What Happens When Real Estate in Probate Has Tenants Living in it?

When someone passes away, and the deceased person’s estate has real estate in it, that can create a lot of issues in probate court. But those issues become far greater, when the deceased has rental property in his or her estate, and that property has tenants—in other words, where the deceased is or was a landlord.

A Mix of Interests

When this happens, you have beneficiaries expecting to inherit property, tenants that have valid leases and expect them to be honored and who have no intention of going anywhere, and on top of all that, no current, living landlord to maintain the property.

Look to the Lease

Many leases have provisions in them, that the lease will be honored, even upon the death of the landlord. If there is such a lease, that lease must be honored, and will usually take precedence over any other estate plan that may have been made by the deceased which might contradict the pre-existing lease.

And because the lease is still in effect, the estate can start eviction proceedings on any tenants who stop paying rent just because the landlord has passed away.

This can also create issues for beneficiaries, because while the deceased may have planned out who will get the property, there may be nothing in any will that says who gets the revenue or profits from the rent, while the tenants are there. This can lead to fighting, or else, to the rental payments being treated as intestate property, which may not go to whomever the deceased would have wanted those rental payments to go to.

Who is the Landlord?

Of course, tenants require a landlord, and because of his or her death, there is no landlord. Technically, the personal representative or executor of the estate, managing the state’s affairs, would be the landlord, as the person charged with maintaining the estate’s property for and on behalf of the beneficiaries. One of the executor’s first duties should be informing the tenants, and giving them instructions on how and where to continue paying their rent.

But many personal representatives aren’t equipped to become overnight landlords. They may not know the laws or the ins and outs of managing property. The last thing the estate wants is a lawsuit by disgruntled tenants or to have them withholding rent. The executor may need to call in outside help to assist in managing the property.

Don’t Forget the Mortgage

If the property is mortgaged, the mortgage may have a payable (or acceleration) on death clause, which would accelerate the entire balance of the loan. Because the property can’t immediately be sold because of the tenants living there, this can be a problem.

Executors or beneficiaries seeking to avoid this problem, may have to ask the probate court for permission to work out solutions for the existing tenants (for example, early buyouts) to avoid a mortgage foreclosure.

Verbal Leases

Note that in verbal tenancies, which are month to month, tenants can be evicted much easier and earlier, avoiding many of these problems. So long as the required notice for termination of the month to month tenancy is given, usually about 30 days, the tenants can be evicted by the executor or personal representative.

Do you have rental property in your estate with tenants living in that property? Get help with the complex legal issues that this scenario creates. Call the West Palm Beach probate lawyers at The Law Offices of Larry E. Bray today for help with your case.

Source:

squarecowmovers.com/death-landlord-affect-lease/#:~:text=In%20most%20cases%2C%20ownership%20of,on%20the%20points%20noted%20above.