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Selling in unexpected circumstances with Allan Farrar

With people living longer and having more complex financial and family arrangements, life has certainly become more complicated. In the event of a loved one passing away, all those complexities can bubble to the surface and become a minefield to navigate through. Real estate agents who are brought in to sell a deceased estate can find themselves right in the middle.

Estate planning specialist lawyer, Allan Farrar has been working in this field for many years providing expert advice and guidance. In the event of the passing of a loved one and dealing with the distribution and sale of property assets, Allan explains that what has to be established first is the nature of the ownership of the property. Is it joint tenants or tenants in common?

Once that has been established, Allan says, “If the property has been transferred out of the estate’s name to the executor or beneficiary, then that executor or beneficiary has the legal right to deal with the property. The property is in their name and they can instruct the real estate agent accordingly.”

He adds, “If it’s before the probate has been granted or before the property has been transferred into the executor’s name, then the person would need to consult with their legal advisor and be advised as to how she or he should deal with that. In some cases, the executor or the beneficiaries want to sell the property fairly quickly and try and get the dollars into the beneficiaries’ accounts. To that extent, once you know who the executor is and he or she has the right to deal with the property, then they can instruct an agent to list the property for sale. The contract which would be prepared by the solicitor or conveyancer would or should be made subject to and conditional upon the grant of probate and allowing the property to be transferred into the name of the beneficiary or executor.”

What do you do when the subject property to be sold is actually tenanted? There’s a lease on the property and the tenant is saying, “I don’t want to move out.” Yet you’re saying, it’s going to be sold. What happens there?

Allan says, “It depends on the nature of the tenancy. If the tenancy has expired, then the executor can give 30 days’ notice once the contract is exchanged and sell the property with vacant possession and require the tenant to exit. If s/he doesn’t, s/ he can apply to the court for an order for the tenant to be unfortunately removed. Whether the tenant likes it or not, if his or her contract which is the lease has expired, he or she has less rights. If the lease is still in place, then obviously s/he’s entitled to stay in the property until the lease does expire. You could sell the property with the existing tenant in situ.”

Will the insurance companies still insure the property now that the owner is deceased?

Allan explains, “In most cases yes, because hopefully the deceased would have had an insurance policy on the property. The issue you’ve got to deal with obviously is some policies of insurance companies have a 30-day or a 90-day period after which, if the property is vacant, they will not be prepared to cover the property for insurance. You need to make sure that someone physically goes to the property each period of time so that the property hasn’t been left as vacant. Make sure that the insurance company is aware that the property may not be fully occupied during that period because you have different claims: fire, theft, and etcetera. It depends on the nature of the claim and the policy you’ve got as to what is applicable.”

If the property sells and settles, what are the taxation issues?

Allan says, “First of all, it couldn’t settle until the property has been transferred into the name of the beneficiary or executor. You need to get the grant of probate finalised as far as that’s concerned before you can deal finally with the land or property. Regarding the question of taxation liability, in New South Wales at this point of time there are no death charges, therefore, there is no tax formally on the sale of a deceased property. However, you still have capital gains tax which is obviously payable depending upon the nature of the property and when it was purchased. You have the obligation to account back for that capital gains tax to the Australian Taxation Office as if it’s an income of the deceased in the year of sale.”

Does capital gains tax have to be paid?

Allan explains, “It depends on the nature of the asset - when it was acquired and what is the purpose of the property.” He continues, “Obviously, your normal residential home and/or occupier is normally exempt from capital gains tax. If a property was purchased pre-1995, it also is exempt from capital gains tax. Other property which do not comply with those two requirements would more than likely be liable for capital gains tax and could, subject to other exemptions, incur some liability.”

What is probate?

Probate is a technical word. If you’re talking about the noun, it is a piece of paper that comes from the Supreme Court of New South Wales verifying that the will is a valid will and that the executor appointed under that will is the appropriate person to deal with the asset of the estate. If you’re talking about it in the generic sense, then probate is the whole process under which you apply to the Supreme Court for the transfer and deal with the transfer of the assets from the deceased name through to the beneficiaries’ names.

Allan Farrar is a partner of Allan Dixon Farrar law firm in East Gosford, NSW. Allan can be contacted on 02 4324 4211.  

 

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