death of a party before settlement
There is already much to consider when it comes to the sale or purchase of a property, but what happens if a party to the transaction dies before the day of settlement?
In some circumstances, a vendor or purchaser may pass away at some point after a contract has been signed, but before settlement has occurred. What happens is dependent on a variety of factors, the most important one being whether the deceased was a purchaser or vendor of the property.
Generally, if there is a valid contract, and the subject matter relates to personal rights, these contracts will be terminated if a party dies. In the same way that death revokes any power of attorney that has been granted, death also terminates the instructions of the deceased.
Contracts relating to the sale of a property, however, are still enforceable by or against the estate of the deceased.
death of a vendor
If the deceased was a vendor of a property, the implications depend on whether there is a joint tenancy, tenants in common, or if the vendor was the sole proprietor on the title. If the there is a joint tenancy, then the deceased’s interest in the land will transfer to the surviving joint tenant(s). Should the deceased have been a tenant in common or a sole proprietor, the property will automatically vest in the executor or administrator of the estate to any mortgage, equity or trust associated with it. Because it takes a considerable amount of time for probate or letters to be applied for, it is likely that the initially agreed settlement date will pass before the contract can settle. It is also likely that the that the purchaser will terminate the contract as a result of the vendor’s inability to settle. There are various steps that can be taken to deal with the implications of a proprietor’s death. An executor appointed under a will may be able to vary the settlement date prior to the grant of probate. Alternatively, if the contract is terminated because of the death of a vendor, it may be offered for sale again before probate is granted.
Settlement will not proceed, however, until probate or letters have been granted and Land Services SA have registered the Transmission Application.
death of a purchaser
For prospective joint tenants, unless the contract says otherwise, all purchasers are bound by the contract. The death of one purchaser will not invalidate the obligation for the surviving purchaser to settle on the agreement. In some circumstances, if the contract is subject to finance and finance is not approved because of the death of a purchaser, the surviving purchaser may be able to terminate the contract. If the deceased was a (prospective) sole proprietor or a tenant in common, the interest in the contract becomes an asset in the estate. However, the estate may not proceed with the purchase. Should this situation arise, the vendor may terminate for breach or failure to complete the contract, the vendor and the executor may agree to a mutual termination, or the executor may be able to terminate (potentially even before probate) if a special condition has not been satisfied.
See also: joint tenants and tenants in common
Whatever the circumstances, your conveyancer will advise on the best course of action to take, which could well be to obtain legal advice. It is important that those with any association to the deceased obtain legal advice, and base their following decisions on that advice.
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers