Before we see if probate property can be rented out let’s look at what ‘Probate’ is. Probate is a court procedure that is responsible for the transfer and distribution of a deceased person’s estate as stated in their Will. Sometimes probate can become a long process, an executor is normally named and confirmed by a court to be responsible for the estate during the probate process. This includes sorting out the deceased’s personal belongings, financial property, physical property or even land.
So, in a nutshell for this blog article: An executor does have the power to rent out a property in probate but always with appropriate consent/confirmation from the estate legal representative.
It is not uncommon for properties of deceased owners to be in local newspapers or online rental portal listings. However, the question lies in who rents them – the heir, beneficiaries, or the executor? There might be controversies surrounding the executor. Can executors actually rent out a deceased person’s estate? The answer is not as straightforward as anyone would think. There must be specific due protocols followed, otherwise legal consequences will ensue.
The rental process for a dead person’s property depends on the person’s Will before death and the statute law governing such circumstances. If representatives of the estate do not have authority based on those factors, they would have to rely on the beneficiary’s legal consent, which is in the form of an agreement.
What powers does an executor have with a probate property?
Both trustees and executors have general powers to manage a recent deceased person’s property and assets. These can include the authority to rent out the property or to sell it, or even secure a mortgage on that property, provided it is in the best interest of the administered deceased estate. Executors who rent out a property for some other external reason or for personal financial gain could be exceeding their powers.
What backs the executor’s authority to manage a deceased person’s estate?
For executors to oversee the estate of a deceased property owner, they must have access to the individual’s Will (if there is one). This legal documentation either grants the executor direct (express) or implied authority to manage the property. In the case of the former, the deceased may state in the Will that they wish their property to be rented out by the executors. This scenario may most likely play out if the estate has an existing tenant.
On the other hand, if the power is implied, the executors can manage the property. An example is when the Will states that the heir or beneficiary is to earn an income at the time of the property owner’s passing. Based on the beneficiary’s agreement, the executor may rent out the property throughout the administrative period. But what happens when there isn’t a Will or reference to income generation through property rental? The executor could resort to implementing some clauses in the law.
The inheritance law confers authority on the decedent’s survivors to inherit property, but it also grants executors the authority to rent out such estates. However, this authority should be within the bounds of the specified conditions and nothing more than that. Additionally, there should be a reputable letting agent engaged to manage the property properly, to prevent any loss of potential income.
Renting out the property does come with potential risks for the amateur executor landlord. For example, possible high running costs can have results in losses. In some locations, property market valuations may perform poorly, generating low ROI’s (return on investment). Similarly, there may be damage to the property due to tenant abuse or of a tenant default on rent payment, which will affect the commercial viability of the estate.
Property rental – why and when to engage in this procedure
Having studied the risks that come with property rental, it is glaring that this option is no child’s play. Should there be beneficiaries, the executors must justify reasons to embark on this course. As a result, there should be legal backing on the decision to rent out a deceased person’s estate, to prevent legal consequences and actions in the future. All actions taken on property rental should be in the best interest of the beneficiaries and property.
It is illegal for an executor to exercise control over an estate beyond the administrative duration assigned to the detriment of the beneficiaries. Likewise, renting out a property as a strategy to delay its sale is deemed an abuse of authority, which comes with legal consequences. As highlighted before, all actions should revolve around administering the estate to achieve the healthiest outcome.
Can beneficiaries prevent executors from renting out a property?
Several factors come into play when it comes to stopping an executor from renting out an estate. For example, the administrators and executors control the deceased estate assets until such time as they have completed paying any debtors off, paid any taxes due and distributed the allocated Will’s proceeds to the intended beneficiaries. During that period the beneficiaries (unless they are an executors too) have minimal control in the way the estate is being administered.
In essence, beneficiaries quite often have a lot of influence over any decisions made, as they are the people who benefit or suffer from any poor decisions being made. As always, it reverts back to the issue of personal liability of the executor. It is not enough to have the power to lease out the probate property – you must be able to justify any decision to do so.
Guidelines on property rentals: what executors should know
As previously discussed, executors should not take decisions on their own to rent out properties. Such appointed people must follow strict laws and conditions to ensure that their activities are focused on managing the property. There should be justifiable reasons to rent out the property, with the idea that its interest comes first. To prevent legal actions executors should consider the following:
- Discuss potential decisions with the beneficiary and receive permission before executing them.
- Weigh up several options to select the best fit for a property, including lease and sales.
- Find out which tenancy arrangement offers the best deal.
- Map out the rental duration.
- Carry out a feasibility evaluation of becoming a landlord.
- Analyse the merits and demerits of hiring a management agent.
- Seek professional counsel before taking in tenants.
- Have excellent records of property management.
- Advantages of renting out the property
It is more desirable to have a tenant in situ in the property during the probate process than leaving the property vacant. The rents from a tenant can contribute towards any monthly mortgage payment, standing charges on utility bills, building repairs and maintenance costs. Also, any surplus rental revenue can help pay towards any probate legal costs.
Conclusion
After reading this Quick Property Sale blog we can now say accepting and becoming an executor comes with many responsibilities. And if the property is rented out, most importantly, they will need to ensure that the property is in a saleable condition after the tenant has vacated.