Rise in in buy-to-let ownership leads to liability warning for executors

A property law specialist has warned the executors of wills involving rental properties that they could be personally liable for losses incurred during their administration of the estate, and says it is vital that such issues are handled carefully.

With a record number of landlords opening property companies in 2023, buy-to-let properties have become a common feature of many people’s investment portfolio. Executors are now regularly called upon to deal with a rental property in an estate after someone has died.

Sarah Woolnough, a Senior Associate with Furley Page’s Property Disputes team, regularly supports colleagues dealing with probate issues that involve a rental property with a sitting tenant.

Sarah said: “We often see problems arise in estates which have rental properties. These can include issues in relation to tenants’ rights, tenancy agreements and potential disputes involving the parties involved. When dealing with the administration of an estate involving a rental property with a tenant in situ, it is very important to navigate these issues carefully to avoid falling foul of landlord and tenant law.

“If you have been asked to be an executor of an estate with one or more rental properties, then it is important to handle this carefully as you could be personally liable for any losses or mistakes. For example, if unforeseen damage occurred to the property and the conditions of the insurance policy were not being met, as the executor you could be liable for the costs of repair.”

At their earliest opportunity, the responsible executor should clarify the terms of the will to ensure they are able to deal appropriately with the person(s) who will ultimately inherit the property. They will also need to inform the tenants that a different person will be responsible for the collection of rent and for property maintenance, and contact the insurance company to notify them.

A valuation of the property will be required to calculate whether any inheritance tax is due, which needs to be paid within six months of a death. If there is a mortgage over the property, the lender may expect the outstanding balance of the mortgage to be paid and this may necessitate the sale of the property, or it may be possible for a beneficiary to refinance the mortgage into their name.

Sarah continued: “It can take several months to obtain the grant of probate, even with a simple estate, and longer where affairs are more complex or there is a dispute. During this time, the executors will be the landlord of the property and must ensure strict compliance with their contractual obligations under landlord and tenant laws.

“Executors should strive to cooperate with any tenants to ensure a smooth transition. The property needs to be properly maintained during this time.

“Due to the legal and practical issues, it is advisable that executors take professional legal advice to ensure that each stage is carried out correctly and efficiently.

For more information visit: www.furleypage.co.uk