Dealing With Property When The Owner Dies
When the owner of a property dies all of his assets, including any land he owns pass either in accordance with his will or if he has not left a valid will, to his next of kin in accordance with the rules of intestacy.
Land is different from other assets however in that legal ownership does not pass automatically. Instead, some form of document must be signed by the personal representative (i.e. the executor or administrator) assigning legal ownership to the person who is entitled to inherit. The exception to this rule is where land is held by two or more proprietors as joint tenants and at least one joint tenant survives. We will deal with this situation later in this article.
Grant of Probate or Letters of Administration
Before the land, or indeed any of the deceased’s other assets, can be dealt with a person needs to be appointed to administer the “estate”. Estate is a term used to describe the totality of a person’s assets including cash, land and other property. Where a valid will is left it will name the person whom the deceased wants to be responsible for distributing his assets. The named person must apply for Probate and when, but only when, this is granted he can proceed to deal with the assets. A person appointed in this way is known as an executor.
Where a person dies intestate (without a valid will) the Court will appoint a suitable person to deal with the estate. This may well be a relative of the deceased who has applied for the role. The Court will grant Letters of Administration, which is the equivalent of Probate. A person appointed in this way is known as an administrator.
Collectively, executors and administrators are known as personal representatives and that is how we will refer to them from now on. The personal representatives are often also the beneficiaries under a will or intestacy.
Land Held as Joint Tenants
Earlier we said that land needed to be formally transferred to any person who inherits it under a will or intestacy however that is not the case where two or more people owned the land as joint tenants and one joint tenant dies leaving at least one survivor. This is because each joint tenant each owns the whole of the property on trust for the other(s), so when one dies the remaining owners still own the whole of the property. Effectively the deceased’s share passes to them automatically, irrespective of anything in the deceased’s will.
What Happens to Land Where No Heir Can Be Found?
If a person dies intestate and no heir can be traced their estate, including any land they own, vests in the Crown via a process known as escheat. If someone subsequently wants to buy the land they must purchase it from the Crown.
Land Which is Subject to a Mortgage
When a person who is the sole or sole surviving borrower under a mortgage dies, the debt is not enforceable against that person’s heirs but this does not affect the lender’s rights to take possession of the mortgaged property and sell, and it will do so should the payments cease.
Where there is a mortgage outstanding the personal representatives, whether or not Probate has been granted at the time, should contact the lender and explain that the owner has died. There should be an insurance policy in place under which an amount equal to the outstanding debt can be claimed, allowing the mortgage to be repaid. There may be a delay until payment is made and the lender should be kept informed. If no insurance is in place then payments can be maintained out of any other funds within the estate, perhaps while the property is sold.
If the lender does repossess and sell and there is money left over after the debt due to them and their costs have been deducted then provided there are no other charges registered against the property the left over money should be paid by the lender to the personal representatives. This must then be distributed to the beneficiaries in accordance with the will/rules of intestacy.
Assent in Favour of Beneficiaries Under a Will or Intestacy
If there are no outstanding mortgages on the property then, where it is held as joint tenants, on the death of the sole surviving joint tenant or where it is held as tenants in common, on the death of one of the tenants in common the personal representatives may dispose of the deceased’s land or share of the land by way of an assent.
When a person inherits a property what he really inherits is the equity. He is not automatically entitled to be registered as the legal owner and for him to become registered; the personal representatives must transfer the legal title to him.
An assent is a type of transfer where the legal title in a property is assigned to the person who, according to the will of the deceased or to the rules of intestacy, is entitled to equitable interest in it. It is generally a very simple transaction. No stamp duty will be payable and no ID1 form need be supplied. The personal representatives do not have to prove that the transferee is actually entitled to the property and the land registry are obliged to assume that the personal representatives are acting within their powers. In fact all that is needed is the form AS1 and the original grant of probate/letters of administration together with the application form AP1.
Where the property is held by two or more people as tenants in common and one owner dies but one or more remain the deceased’s share can be transferred to the beneficiary by way of an assent.
Sale by Personal Representatives
The beneficiaries may not want to be registered as the legal owners and may instead only be interested in realising the equity in the property, in which it can be sold without the need for an assent in favour of the beneficiaries.
The personal representatives have the power to conduct a sale, including agreeing a price, signing the contract and signing the transfer deed (and conducting the conveyancing if they so wish). A personal representative will generally sell with “Limited Title Guarantee” as opposed to Full Title Guarantee but otherwise there will be very little difference between this and an “ordinary” sale. The seller will be named in the contract and transfer as “xxxxxxxx as personal representative of xxxxxxxxx, deceased” and the original or an office copy of the grant of probate/letters of administration will need to be provided by the buyer together with the original or certified copies of the death certificates in respect of any previously deceased joint tenant or grant of probate/letters of administration in respect of any previously deceased tenant in common if, in either case, the previously deceased owner still appears on the legal title.
The personal representatives, after deducting the costs of sale, must distribute the proceeds in accordance with the will or intestacy.
Inheritance Tax and Capital Gains Tax
Information of taxation implications is beyond the scope of this article however advice should be sought to ensure that the correct tax is being paid and that the minimum amount of tax is legally paid.
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