Navigating real estate transactions when a Seller dies before settlement

What do you do if a Seller dies before settlement of a Contract in a real estate transaction?

If a Seller passes away before settlement of a Contract has been effected a Contract for the sale of real property is not terminated, unless the Contract contains a special condition which expressly provides for or allows this outcome. Generally, in the absence of a special condition providing for or allowing termination of the Contract, the executor/administrator of the deceased Seller's estate (otherwise referred to as their "Legal Personal Representative") will be required to carry out all steps necessary to effect completion of the Contract.

Review the terms of the Contract

If a Seller passes away before settlement, the starting point is to review the Contract to ascertain whether there are any special conditions which dictate what happens if the Seller dies before settlement is effected.

When a Contract does not include a special condition which deals with the requirements in the event of a Seller's death, the Contract will remain valid and enforceable. As the deceased Seller will be unable to perform their remaining obligations under the Contract, ownership of the property will need to be transmitted to another person (based on the deceased Seller’s particular circumstances) before settlement can be completed.

In circumstances where there are concerns that a Seller may pass away before settlement is effected, it is worthwhile including a special condition in the Contract which sets out the rights of each party if the Seller passes away prior to settlement - such as the ability to extend settlement (to allow for the abovementioned property transmission) and/or including a right of termination. 

Property owned as joint tenants

Where property is owned jointly by a deceased Seller and another person(s) as joint tenants at the date of the Seller’s death, ownership of the deceased Seller's share of the property will pass to the surviving joint tenant(s) pursuant to the rules of survivorship. To be able to complete settlement of the Contract of Sale, the surviving joint tenant(s) will need to arrange for the title to the property to be updated by notifying the Department of Resources (“the Titles Office”) of the deceased Seller's passing. A Titles Office Form 4 Request to Record Death will need to be completed and lodged by the surviving joint tenant(s), together with a certified copy of the deceased Seller's Death Certificate, in order to transmit the deceased Seller’s share in the Property, so the Contract for the sale of the Property can be completed.

It generally takes several weeks before a Death Certificate is issued. It may also take another week or two for the Form 4 Request to Record Death to be processed and registered following lodgement with the Titles Office. Due to the potential delays to settlement, it is recommended that the Buyer be notified as soon as possible about the deceased Seller’s passing, and that an extension of the settlement date be requested, if necessary. 

Property owned either solely or as tenants-in-common

Where a deceased Seller held property either in their sole name or with multiple other co-owners as tenants-in-common, the deceased Seller's share of the property will form a part of their estate, to be dealt with by either their Will (if they have a valid Will) or in accordance with the rules of intestacy pursuant to legislation (if they do not have a valid Will). In either situation, the rights and responsibilities of the deceased Seller will pass to their Legal Personal Representative.

There are three different lodgement options available when recording the death of a landowner who owns a property solely or as a tenant-in-common, namely:- 

1. A lodgement where either a Grant of Probate (if there is a Will) or Grant of Letters of Administration (if there is either no Will, or there is a Will but there is no executor appointed who is able/willing to act) is submitted with the Transmission Application;
2. A lodgement where there is a Will but no intention for a Grant of Probate to be obtained (in which case the original Will must be submitted with the Transmission Application); and
3. A lodgement where there is no Will and no intention for a Grant of Letters of Administration to be obtained. 

Lodgement with a Grant of Probate/Grant of Letters of Administration 

A Grant of Probate or a Grant of Letters of Administration is an order issued by the Supreme Court of Queensland which provides the Legal Personal Representative with the authority to administer a deceased person's estate and to make distributions in accordance with either the terms of the deceased person’s Will (if there is one) or the rules of intestacy pursuant to legislation (if there is no Will). Often a Grant of Probate/Grant of Letters of Administration will be required before asset holders are willing to release assets held by them to the estate. Generally, it can take several months from the date of passing before a Grant of Probate/Letters of Administration is issued. The original Death Certificate and the Original Will (if there is one) are required to be lodged with an application for a Grant of Probate/Grant of Letters of Administration.  The original Death Certificate is retained by the Supreme Court on making an application for a  Grant of Probate/Grant of Letters of Administration.

Where a Grant of Probate/Grant of Letters of Administration has been issued by the Supreme Court the Legal Personal Representative can affect the transmission of the property by lodging a completed Titles Office Form 5, together with a certified copy of the Grant of Probate/Grant of Letters of Administration with the Titles Office. 

Lodgement with only a Will

If none of the asset holders require a Grant of Probate/Grant of Letters of Administration to be obtained for the purposes of an estate administration or a property is under Contract/needs to be sold before a Grant of Probate/Letters of Administration can be obtained, then the Legal Personal Representative can arrange the transmission of a Property by lodging the original Will with the Titles Office, together with a completed Titles Office Form 5A and a certified copy of the Death Certificate.

The Titles Office will retain the original Will. If it later transpires that a Grant of Probate is required, the Titles Office will (upon request) release the original Will to the Supreme Court for the purposes of the application for a Grant of Probate.

In circumstances where there is a dispute over whether a Will is a deceased person's valid final Will, it may be appropriate to seek an urgent interim Grant of Probate which provides authority to solely deal with the sale of a property. 

Lodgement without a Grant of Letters of Administration

In Queensland where a deceased Seller does not have a Will and the gross value of a deceased person's entire estate is $300,000,00 or less, a Legal Personal Representative can deal with a property without obtaining a Grant of Letters of Administration. To arrange the transmission of a property in these circumstances, the Legal Personal Representative will need to lodge a completed Titles Office Form 5A along with a certified copy of the Death Certificate. 

Further considerations

When a Seller dies there is no automatic extension of the important dates under the Contract (including the settlement date). An extension of settlement will most likely be required in the event of the death of a Seller before settlement, as it generally takes one to three months for the title for the property to be transmitted from the deceased Seller's name to either the surviving Joint Tenant(s) or the Legal Personal Representative (whichever is applicable).

It is recommended that the Buyer be informed of the deceased Seller's passing, and an extension of the settlement date requested as soon as possible. If the Buyer is not agreeable to an extension of the settlement date, the Buyer will gain the right to terminate the Contract if the Legal Personal Representative/surviving Joint Tenant(s) is/are unable to complete settlement by the due date.

If settlement is completed by a Legal Personal Representative of a deceased Seller’s estate, they should obtain legal advice before distributing the sale proceeds, to ensure the distribution complies with the provisions of the deceased person’s Will (if there is a valid Will) or the rules of intestacy (if there is no valid Will). 

Need Assistance?

Please do not hesitate to contact one of our solicitors via the below link should you require:

• assistance with drafting a special condition setting out the rights of the parties if the Seller passes away before settlement of a Contract for the sale of real property is completed; 

or

• legal advice in circumstances where a Seller has passed away or may pass away before the completion of a Contract for the sale of real property.