of administration. Whichever type of grant you receive, it is a vital bit of paper that proves to everyone involved that you really do have the right to sell the property. Unfortunately, as vital as grants are in these situations, they also have a tendency to slow everything down. This is especially likely to be the case if the probate office are experiencing extra delays.
Though you won’t be able to exchange contracts or complete on a sale until the Grant of Probate has arrived, you can choose to put the property on the market before this. The timing here can be a tricky balancing act… you might want to put the property up for sale with plenty of time to find a buyer (especially if it might be a hard sell)… but if you put it up and accept an offer too early, your prospective buyers may well get fed up waiting for the grant to come through.
Speaking of tricky timing issues, in news that might have you pulling your hair out in the manner of a locked room puzzle: when you put the property on the market (and, crucially, when you hope to sell it) might depend quite dramatically on the fact that any inheritance tax that is due on the estate will need to be paid within six months of the date of death.
What else do you need to do before you put the property on the market?
Before you can even apply for probate, you’ll need to submit a valuation for the property. You won’t need to sell the property for this exact amount, but you do have a responsibility to the estate to sell the property at market value. This means you can’t sell a property at a cut price to help a younger family member get on the ladder, and you definitely can’t sell it to your mate for a song to stitch up your annoying cousin on the inheritance.
We’d also suggest taking the time to make sure you’ve checked the title details, especially if the person who has died owned the property for a long time. In many cases like this, the property won’t have been previously registered with the Land Registry, which will need to be sorted out before the property can be sold. You may also want to make sure you’ve had a gander at any deeds associated with the property to ensure there aren’t any nasty surprises. What sort of nasty surprises could there possibly be, you might ask? Trust us; you’d be surprised.
The executor (or flock of) will also be responsible for ensuring the property is safeguarded during the probate process. This means changing the locks if necessary, as well as regular visits to make sure there aren’t any leaks or illegal squatters. You’ll also need to confirm with the home insurance provider that the property is still insured now that it’s empty. It’s not unusual for insurance providers to insist that an additional premium is paid to cover this: if that happens, we suggest you suck it up and pay the money.
Finally, there’s the not-at-all-insignificant matter of clearing the property. You’ll need to have emptied out any and all belongings before completion, and in our experience the clearing process will almost certainly take longer than you imagine it will. The condition of the property is something to keep in mind here, too. Probate sales are often attractive as, as well as being chain free, they often represent a renovation opportunity. You may decide to try and benefit from this yourself by attempting to tart the house up a bit before selling it. Whether this is worthwhile will generally depend on the market, your inclination and whether you have any skills or previous experience with tarting up property.
Now, just because it’s nice to end on a thrilling note, here’s one more thing to keep in mind: as well as any inheritance tax that may be due on the estate, if the property goes up in value in between the probate valuation and completion, you may well have to pay capital gains tax on it.
If you’re looking for advice on probate sales, administering an estate or managing an inheritance tax bill, please get in touch. No promises; but we’ll do our best to keep our chat about drainage surveys and the ‘d’ word to a minimum.