Probate: How To Deal With A Rental Property With A Tenant
The administration of an estate is not always straightforward, depending on the nature of the estate – and dealing with rental property with a tenant in place definitely adds complexity to the process.
It is becoming more commonplace for executors to have to deal with rental property with a tenant as a result of the popularity of buy-to-let property as an investment choice.
Why Should Executors Beware Of Rental Property?
As an executor, you are personally responsible for any losses or mistakes that occur during probate. There is a lot involved in administrating an estate that includes rental property with a tenant, which means there is a lot that can go wrong.
Examples of mishandling a rental property, include these issues:
- Damage to the property that you were unaware of
- Insurance policy conditions not being met
- Misunderstanding tenancy agreements in place
- Not supporting tenants’ rights
- Disputes between the parties
Tips For Handling Rental Property
It’s important to administer the estate properly, and it’s advisable to seek professional advice if you’re the executor of an estate that includes rental property with a tenant in situ.
Top tips and issues to be aware of for handling probate with a rental property, include:
- Clarify First
Check if there is a Will or whether the rules of intestacy apply before reviewing the details and confirming who is set to inherit the property when the estate is distributed. - Communicate With Tenants
If there are tenants in the rental property, it’s important to update them on the change of circumstances as soon as possible. Make sure they know that the property is now managed by someone else and that this individual now has responsibility for the collection of rent as well as for maintenance and repairs. - Mortgage Or Not
Understand if there is a mortgage on the property as you will need to update the lender and act upon their decision – the lender might want the remaining balance to be paid off, which will force a sale of the property, or the beneficiary of the property might be able to move the mortgage into their name. - Review Insurance Policy
Let the insurance company know that the policyholder has died. The executors must review the policy carefully to ensure the conditions are met, in case it becomes necessary to make a claim at a later date. - Valuation & Grant of Probate
Seek a professional valuation of the property, as the amount can be affected by the rental details including lease length and if there are tenants in situ. As part of the information gathering, the probate forms must be completed and submitted to the Probate Registry – it’s important to note that probate forms differ depending on the specifics of the estate. It can take months to receive the Grant of Probate and the executors are the landlord of the property during this time, and need to follow all landlord and tenant laws correctly – for example, keeping gas and electrical installation inspections up to date. Also tenant eviction has a strict procedure which must be followed, as do deposits and outstanding rent. Be sure to keep written records of all aspects of managing the property as an executor, including any property maintenance carried out and costs involved, for the final accounts. - Tax Accuracy
Any inheritance tax, based on the valuation, must be calculated and paid accurately. The executors are responsible for the deceased person’s tax matters – and this includes any rental income from their property, which must be declared to HMRC. - The Property & What To Do With It
Depending on the estate finances and beneficiaries, the executors will either need to keep the property within the estate, sell it or transfer it. You might need to sell it due to inheritance tax or debts within the estate or to split the proceeds between the beneficiaries – it’s important you understand the legal and financial implications of each option to ensure the final accounts are accurate.
The administration of an estate that includes rental property with tenants is complicated. Seek professional legal advice to ensure that all your duties as an executor are carried out in the most efficient and accurate manner.
Helping You With Probate
There are multiple legal and practical aspects of administering an estate that includes rental property, and it’s important to get things right as the executors are personally responsible for any losses or errors that occur during the process.
Our wills and probate solicitors understand the laws of inheritance and have extensive experience of helping clients with probate and estate administration. They will be able to advise and support you throughout the process and guide you at each stage.
To speak to us about probate and estate administration or your duties as an executor, you can contact us at our Chorlton office on 0161 860 7123 or email chorlton@hlfberry.com or at our Failsworth office on 0161 681 4005 or email failsworth@hlfberry.com and we will be happy to help.
