Row The buying and selling process can be a stressful one – an exchange of contracts is seen as a huge milestone: finally securing a completion date, financially and legally committing the parties to the transaction and the anticipation of the move itself.
What is rarely anticipated following exchange of contracts, is the sad passing of a party. Thankfully, this situation does not occur very often. However, it will of course lead to confusion for many when it does, and it’s important to know where you stand legally.
Once contracts have been exchanged, the death of a party does not invalidate the contract. There is a contractual obligation to complete the sale/purchase, and this obligation will pass to the Executors or Administrators of the deceased person’s estate, who must fulfil the obligation of the person who has died.
The practical situation for dealing with completion varies depending on whether the party was a sole seller/buyer, or a co-seller/co-buyer.
If the deceased owned the property being sold with another person as joint tenants, the surviving owner can continue to sell the property, once the death certificate is available.
If the deceased owned the property being sold with another person as tenants in common, (sole proprietor/ ‘Form A’ restriction on the Registered Tile) the surviving owner could continue with the sale of the property - if the deceased’s share in the property was left to the surviving owner in their Will, an application can be made to the Land Registry to remove the sole proprietor restriction and the name of the deceased from the title, so that the survivor will be the sole owner and can continue with the sale
However, if the deceased left their interest to another, or a Trust, the process may be more involved – Probate may be required, or an additional person, acting as Trustee for the deceased’s estate, may need to be appointed in the document that transfers ownership to provide good receipt of the sale proceeds and their correct distribution.
If the deceased owned the property being sold in their sole name, the sale of the property cannot proceed until the Grant of Probate/Grant of Representation is obtained.
In the case of a sole buyer, the Grant of Probate will be required. This means that documentation will need to be redrafted to reflect the change in parties once this is received.
The situation is slightly simpler if there is more than one buyer. The surviving buyer remains bound by the contract and can be forced to complete the purchase on behalf of the deceased.
However, proceedings can be much more complicated if the deceased person left their share in the property to a third party, rather than the person they were buying it with, or if they were purchasing with the aid of a mortgage.
The Executors – if the person who died made a Will, or the Administrators if they have not – should complete the sale/purchase of the property on the date agreed, when contracts were exchanged.
However, they are unable to do this until they have obtained the Grant. The Grant of Probate/Grant of Representation gives them the legal permission to deal with the deceased person’s assets. It is unlikely a buyer would be advised to proceed with the purchase, until a Grant confirming the authority of the Executor or Administrator is obtained.
The speed at which the Grant can be obtained depends on the size and complexity of the estate of the deceased.
Obtaining either of these may delay completion past the fixed completion date, since no Grant of Probate may be issued within 7 days of the death; and no Grant of Administration within 14 days of the death. The Probate Registry does operate an emergency system to expediate the Grant, or for a limited Grant to be issued. This may be used to enable the sale of the property to take place with minimum delay.
The death of a buyer usually means the mortgage offer is withdrawn, which means the Executors/Personal Representatives may find they do not have the funds available to complete, unless other means of financing are available. When it comes to a co-buyer, finance may need to be re-arranged which may inevitably take time.
If the fixed completion date is missed, a breach of contract will have occurred for which the defaulting party may be liable to pay compensation or damages in accordance with the terms of the contract.
In regard to a sale, if the Grant is unlikely to be granted before the fixed completion date and the matter is uncomplicated, the Executors or Administrators may agree to allow the buyer into the property on licence, pending formal completion. However, this depends on the advice the parties receive from their conveyancer and would vary depending on the circumstances of the parties and the transaction.
The Executors/Administrators are unable rescind (cancel) the contract until time is made “of the essence” by serving a Notice to Complete.
In regard to a purchase, the deposit agreed on exchange of contracts will ultimately belong to the seller if completion fails to take place and the seller is not willing to release the buyer’s Executors/Administrators from the obligations of the contract. A seller is under no obligation to agree to a written release, and in the case of a surviving co-buyer, they will have to carry on with the purchase as planned and then attempt to re-sell the property later.
As you can see, this is a complicated area of conveyancing, filled with a number of hurdles, during what would of course be an emotional and upsetting time. Whether you are looking to buy or sell contact our residential property experts to guide you through the process.