Residential property: What happens if the seller dies between exchange and completion?

If the seller dies between exchange of contracts and completion of the transaction, the contract remains valid and the benefit and burden will pass to the seller’s Personal Representatives (Executors if the seller made a Will or Administrators if the seller died intestate i.e. without a Will).

The practical situation for dealing with completion varies depending on whether the seller was a sole seller or a co-seller:

Sole Seller

The Personal Representatives will need authority to complete the contract. This authority will be the Grant of Probate (where the seller made a Will) or a Grant of Letters of Administration (where the seller died intestate – without a Will).  Obtaining either of these, however, is likely to delay completion beyond the contractual completion date since no Grant of Probate may be issued within 7 days of the death and no Grant of Letters of Administration within 14 days of the death (excluding, in each case, the date of death).

Co-Sellers

Where the Seller is two or more people, how this situation is dealt with will depend on whether they held the beneficial interest as (a) joint tenants or (b) tenants in common. So, what is the difference and how do you know how the joint Sellers held the property?

(a) Joint Tenants

If one joint tenant dies, his or her interest in the property passes automatically to the remaining joint tenant(s) with the last survivor becoming the sole beneficial owner.

If the property is registered at HM Land Registry, the conveyancer needs to check whether there is a “Form A” Restriction noted in the Proprietorship Register in the Title to the property. If there is no such restriction (or other restriction restricting disposal by a sole owner), the Buyer can assume the co-owners were joint tenants and buy the property from the survivor. The Transfer will need to be re-drafted in the name of the surviving Seller and a copy of the deceased’s death certificate will need to be be provided to the Buyer.

If the property is unregistered, the conveyancer must:

• ensure that no Memorandum or Deed of Severance of the joint tenancy has been endorsed against the Conveyance by which the co-sellers bought the property; and
• ensure that no order is registered as a land charge against any of the joint tenants

If both the above are satisfied, the Buyer can purchase the property from the survivor but the Transfer to the buyer must contain a statement that the survivor is the only person with a beneficial interest in the property.

In either of the above cases, both registered and unregistered, if the requirements, as stated above, are not satisfied, the Seller should be treated as a tenant in common (see below).

(b) Tenants in Common

Each tenant in common owns a notional and defined share of the property. For example, the joint owners might own a property in equal shares or, if one tenant in common contributed more to the purchase price, deposit or mortgage payments, the tenants in common might have agreed a different division of ownership of the property and, in this scenario, that agreement should properly be recorded in a Deed. When one tenant in common dies, his or her interest in the property forms part of his or her estate and passes to his or her beneficiaries in accordance with the terms of a Will, if there is one, or under the Intestacy Rules, if there is not a valid Will.

Following a Seller’s death, if two or more joint owners (also known in this situation as “Trustees”) remain they can complete the transaction as a result of the principle of “overreaching”. A Buyer may pay purchase money in good faith to at least two Trustees or a trust corporation in order to “overreach” any beneficial interests behind the trust.

It is, however, more common for there to only be two joint owners or Trustees, for example, husband and wife. If there were only two owners/Trustees and one has died, in order for the Transfer to effectively overreach the trust interests a second Trustee must be appointed.

Delayed Completion

If completion is delayed, the party causing the delay will be in breach of the contract and the usual remedies will be available to the Buyer. Commonly, time is not of the essence for completion. The defaulting party, which in this case would be the Seller, cannot rescind (cancel) the contract until time is made “of the essence” by serving a Notice to Complete.

If you have concerns about any of the issues raised in this article, or for more information on what to do if the seller dies between exchange of contracts and completion of the transaction, please contact Sid Garg on 01628 631051 or email him on sid.garg@colemans.co.uk.

Categorised in: Latest news, Residential Property

This post was written by Colemans Solicitors LLP