When someone dies and they own real estate, the number one question we are asked is: What about timing? When can we sell the real estate?
Answer: It depends on several factors.
Property held as “joint tenants” can immediately be transferred after one person dies. The name of the deceased joint tenant can be removed from title by simply presenting a Funeral Director’s Statement of Death along with an Affidavit of Surviving Joint Tenant to the Land Titles Office. This does not require a Court Order and Galbraith Law can help with this process. NOTE: The Supreme Court of Canada has stated that there are circumstances under which property (whether real estate or bank accounts or other property) does not automatically transfer to the surviving owner on death. Please contact us for more details on this issue.
Otherwise, any interest in land owned by a deceased person can only be dealt with by obtaining a Grant from the Court. This includes ownership interests along with other interests such as mortgages, registered Caveats, Leases, or mines and minerals.
Real estate that is owned by a deceased person cannot be transferred until a Grant is obtained from the Courts in Alberta. The person who owns the real estate is obviously deceased and no longer available to sign a Transfer of Land. The Land Titles Office will only accept documents that are signed by a person authorized by a Court Order issued by the Surrogate Court of Alberta. This Court Order is called a Grant of Probate when there is a Will and a Grant of Administration when there is no Will. There are more esoteric names in particular circumstances.
Question: Who are the beneficiaries? This includes looking at how many beneficiaries there are and any issues those beneficiaries may bring to the table. For example, if it is well known that certain beneficiaries have a hankering to keep the real estate while others are ready to sell, then it may be necessary to delay the sale process until there is greater certainty.
Question: Are any of the beneficiaries under the age of 18? If yes, then a transfer can only take place with the consent of the Public Trustee and after a Grant has been issued by the Court. They will also require an appraisal so they can properly determine whether consent is appropriate.
Question: Are any of the beneficiaries over the age of 18 either incapacitated or dependents? If yes, then consent will be required from their trustee. This may involve the Public Trustee or a Court-appointed trustee or a limited trustee appointed solely for the purpose of review and consent. Where the adult already has a guardian or trustee, it is a conflict of interest if that person is also a beneficiary of the estate. Special consideration must be given in these circumstances. We recommend seeking legal advice to properly address these concerns. In the past, we have had success dealing with these issues in a more informal manner which minimized cost and time. This can dispense with a formal Court application.
Question: Will the beneficiaries consent? If all the beneficiaries are in agreement on the terms of the sale, then the property can be listed with a realtor before a Grant is officially obtained from the Courts. Often, when there are a small number of beneficiaries, they are all in agreement and there is no animosity between them, many steps towards the sale of the property can be completed including listing with a realtor and entertaining offers before a Grant is issued. The final sale and transfer of land cannot take place until the Grant is issued by the Court or by special Order. Once a Grant is obtained, then consent of the beneficiaries is no longer required for a sale.
Will & Estate
Question: Are there any specific directions in the Will regarding real estate? The Will can also dispense with the consent that is otherwise required for the sale of real estate that is done for distribution purposes only. Specific directions can include directions on the manner of sale or the timing of the sale. The Will could also grant certain people a first option to purchase the real estate. There can also be clauses allowing certain people to remain living in the residence for a fixed period of time or indefinitely.
Question: Are there any Dower rights? The Dower Act gives a spouse who is not on title a life estate in the residence or homestead owned solely by their deceased spouse. It only applies to one property per married couple. However, the issue of Dower release and Dower consent applies to any property where either one of the spouses or both of them lived there at any time since their marriage. This means a spouse who is not a registered owner has the right to continue living in the property for the remainder of their lifetime. Obviously, this interferes with the ability to sell the real estate.
Question: Are there any claimants with a claim against the property? For example, there may be someone who asserts a right to purchase the property and says the deceased provided them with an option to purchase. Or, someone may claim they made significant improvements to the property and were never reimbursed and were expecting payment when the deceased died.
Question: Are there any income tax considerations? If this real estate is not the principal residence of the deceased, then capital gains tax may apply. Before making any final decision regarding the sale of real estate or the timing of that sale, consult your tax advisor.
Question: How will the estate continue to pay ongoing expenses? Examine the financial affairs to determine whether ongoing payments such as utilities, property taxes, and insurance are set for automatic payment and payment will come from an account with sufficient funds. If money to pay ongoing expenses is scarce, then alternate arrangements may need to be made or the sale take place much quicker.
Question: Who are the owners? A copy of title often shows a deceased spouse still on title as an owner. Or, there could be other owners on title as the deceased may have transferred the property to include other family members prior to their passing. Either clean up the title by removing names that no longer belong on title, or ensure that all owners will proceed and agree with the listing and selling of the property.
Question: What is the state of the title? Obtain a copy of title from Land Titles Office or phone us and we can do that for you. Look at the title to see if there are any registrations that should be discharged. For example, people will pay off their mortgage and years later that mortgage is still registered against the title. Or, there may be a Builders’ Lien that has long since expired. Before the property can be sold, these defunct registrations must be cleared from the title.
Question: What is the physical condition of the property? The first priority is to give any personal contents and belongings to the beneficiaries and then dispose of the rest. Then the property must be cleaned up and made presentable for sale purposes. If the property is particularly tired, you may benefit from hiring a staging company to stage the residence. They will make the property look much more attractive to a typical buyer. You can contact us for assistance in finding a staging company.
Question: Will you renovate or sell the property “as is”? Most times, in our experience, it is most cost effective to clean up the property and make it presentable and then leave the questions of renovations up to a buyer. However, in certain cases, renovations may be necessary especially where repairs are required to ensure the property and buildings are in proper working order.
Question: Are there any outstanding insurance claims or other unresolved matters? There may have been some damage done to the house during a recent storm or fire and property insurance is available to cover the loss. Make sure these claims are addressed before the property is sold.
Question: Are there any tenants or occupants? This can include legal tenants who are renting or family members who have been living in the property and plan to continue to live there, whether they are entitled to do so or not. Under the Residential Tenancies Act, tenants who are paying rent must be given 90 days notice to vacate, for month-to-month tenancies or longer if the tenancy is for a fixed term. Family members or others who are not paying any rent are not covered by the Residential Tenancies Act.
Question: What about building insurance? It is essential that insurance be maintained on the premises. Also, if the property is vacant, then the insurance company must be informed and a vacancy endorsement must be obtained. Otherwise, without a vacancy endorsement in place, the building insurance may be invalid.
Question: What about utilities? Make sure there are arrangements in place to provide for ongoing payment for all utilities, especially heat. This can become problematic where the utility account is in the name of the deceased and, due to privacy legislation, the utility company will not speak to any other party until a Grant is issued by the Courts. When a Grant takes several months to obtain, all the pipes could be frozen and burst before the utility company will speak to the Personal Representative. In these cases, it may be necessary to either authorize the bank to pay the accounts automatically or provide payment from the Personal Representative in an amount estimated to keep the utilities active.
Question: What about property taxes? Make sure there are arrangements in place to continue any monthly payments towards property taxes or to ensure that the yearly tax bill is paid. We recently had an estate where property taxes had not been paid for the previous two years while the owner was in a state of poor health and the property was put up for tax sale and almost lost before payments were made at the eleventh hour to avert a tax sale.
Question: What about security? Make sure that until the property is transferred to or occupied by the new owner, arrangements are in place for someone to check on the property on a regular basis. If the property is vacant, consult with the insurer regarding requirements on checking the property. If the property is occupied, then checking on a more infrequent basis is acceptable as long as the property is checked periodically.
Selling estate property presents some unique issues and challenges. We highly recommend the use of a professional realtor who is vibrantly aware of the issues that can arise on a estate sale.
When an offer is received, it must be accepted by those who have received a Grant from the Court. It must also be approved by the Public Trustee where there are any minor beneficiaries. The law used to state that if the sale is made for distribution purposes only, then it must receive the consent of all beneficiaries, unless the terms of the Will specifically allow the Personal Representative to sell the property without the consent of all the beneficiaries. That law was repealed when Alberta revised the Estate Administration Act in 2015. Now the Personal Representative has the ability to sell the property for either distribution purposes or for repayment of estate debts without requiring consent of the beneficiaries.
If a Grant has not yet been issued, then the offer can be signed by the Personal Representative(s) named in the Will or those who have filed an Application for a Grant. In this case, special clauses should be put in the Real Estate Purchase Contract to cover what will happen if the Grant is not obtained prior to the scheduled completion day. Either you or your realtor can phone our office for assistance in writing the extra clauses.
If it is necessary to complete a sale before a Grant is issued, then the following three options are available:
- Delay the closing and completion until the Grant is obtained.
- Close on a tenancy basis until the Grant is available. The title will remain in the name of the estate and the new owners will pay “rent” for a few days or weeks until a Grant is issued and the title can be transferred. This offers the advantage of transferring responsibility of utility payments and property taxes to the potential new owner. Where the property is vacant, it is now occupied which typically reduces security risks.
- Obtain an Order from the Court allowing the sale to take place and the title to be transferred before the Grant is issued. Typically, this Order will include terms that the sale money must be held in the lawyer’s trust account until the Grant is issued. This method has the advantage that the deal is closed, the money is received, and the ongoing monthly expenses are stopped. As a special Court application is required, additional costs are involved, however, these costs can be offset by the savings in ongoing property taxes, utilities, and other expenses of owning and maintaining the real estate.
There are many issues to consider when selling real estate that is owned by an estate. Working through the list of issues in this article will make the entire process run a lot smoother. Galbraith Law has extensive experience in dealing with real estate, estates, and real estate that is owned by estates. If you have any questions or concerns please contact us.
This article is meant as a general discussion of topics in this area. It is not meant to offer specific legal advice to anyone as individual circumstances can have an impact on each and every situation.